Use Worksheet 14.1

to help Georgia and Jude Sullivan determine how much they need to retire early in about 20 years. Both have promising careers, and both make good money. As a result, they're willing to put aside whatever is necessary to achieve a comfortable lifestyle in retirement. Their current level of household expenditures (excluding savings) is around $84,000 a year, and they expect to spend even more in retirement; they think they'll need about 125% of that amount. (Note: 125% equals a multiplier factor of 1.25). They estimate that their Social Security benefits will amount to $30,000 a year in today's dollars and they'll receive another $33,000 annually from their company pension plans. Georgia and Jude feel that future inflation will amount to about 3% a year, and they think they'll be able to earn about 6% on their investments before retirement and about 4% afterward. See Appendix A

a-Use Worksheet 14.1 to find out how big Sullivans' investment nest egg will have to be. Round your answer to the nearest dollar.

b- How much they'll have to save annually to accumulate the needed amount within the next 20 years. Round your answer to the nearest dollar.

e$

Thistert Home Draw Page Layout Formulas Data Review View 9 24 C AB D H E G PROJECTING RETIREMENT INCOME AND INVESTMENT NEEDS Date Name(s) S % $ $ $ 1. Estimated Household Expenditures in Retirement: A Approximate number of years to retirement B. Current level of annual household expenditures, excluding savings 3 C. Estimated household expenses in retirement as a percent of current expenses 16 D. Estimated annual household expenditures in retirement (8 *C) 8. Estimated Income in Retirement: 0 E Social security, annual income 2 F. Company/employer pension plans, annual amour 4 G. Other sources, annual amounts 26 H. Total annual income (E+F+G) 1. Additional required income, or annual shortfall (D-H) 30 l. Inflation Factor: 32 J. Expected average annual rate of infilation over the period to retirement 34 K. Inflation factor in Appendix A): Based on 0 years to 35 retirement (A) and an expected average 36 annual rate of inflation () of 0% 38 L Size of inflation-adjusted annual shortfall (K) 40 IV. Funding the Shortfall: 42 M. Anticipated return on assets held after retirement N. Amount of retirement funds required-size of nest egg (L+M) 0. Expected rate of return on investments prior to retirement P. Compound interest factor in Appendix B): 49 Based on O years to retirement (A) and an expected rate of return 50 on investments of 0% Q. Annual savings required to fund retirement nest egg (N+P) S4 Note:Parts and I are prepared in terms of current (today's) dollars. 55 1.000 0.000 52 56 57 58 59 60 61 62 63 64 55