Planning for Retirement Practice Problems (Key) John, age 29, currently makes $70,000. His wage replacement ratio is determined to be 80 percent. He expects that inflation will average 2 percent for his entire life expectancy. Before retirement, he expects to earn 7.3 percent on his investments and retire at age 67 and plans to live until age 88. After retirement, he will earn only 5.4 percent. He has sent for and received his Social Security benefit statement, which indicated that his Social Security retirement benefit in today's dollars is projected to be $22,000 per year. It is reasonable to subtract the Social Security benefit from today's needs because it is inflation adjusted. He has $8,000 of savings. What is his target monthly savings amount to have a sufficient portfolio at retirement? If he decides he wants to leave a legacy of $100,000 at age 88, what will be his required monthly savings? Current income adjusted for WRR and Social Security = $34,000 Future value of the current income = $72,158.16 Target portfolio at retirement = $1,077,424.52 Monthly savings = $388.29 To have a $100,000 left at age 88, the monthly savings = $401.83 Planning for Retirement Practice Problems (Key) John, age 29, currently makes $70,000. His wage replacement ratio is determined to be 80 percent. He expects that inflation will average 2 percent for his entire life expectancy. Before retirement, he expects to earn 7.3 percent on his investments and retire at age 67 and plans to live until age 88. After retirement, he will earn only 5.4 percent. He has sent for and received his Social Security benefit statement, which indicated that his Social Security retirement benefit in today's dollars is projected to be $22,000 per year. It is reasonable to subtract the Social Security benefit from today's needs because it is inflation adjusted. He has $8,000 of savings. What is his target monthly savings amount to have a sufficient portfolio at retirement? If he decides he wants to leave a legacy of $100,000 at age 88, what will be his required monthly savings? Current income adjusted for WRR and Social Security = $34,000 Future value of the current income = $72,158.16 Target portfolio at retirement = $1,077,424.52 Monthly savings = $388.29 To have a $100,000 left at age 88, the monthly savings = $401.83