nces Continuing Case 65. Retirement Income Forecast Jamie Lee and Ross, now 57 and still very active, have plenty of time on their hands now that the triplets are away at college. They both realized that time has just flown by, over twenty-four years have passed since they married! Looking back over the past years, they realized that they have worked hard in their careers, Jamie Lee as the proprietor of a cupcake caf and Ross, self-employed as a web-page designer. They have enjoyed raising their family and strived to be financially sound as they are looking to retirement that is just around the corner. They saved regularly and invested wisely over the years. They rebounded nicely from the economic crisis over the past few years, as they watched their investments closely and adjusted their strategies when they felt it necessary. They purchase vehicles with cash and do not carry credit card balances, choosing instead to use them for convenience only. The triplets are pursuing their master's degrees and have tuition covered through work/study programs at the university. Jamie Lee and Ross are just a few short years from realizing their goals of retiring at 65 and purchasing a home at the beach! They are reviewing their financial situation to ensure they will be ready for retirement. They anticipate being able to live comfortably with 80% of their current expenses. The rate of return on their investments until they retire is 4%. They expect this percentage to drop to 3% after retirement. Use this information, along with Exhibit 1-A. Exhibit 1-8. and the information provided below to determine the annual deposit amount Jamie Lee and Ross will need to make until they retire in order to make up the shortfall between their estimated expenses and income needed during retirement. Each answer must have a value for the assignment to be complete. Enter "O" for any unused categories. Current Expense Amounts (Jamie Lee and Ross Combined) Fixed expenses: $3,000/month Variable expenses: $2,000/month Estimated Income Amounts (Jamie Lee and Ross Combined) Social Security: $2,100/month Current IRA balance: $92,000 Estimated IRA withdrawal: $300/month Other investments: $26,400/year Estimated Annual Retirement Living Expenses Estimated annual living expenses if retiring today Number of years until retirement Expected annual rate of return before retirement Future value (use Exhibit 1-A) Projected annual retirement living expenses, adjusted for inflation (A) Estimated Annual Income at Retirement Company pension, personal retirement account income Social Security income Investment and other income Total retirement income Needed investment fund after retirement (A-B) Number of years until retirement Expected annual rate of return before retirement Future value for a series of deposits (use Exhibit 1-B) Annual deposit to achieve needed investment fund (C/D) (B) (C) (D) EXHIBIT 1-A Future value (compounded sum) of $1 after a given number of time periods Period 1% 256 3% 5% 6% 7% 8%6 9% 10% 17% 1 1010 1020 1030 1040 1.050 1060 1070 1.080 1090 1.100 1110 2 1020 1040 1061 1082 1.103 1.124 1.145 