Question
Steve is planning for his retirement. He is currently 37 and plans to retire in 25 years, at age 62. He expects then to live
Steve is planning for his retirement. He is currently 37 and plans to retire in 25 years, at age 62. He expects then to live an additional 34 years. He believes he can earn an inflation-adjusted return on his retirement investments of 5% per year before retirement, and 2% per year after retirement. Based on his assumptions about investment returns, inflation and Social Security, and his desired Wage Replacement Rate, he believes he will need to accumulate $6,000,000 in inflation-adjusted terms by the day of his retirement in order to produce enough income to achieve his retirement income goal. Use the Economists (Hanna) method described in the Journal of Financial Planning article by Hanna and Kim.
How much does he need to contribute to his retirement fund at the end of each year to accumulate enough by the day he retires?
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