Problem $3$:

Individual Retirement Plan

Your goal is to be able to have a comfortable lifestyle in retirement. You expect to retire at age of $67$ years old. You expect to be able to earn $9\mathrm{.}00\%$ return on your investments during your working life, and $3\mathrm{.}00\%$ in retirement.

Question $1$: Calculate your TOTAL monthly budget in retirement. Clearly identify line$-$items of spending. Use the following table as a template $($below$).$ Please adjust this table and its line item spending categories as you see fit:

#

Line Item of Monthly Expenditure

Amount

$1$

Housing $($Mortgage or Rent$)$

$$1500$

$2$

Food $$500$

$3$

Transportation $$300$

$4$

Insurance $$200$

$5$

Entertainment $$300$

$6$ Intermedieary total

$7$ Emergency Fund $15\%$

Total Monthly Budget:

Question $2$: Look up on$-$line your individual life expectancy based on your gender, race, level of education, and other relevant demographic characteristics. Based on your life expectancy and retirement age of $67$ y$.$o$.,$ calculate your retirement goal $($value of your individual retirement fund on the first day of retirement$).$

Question $3$: Based on your current age and your individual answers to questions $1$ and $2,$ calculate your required monthly contribution into your individual retirement fund. How much do you have to save each month to be able to reach your goal?

A complete and correct answer phrased in complete sentences with relevant calculations$/$numbers is required for full credit for each question.

Bonus questions:

How much will you have contributed directly towards your retirement account until you$$re $65?$

How much will you have earned from compounding of interest in your retirement account until you$$re $65?$

How will your answer to question $3$ change if you wait until age of $30$ yo old to start contributing to your individual retirement account?

How will your answer to question $3$ change if you wait until you$$re $40$ years old to start contributing to your individual retirement account?