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CONTINUING CASE Starting Early: Retirement Planning now in their 50s and still very active, have plenty of time on their hands now that the triplets are awa er the past years, they realize they have worked hard, Jamie Lee as the proprietor of a cupcake caf and R lege. They both realized that time has just flown by: over 24 years have passed since they r self-employed as a web-page designer. They have enjoyed raising their family and striven to make financially sound decisions w they are looking forward to when they felt it necessary. They purchase vehicles with cash and do not carry credit card balances. university m the recent economic crisis, as they watched their investments closely and adjusted their strategies ets are pursuing their master's degrees and have tuition covered through work-study programs at the a retirement that is just around the corner. They saved regularly and invested wisely over the years them Jamie Lee and Ross are just a few short years from realizing their goals of retiring at 65 and purchasing the home at the beach Current Financial Situation Assets (Jamie Lee and Ross combined): Checking account: $5,500 Savings account: $53.000 Emergency fund savings account: $45.000 House: $475.000 IRA balance: $92,000 Life insurance cash value: $125,000 Investments (stocks, bonds): $750,000 Car: $12,500 (Jamie Lee) and $16,000 (Ross) Income: Jamie Lee: $45.000 gross income ($31,500 net income after taxes) Ross: $135,000 gross income (597,200 net income after taxes) Monthly Expenses: Mortgage: $1,225 Property taxes: $500 Homeowner's insurance: $300 IRA contribution: $300 Utilities: $250 Food: $600 Gas/maintenance:$275 Entertainment: $300 Life insurance: $375 Liabilities(Jamie Lee and Ross combined) Mortgage balance: $43.000 Credit card balance: SO Car loans: $O Questions 1. Looking over Jamie Lee and Ross's assets, which ones could be valuable to them for income as retirement approaches? 2. Using the Personal Financial Planner Sheet 63, "Retirement Planning." evaluate Jamie Lee and Ross's housing needs as they begin to look at retirement properties at the beach. Using the Internet, research retirement options for Jamie Lee and Ross at the beach of your choice. What are the prices for a small residence that would suit their needs during their retirement years? 3. Jamie Lee and Ross estimate that they will have SI million in liquid assets to withdraw from at the start of their retirement. They plan to be in retirement for 30 years. Using the chart in Exhibit 18-16, "Dipping into Your Nest Egg." how much can Jamie Lee and Ross withdraw each month and still leave their nest egg intact? How much can they withdraw each month that will reduce their nest egg to zero? pasi 622 PART 6 CONTROLLING YOUR FINANCIAL FUTURE EXHIBIT 18-16 Dipping into your nest egg Dipping into savings isn't wrong: however, you must do so with caution. You Can Reduce Your Nest Egg to Zero by Withdrawing This Much Each Month for the Stated Number of Years Or You Can Withdraw This Starting Amount of Nest Egg Much Each Month and Leave Your Nest Egg Intact 15 Years $ 81 30 Years $ 56 84 112 140 168 224 281 337 449 561 20 Years S 68 102 Years $10,000 S 107 S 61 s 46 15,000 20,000 25,000 30,000 40,000 50,000 60,000 91 69 215 269 322 430 537 645 121 202 243 92 115 404 485 647 808 204 272 340 408 544 680 182 243 304 364 486 607 230 276 368 460 80,000 100,000 Source Select Committee on Aging. U.S. House of Representatives EXHIBIT 18-17 Major sources of retirement income: Advantages and disadvantages 1,074 Note Based on an interest rate of 5 5 percent per year, compounded quarterly