Rodrigo and Jesse are taking a personal finance course. They have calculated their projected retirement income and investment needs. Based on their calculations and taking into account their Social Security and pension incomes, they have a projected shortfall of $7,500.00 per year. They have 30 years to retirement. The impact of the inflation factor Continuing their worksheet, they consult a friend, economics professor Dr. Blakely, who believes that they can expect the average annual inflation rate to be 5%, possibly 6% tops. Calculate their inflation-adjusted annual shortfall at 5%. Then recalculate the shortfall based on the top rate provided by Dr. Blakely. Inflation-adjusted annual shortfall at 5%: $ Inflation-adjusted annual shortfall at 6%:$ You can use the following tables to answer the questions about future value interest factors. Periods 9.00% 5.600 Interest Factors-Future Value 3.00% 5.00% 6.00% 8.00% 1.810 2.653 3.210 4.661 2.090 3.386 4.290 6.848 2.420 4.322 5.740 10.062 2.810 5.516 7.690 14.785 3.260 7.040 10.280 21.724 8.620 13.260 20.410 31.410 Funding the shortfall In addition to determining a realistic inflation rate, Rodrigo and Jesse talked to their financial advisor to understand rates of return now and after they reach retirement. First, their advisor projects that in 30 years, they can realistically earn 5% on their nest egg. Second, he recommends an investment vehicle that is earning 6% annually. Using the inflation-adjusted annual shortfall at 5% as previously calculated, determine the following: Amount of retirement funds required at 5%: $ Annual savings required to fund nest egg at 6%:$ You can use the following tables to answer the questions about future value interest factors. Periods 20 25 Interest Factors-Future Value 3.00% 5.00% 6.00% 8.00% 1.810 2.653 3.210 4.661 2.090 3.386 4.290 6.848 2.420 4.322 5.740 10.062 2.810 5.516 7.690 14.785 3.260 7.040 10.280 21.724 9.00% 5.600 8.620 13.260 20.410 31.410 Interest Factors-Future Value of an Annuity Periods 3.00% 5.00% 6.00% 8.00% 9.00% 26.870 33.066 36.780 45.762 51.160 20 25 36.460 47.726 54.860 73.105 84.700 30 35 47.570 60.460 75.400 66.438 90.318 120.797 79.060 111.430 154.760 113.282 172.314 259.052 136.300 215.700 337.870 40 Rodrigo and Jesse are taking a personal finance course. They have calculated their projected retirement income and investment needs. Based on their calculations and taking into account their Social Security and pension incomes, they have a projected shortfall of $7,500.00 per year. They have 30 years to retirement. The impact of the inflation factor Continuing their worksheet, they consult a friend, economics professor Dr. Blakely, who believes that they can expect the average annual inflation rate to be 5%, possibly 6% tops. Calculate their inflation-adjusted annual shortfall at 5%. Then recalculate the shortfall based on the top rate provided by Dr. Blakely. Inflation-adjusted annual shortfall at 5%: $ Inflation-adjusted annual shortfall at 6%:$ You can use the following tables to answer the questions about future value interest factors. Periods 9.00% 5.600 Interest Factors-Future Value 3.00% 5.00% 6.00% 8.00% 1.810 2.653 3.210 4.661 2.090 3.386 4.290 6.848 2.420 4.322 5.740 10.062 2.810 5.516 7.690 14.785 3.260 7.040 10.280 21.724 8.620 13.260 20.410 31.410 Funding the shortfall In addition to determining a realistic inflation rate, Rodrigo and Jesse talked to their financial advisor to understand rates of return now and after they reach retirement. First, their advisor projects that in 30 years, they can realistically earn 5% on their nest egg. Second, he recommends an investment vehicle that is earning 6% annually. Using the inflation-adjusted annual shortfall at 5% as previously calculated, determine the following: Amount of retirement funds required at 5%: $ Annual savings required to fund nest egg at 6%:$ You can use the following tables to answer the questions about future value interest factors. Periods 20 25 Interest Factors-Future Value 3.00% 5.00% 6.00% 8.00% 1.810 2.653 3.210 4.661 2.090 3.386 4.290 6.848 2.420 4.322 5.740 10.062 2.810 5.516 7.690 14.785 3.260 7.040 10.280 21.724 9.00% 5.600 8.620 13.260 20.410 31.410 Interest Factors-Future Value of an Annuity Periods 3.00% 5.00% 6.00% 8.00% 9.00% 26.870 33.066 36.780 45.762 51.160 20 25 36.460 47.726 54.860 73.105 84.700 30 35 47.570 60.460 75.400 66.438 90.318 120.797 79.060 111.430 154.760 113.282 172.314 259.052 136.300 215.700 337.870 40