1144 1.100 1710 1252 3 1.030 1061 1003 1.125 1158 1.191 1225 1.260 1295 1331 1368 4 1041 1003 1.126 1.170 1.216 1.262 1311 1360 1.412 1516 $ 1.051 1.104 1.159 1.317 1276 1338 1.405 1409 1.5.39 A 1062 1.126 1.194 1265 1340 1419 1501 1347 1677 7 1072 1149 1250 1310 1.407 1504 1406 1714 1820 B 1.003 1.172 1267 1360 1477 1504 1718 1094 1.195 1.305 1.423 1551 1409 1838 1.999 2.172 2558 10 1.105 1219 1.344 1400 1629 1791 1967 2159 2367 11 1.116 1.243 1.384 1539 1710 189 2.105 2332 2560 2613 3132 12 1327 1.260 1426 1401 1.796 2012 2252 2518 2813 313 3498 13 1.138 1.294 1460 1665 186 2.133 2410 2720 1066 3452 1883 34 1.149 1319 1513 1732 1.900 2261 2570 2.937 3343 5797 4310 15 1.161 1346 1558 1801 2079 2307 2759 3172 3642 4177 4765 16 1.175 1.375 1.605 1873 2.143 2540 2.953 3436 5.970 4595 5311 17 1.184 1.400 1455 1948 2292 2693 3.159 1700 4326 5054 5495 18 1.196 1428 1.702 2036 2407 2854 3.380 3.996 4.777 5500 6544 19 1.208 1457 1754 2.107 2527 3026 3617 4316 5.142 6116 7365 20 1220 1486 1806 2.391 2653 3207 1470 4661 5004 6727 8062 25 1.202 1441 2094 2666 1386 4292 5427 6.848 8633 10 A35 13585 30 1348 1811 2427 3245 4322 5745 7412 10063 13268 17449 22.892 40 1.409 2.208 3262 4801 7040 10206 14974 21735 31.409 45200 65001 50 1645 2692 4364 7107 11.467 18.420 29.457 46902 74358 117390 184370 Period 12% 13% 14% 15% 16%4 17% 18% 19% 30% 35% 30% 1 1.120 1.130 1.140 1.150 1.160 1.170 1.180 1.100 1300 125 1.300 2 1254 1300 1.333 1.346 1.369 1.3921 1416 1440 1363 1490 3 1.405 1.445 1483 1321 1561 1002 1643 1445 1738 1055 2197 1574 1430 LAMP 1.749 1811 1.874 1939 2005 2074 2441 2456 1762 1340 1.925 2011 2.100 2192 2.255 2306 3.45 3057 3713 1974 2083 2.195 2313 24M 1545 2.700 1340 2986 3815 4827 2211 2353 2302 20 2826 3001 3.185 5379 3561 4.768 4376 " 2476 2458 2.853 3059 3278 3511 3759 4.001 4.300 1960 . 2773 3004 3353 3518 3801 4108 4435 4785 7.451 10404 10 1100 5.395 1707 4046 4411 3334 3.406 6192 9311 13.7M 11 3.479 3836 4236 4452 5317 5624 6176 6777 7430 11442 12 1896 4335 5.350 5934 4.340 7360 8064 6.914 14552 3129 13 4363 5.491 4155 AMA 7499 6599 9.596 10499 14.100 30.244 3 5335 6361 7076 7.9 9007 10147 11420 12839 21.33 374 15 5474 6354 7.138 8.137 9.266 16 6.130 7047 137 17 9276 7490 9034 10575 10197 12.054 14333 20 9344 13743 16347 35 17.000 31.331 26463 30 40 50 3051 289000 29940 30336 132.780 450740 700336 500 166.380 19748 23.106 32919 40874 50458 64213 14463 16879 16777 10339 11974 15540 15407 1.318 10748 12.350 14129 16372 10741 12.468 14.436 16672 19344 73375 19A73 22041 23214 37253 31.948 27.343 32429 36336 77304 95.390 26422 51.18 36327 46342 22186 44409 64504 112400 1.389 146190 247 A0 05450 111070 343370 184480 337.380 378730 555870 750.380 1051700 C03700 1470700 2544200 1927.400 998900 4800 7323200 3119.000 100.400 765.000 4729.000 84756 190050 264700 705640 1430000 EXHIBIT 1-B Future value (compounded sum) of $1 paid in at the end of each period for a given number of time periods (an annuity) Personal Finance Period 196 216 396 F 5% 6% 7% 8%6 9%6 10% 11% 1 1000 1000 1000 1000 1000 1000 1,000 1.000 1000 1.000 1.000 2 2010 2020 2030 2040 2050 2060 2070 2000 2090 2100 2.110 3 3030 3060 3.001 3122 3.153 3184 3215 3346 3278 3.310 3347 4 4060 4122 4.184 4246 4310 4.375 4440 4.506 4573 51011 5204 5.309 5416 5526 5637 5751 SMY 5.965 6 6.153 6.308 6.468 6633 6802 6975 7.153 7336 7323 7 7214 7434 7662 7090 8142 8394 8654 6923 9200 8306 8.581 892 9214 9549 9847 10.360 10617 11.00 . 