ukasz is at it again. He never finished his retirement plan and wants to run new numbers so that he can begin his first contributions in the New Year.

First he realizes that he will need more money in retirement and now plans to withdraw $5,000 at the end of each month of his retirement. He assumes all contributions and withdrawals to his 401(k) Plan are made at the end of each month.

ukasz is now 30 years old and decides his previous estimate of retiring early at 55 years old was a little aggressive. He did some research and now assumes he will use the average age of retirement in the United States which is 62 years old. He further researches the average life expectancy and he reluctantly revises his forecast down to 77 years and 5 months old for males in the United States. ukasz' existing balance in his 401(k) Plan is now $3,955.70.

He figures that he should be able to increase his contribution over the years as his earning power increases. He intends to double his contribution in the second savings period and double it again in a new third savings period. He also called his company's Human Resources department and was pleased to hear that his employer will match 75% of his contributions.

ukasz revisits his Chapter 10 historical average returns and now hopes to receive a 13% annual return compounded monthly during his first savings period (180 months from 1/1/2019 through 12/31/2033), 10% during his second savings period (144 months from 1/1/2034 through 12/31/2045), 8% during his third savings period (60 months from 1/1/2046 through 12/31/2050), and 6% /during his retirement period (185 months from 1/1/2051 through 5/31/2066).

ukasz now understands that he can make these contributions to his 401(k) Plan before taxes are taken out. He assumes the tax rate will be 34% during the savings periods. At 34%, if Lukasz' contributes $1 of his after-tax take-home pay, the gross amount he will be able to contribute to his 401(k) Plan is $1.52 (calculated as $1.52 - $1.52(0.34) = $1). In other words, by contributing $1.52 (rounded) to his 401(k) account, ukasz' take-home pay is only reduced by $1.

ukasz would also like to leave behind two gifts upon his death. He would like $50,000.01 each to go to his first two grandchildren who attain Master's degrees from NYU. Alternatively, if there are not two grandchildren who meet the condition, ukasz would like the remaining amount to be given to NYU to fund facilities upgrades (namely improved electricity sockets and faster computers).

Summary Saving Period 1 Begin date 1/1/2019 End date 12/31/2033 Beginning age 30 Ending age 45 Years 15 Months 180 Contribution 100% Employer match 75% Annual % return 13% Tax rate 34% 401(k) Plan starting balance $3,955.71 Withdrawal amount n/a Saving Period 2 1/1/2034 12/31/2045 45 57 12 144 Saving Period 3 1/1/2045 12/31/2050 57 Re ti re me nt 1/ 1/2051 5/ 31/ 2056 52 77