Your client, Bill Smith engages you to assist him in planning for his retirement. Specifically, he wants the following question answered:

In addition to the amounts described below, how much money will I need to invest at the end ofeach of the next three years (i.e., December 2016, 2017 and 2018), invested at 4% (compounded annually), so I may retire at my desired standard of living at the end of three years from now (December 31, 2018)?

Assume today is January 1, 2016 and ignore the impact of income taxes throughout.

In order to answer Bills question, you gather the following information from him:

- Bill desires an income in todays dollars of $85,000 during each year of his retirement, which is assumed to last 16 years.

- One of Bill greatest concerns is inflation. He recently read inflation is expected to average 2.5% annually over the next twenty years.

-Bill will be eligible for Social Security. Assuming Social Security benefits increase 2% per year as they have in the past, Bill would receive $20,500 in the first year of retirement, increasing thereafter at the historical rate.

- Bill has been told by his employer that at December 31, 2017 he will be eligible for a fixed pension of $26,000 per year.

- Bill currently has $15,000 in a savings account earning 1% compounded annually. He states that these funds will be made available to support his retirement savings pool.

In addition to the answer to his question, Bill asks that you provide sufficient detail so he may review and understand your analysis.