The Johnsons Consider Retirement Planning

Harry Johnson$$s father, William, was recently forced into early retirement at age $55$ because of poor health. In addition to the psychological drawbacks of the unanticipated retirement, William$$s financial situation is poor because he had not planned adequately for retirement. His situation has inspired Harry and Belinda to look at their own retirement planning. Together they now make about $$200,000$ per year $($$$110,000$ for Belinda and $$90,000$ for Harry$)$ and would like to have a similar level of living when they retire. Harry and Belinda are both in their early $40$s$,$ and they recently checked into their annual Social Security Benefits Statements, which indicated that they each could expect about $$32,000$ per year in today$$s dollars as retirement benefits in $25$ years at age $67.$ Although their retirement is a long way off, they know that the sooner they put a plan in place, the larger their retirement nest egg will be

$($b$)$

Both Harry and Belinda are covered by defined$-$contribution retirement plans at work. Harry contributes $$5,400$ to his plan and his employer puts in $$2,700.$ Belinda contributes $$6,600$ and her employer puts in $$3,300.$ Assuming a $7$ percent rate of return, what would their combined retirement nest egg $($now valued at $$400,000)$ total $25$ years from now if they keep contributing? $($Hint: Use Appendix A$-3$ or visit the Garman$/$Forguecompanion website.$)$$$1$ Paid at the End of Each Period$)($Used to Compute the Compounded

Future Value of a Stream of Income Payments$)$