Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Use the following information to answer questions 6-9. Brent and Sharon are getting close to retirement and want to make sure they are on track

Use the following information to answer questions 6-9.
Brent and Sharon are getting close to retirement and want to make sure they are on track for a comfortable lifestyle. They want to retire in 10 years. They currently make $120,000 per year in gross income. They pay FICA taxes of $9,180 per year; have commuting expenses of $2,000 per year, Uniform expenses (inc. dry cleaning) of $1,200 per year, a monthly mortgage payment of $950 per month and will be paid off in 10 more years. They eat lunch out at work often which runs $1,300 per year. They anticipate some expenses will increase during retirement: Medical insurance will increase by 6,000 per year, travel expenses will increase by $5,000 per year, and hobby expenses will increase by $4,000 per year. They currently save $12,000 per year. Brent has a defined benefit pension plan at work that will pay him $2,000 (in todays dollars) each month and adjusts for inflation each year.
6.) What is their current annual wage replacement need for retirement in todays dollars?
a.) $73,920
b.) $84,370
c.) $93,370
d.) $97,920
e.) Some other amount. (indicate the amount here ____________________________)
7.) What is their annual retirement need when they start retirement 15 years from now? In other words, how much will they need to withdraw from their retirement account each year to fund their retirement 15 years from now? Assume inflation averages 2.5% per year.
a.) $141,817
b.) $137,472
c.) $135,228
d.) $122,193
e.) $107,058
8.) Assuming inflation averages 2.5% and their investment rate of return is 9% per year, and they expect to live 25 years in retirement. How much will they need in their retirement accounts when they retire in 15 years from now?
a.) $6,554,942
b.) $2,719,865
c.) $1,409,299
d.) $1,325,258
e.) $1,081,454
9.) Assume they have already saved $300,000 in their retirement accounts. How much more do they need to save on an annual basis (at the end of each year) to reach their goal?
a.) $17,764
b.) $13,269
c.) $12,193
d.) $10,781
e.) $9,891

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Contemporary Issues In Social Science

Authors: Simon Grima, Ercan Özen, Hakan Boz

1st Edition

1800439318, 9781800439313

More Books

Students also viewed these Accounting questions

Question

What is the major disadvantage of the high-low method? AppendixLO1

Answered: 1 week ago