The Smiths had $110,000 in savings at age 51. They had a desired retirement age of 65. They want to fund through age 92. Assume a 4 percent inflation rate and a 5 percent after-tax rate for investment both pre and post- retirement. They have household income of $140,000, which is increasing at the rate of inflation. Their expenditures including taxes are $125,000 a year. They estimate that in retirement they will receive $28,000 a year together in Social Security and Mr. Smith will receive a $12,000 a year pension, both in todays dollars. Their retirement expenditures would be $90,000 a year in todays dollars.

Calculate

a) The lump sum needed at retirement

b) Current assets available at retirement

c) The difference between needs and resources

d) Yearly savings needed

Step	Item
3	Investment rate
3	Inflation rate
3	Real rate
3	Age at beginning of payout period
3	Age at end of payout period
3	Number of years for payout peiod
3	Current age
3	At at beginning of payout period
3	Number of years for payout peiod
3	Age at beginning of payout period
3	Current age
3	Number of years from future period to today
4	Cash inflow (pension, soc sec, etc. in today's dollars)
4	Cash outflows (discretionary and nondiscretionary expenses in today's dollars)
4	Cashshortfall (A-B = C)
5	Cash Shortfall Future
5	Lump-sum Shortfall Future
6	Assets Accumulated
6	Assets Accumulated Future
7	Additional Assets Required Future
7	Required Yearly Savings