9364 9755 10.159 10563 11.027 11.491 11.978 12.450 13021 11379 10 10.462 10.950 11.464 12.006 12.578 11 11567 12.169 12.800 13480 14.207 15101 13816 14972 15.784 16.395 JAN 16229 16645 17.560 18531 19561 12 12443 13412 14.192 15036 15917 16870 17885 18977 20.141 31.384 22711 13 13809 14680 15418 16827 17.715 18.882 20141 21.495 22.953 24523 36212 14 14947 15974 170 18.292 19.599 21015 22550 24215 26019 21975 30095 15 16097 17.295 18.500 20024 21.579 21276 25.129 27.152 29.361 31772 34405 16 17258 18459 20.157 21.035 17 18430 20012 21.762 23498 18 19415 21.412 23414 25.645 19 20811 22841 25.117 27671 30539 20 22019 24297 26870 29778 25 28343 32030 36.459 41.646 30 34785 40508 47575 56.005 48.304 60.402 75.401 50 64.463 84579 112500 95026 152670 23457 25.673 25840 38.213 28.132 30906 35.700 33.066 56.706 47727 54865 66.439 79058 120.800 154760 209.350 290.340 27.08 30324 30440 35.750 31.999 37.450 37379 41.446 40.995 45.763 $1.160 57375 64303 63.349 73.106 84.701 98547 114410 94461 113.200 136310 164490 199000 199640 259 060 337890 442.390 581830 406530 573770 $15.000 1.163900 1680 11005 36.974 41301 35.950 30.190 40545 44501 45599 50.39 46018 51.159 56939 Period 12% 13% 14% 15% 16%6 17% 10% 19% 30% 3596 3016 1,000 1.000 1000 1.000 1000 1.000 1.000 1.000 1000 1000 1.000 2 2.130 2130 2.140 2150 2.160 2170 2.180 2190 2300 2250 2300 3 337A 3407 1440 3473 3.506 3539 3573 3000 3640 3815 3090 4 4779 ABSO 4921 4993 3.066 5141 5215 5291 5368 5760 6187 5 6353 6480 6610 6742 6877 7.014 7.154 1297 7442 8207 9043 . 4315 8536 8754 9.307 9443 9443 9930 11.399 12.756 7 10009 10.405 10730 11067 11.414 " 12.300 12.757 13233 14776 15416 14.045 10 17.549 11 20655 12 34135 25650 18.420 10.337 21814 23045 37271 13 28.009 29085 32009 34 32.343 34353 37381 15 37.200 40417 45843 0505 47580 14 42753 46372 1040 17 AL564 53739 59318 38 35.750 41725 " 20 25 30 341.350 NO 43219 45344 50818 5484 44.241 72035 100400 167.290 35717 60.975 72939 750 87442 130110 5.075 71475 STOLE 96002 10530 175440 285010 75836 64341 93.406 103740 115270 128120 218.000 371330 63.440 30749 75940 88.212 110290 123410 138170 71053 80947 93005 102440 115340 130030 14630 145430 133.330 155420 181470 212790 349310 392110 542400 403040 291300 314790 434790 530310 47440 7900 944700 747090 1013700 1343000 1779.100 2360800 3134500 4145210 552800 11.772 12.142 12523 12916 13727 14240 14.775 15387 15902 14.499 16780 17519 18.385 19004 10921 20799 30304 21.321 22.395 23521 24701 25.959 31.253 24349 25.755 27.200 28755 30404 32150 42.306 2000 30850 32824 34931 37.180 39581 54.200 54352 56.79 39404 45497 ASAT 47.103 30.19 15075 17343 19842 25.802 32015 42A1F 54405 74327 NO WA20 84549 127910 56110 M 218470 154740 175540 IMA 342 950 471980054800 1,181 9001227300 2.341900 30.09 000 130395.000 43970 630179 2.348800 730000