Patti is a 25-year old sales representative who started her employment at company K last year. She needs a CFP to draft a retirement plan for her. The following list has the details: 1. Patti earns a pretax income of $80,000 this year. For simplicity, assume that her income does not grow and the tax rate is 25%. 2. Her current annual cost of living is $36,000, which is expected to increase by 4% annually. She plans to retire at the age of 67, and the cost of living after then will be roughly 80% of the pre-retirement cost of living. The applicable tax rate after retirement is 20%. 3. In the past year, she paid $4,960 of Social Security Tax, and it is estimated that the Social Security benefits at the time of retirement will be $4,000 per month. 4. She has an employer-sponsored 401(K) retirement account, to which she contributes 5% of pretax income and the employer matches 5%. Based on the historical performance, the average return is 10% a year. Assume that the account no longer grows once she starts withdrawing funds at age 67. The accumulated dollars will be distributed evenly to her for 20 years. Answer the following questions: 1. Considering all factors such as inflation and lifestyle. What will be Patti's cost of living at age 67 right before she plans to retire? Cost of living at 67 before retirement = $ (enter whole numbers only, no decimals) 2. What is the after-retirement cost of living initially? Cost of living right after retirement = $ (enter whole numbers only, no decimals) 3. What is the total amount of 401(k) account balance? Balance = $ (enter whole numbers only, no decimals) 4. What is the annual disbursement of 401(k) pension? Annual disbursement = $ 5. Is social security benefit and 401(k) disbursement enough to cover her retirement cost of living? Answer (enter 1 for yes; 2 for no) Patti is a 25-year old sales representative who started her employment at company K last year. She needs a CFP to draft a retirement plan for her. The following list has the details: 1. Patti earns a pretax income of $80,000 this year. For simplicity, assume that her income does not grow and the tax rate is 25%. 2. Her current annual cost of living is $36,000, which is expected to increase by 4% annually. She plans to retire at the age of 67, and the cost of living after then will be roughly 80% of the pre-retirement cost of living. The applicable tax rate after retirement is 20%. 3. In the past year, she paid $4,960 of Social Security Tax, and it is estimated that the Social Security benefits at the time of retirement will be $4,000 per month. 4. She has an employer-sponsored 401(K) retirement account, to which she contributes 5% of pretax income and the employer matches 5%. Based on the historical performance, the average return is 10% a year. Assume that the account no longer grows once she starts withdrawing funds at age 67. The accumulated dollars will be distributed evenly to her for 20 years. Answer the following questions: 1. Considering all factors such as inflation and lifestyle. What will be Patti's cost of living at age 67 right before she plans to retire? Cost of living at 67 before retirement = $ (enter whole numbers only, no decimals) 2. What is the after-retirement cost of living initially? Cost of living right after retirement = $ (enter whole numbers only, no decimals) 3. What is the total amount of 401(k) account balance? Balance = $ (enter whole numbers only, no decimals) 4. What is the annual disbursement of 401(k) pension? Annual disbursement = $ 5. Is social security benefit and 401(k) disbursement enough to cover her retirement cost of living? Answer (enter 1 for yes; 2 for no)
