You are the financial planner and Marc & Maral have come to you for recommendations. Marc & Maral earn $100,000 per annum now and estimate that in retirement they will need to have $50,000 a year after tax. Marc & Maral now have $300,000 in investments and they would like to retire in 15 years when Marc is 60. Their investments grow 5% annually. They imagine they will be retired for 30 years.

They are concerned about their retirement and ask how much they will have to save each year from now until retirement to fund their retirement lifestyle. At retirement, they expect to receive $24,000 annually before taxes at the start of the year from government programs. They also anticipate an annual real return of 4% after tax. Their tax rate at retirement will be 20%.

a. How much do they need to have saved when they retire?

b. How much will their present savings grow to by retirement? (Ignore taxes)

c. Upon retirement what is the value of their after-tax income from government programs in retirement?

d. Considering the government programs and their investments alone, how much do they need to save by the end of each year until retirement?