Question Three 3) Andy and Rachel Cutler, who'd like to retire while they're still relatively young - in about 20 years. Both have promising careers, and both make good money. As a result, they're willing to put aside whatever is necessary to achieve a comfortable lifestyle in retirement. Their current level of household expenditures (excluding savings) is around $82,500 a year, and they expect to spend even more in retirement; they think they'll need about 125% of that amount. (Note: 125% equals a multiplier factor of 1.25). They estimate that their Social Security benefits will amount to $28,000 a year in today's dollars and they'll receive another $30,000 annually from their company pension plans. They feel that future inflation will amount to about 3% a year, and they think they'll be able to earn about 6% on their investments before retirement and about 4% afterward. You may use worksheet 14.1 to help you with the calculations. 3A. Calculate how much Andy and Rachel's investment nest egg will have to be. Round your answer to the nearest dollar. 3B. How much they'll have to save annually to accumulate the needed amount within the next 20 years. Round your answer to the nearest dollar. Question Four 4A). Elizabeth, age 30, is thinking about investing for retirement. She plans to retire when she turns age 65. At that time, she will need $3.15 million in assets. She has calculated that inflation will average 3.00% over her lifetime. If she can earn an average annual 11.00% rate of return, what will be her real rate of return? Real Rate of Return= [(1+Nominal Return)/(1+Inflation Rate)] -1 4B). Joe has cash in a savings account totaling $12000, and his monthly expenses are $4000. What is his emergency fund ratio? 4C). Nancy, age 55, is self-employed and has never made a lot of money. But, she has consistently saved $4608 per year into a traditional IRA. Over the years, she has taken full advantage of the tax law and deducted each year's contribution from her tax return. If Nancy started saving at age 25 and has earned an average annual return of 5%, how much is the account worth today? 4D). What is the APR for a loan that charges 3.1% every 30-day payment period? Question Three 3) Andy and Rachel Cutler, who'd like to retire while they're still relatively young - in about 20 years. Both have promising careers, and both make good money. As a result, they're willing to put aside whatever is necessary to achieve a comfortable lifestyle in retirement. Their current level of household expenditures (excluding savings) is around $82,500 a year, and they expect to spend even more in retirement; they think they'll need about 125% of that amount. (Note: 125% equals a multiplier factor of 1.25). They estimate that their Social Security benefits will amount to $28,000 a year in today's dollars and they'll receive another $30,000 annually from their company pension plans. They feel that future inflation will amount to about 3% a year, and they think they'll be able to earn about 6% on their investments before retirement and about 4% afterward. You may use worksheet 14.1 to help you with the calculations. 3A. Calculate how much Andy and Rachel's investment nest egg will have to be. Round your answer to the nearest dollar. 3B. How much they'll have to save annually to accumulate the needed amount within the next 20 years. Round your answer to the nearest dollar. Question Four 4A). Elizabeth, age 30, is thinking about investing for retirement. She plans to retire when she turns age 65. At that time, she will need $3.15 million in assets. She has calculated that inflation will average 3.00% over her lifetime. If she can earn an average annual 11.00% rate of return, what will be her real rate of return? Real Rate of Return= [(1+Nominal Return)/(1+Inflation Rate)] -1 4B). Joe has cash in a savings account totaling $12000, and his monthly expenses are $4000. What is his emergency fund ratio? 4C). Nancy, age 55, is self-employed and has never made a lot of money. But, she has consistently saved $4608 per year into a traditional IRA. Over the years, she has taken full advantage of the tax law and deducted each year's contribution from her tax return. If Nancy started saving at age 25 and has earned an average annual return of 5%, how much is the account worth today? 4D). What is the APR for a loan that charges 3.1% every 30-day payment period
