Steven, age 43, earns $80,000 annually; and his wage replacement ratio has been determined to be 80%. He expects inflation will average 3% for his entire life expectancy. He expects to work until 68 and live until 90. He anticipates an 8% return on his investments. Additionally, Social Security Administration has notified him that his annual retirement benefit, in todays dollars will be $26,000.

Determine the amount of savings (capital balance) needed at retirement to fund expenses throughout the remainder of life expectancy using an annuity due.

Remember Step 1 is to determine his funding needs in today's dollars.

Step 2 is to take the amount from step 1 and determine its inflation adjusted equivalent in 25 years. Don't forget to use an inflation adjusted discount rate in this step.