Troy and Kristy Reynolds (both currently age 56) have determined that they will require retirement income equal to $93,000 in today's dollars, based on their current income. They plan to retire in eight years and wish to assume an after-tax return on their investments, prior to retirement, of eight percent. They plan to readjust their assets after retirement and believe that their net return will drop to six percent. Troy's parents are both in their late eighties, and Kristy's parents are in their seventies. Troy and Kristy assume that retirement will last for 30 years, and that inflation will average two percent.

Assume that both Troy and Kristy will die at age 95, regardless the clients assumption about life expectancy.

Use the Annuity model for capital needs calculations

(1) 0.5 Points - How much income will Troy and Kristy need in their first year of retirement?

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(2) 0.5 Points - What is the amount of capital necessary at the start of retirement to support their income needs throughout retirement?

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(3) 0.5 Points - For purposes of Social Security retirement benefits, the Reynolds reach full-retirement age at age 67. Their full (combined) benefit is expected to be $30,000 in today's dollars. If the Reynolds decided to factor in Social Security and begin taking Social Security benefits when they retire at age 64, how much personal capital would they need to accumulate at retirement?

One of two Approach...

1. Given how much they are going to receive from so security how much will they now need in today's dollars from their investment portfolio and retirement accounts?
2. How much in how much in future $ would they need each year and month beginning at age 64 from their investment portfolio and retirement accounts?
3. How much capital would they need on the first day of retirement to likely provide for the necessary income from investment portfolio and retirement accounts?

Note: Assume that SSI will also increase by 2% due to its Cost of Living Auto increases (COLA)

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(4) 1 Point - The Reynolds would like to know how much they need to save each year to fund retirement. For purposes of this calculation, assume they have accumulated retirement savings of $162,491, they want to retire at age 64, they will live until age 95, and they expect to inherit $1,000,000 at age 64 (just when they are retiring). Social Security benefits are the same as described above.

Assume that they will claim SSI as described in question #3 above for this case

Answer with the amount of annual savings yet needed (omit dollar sign in answer)