Question
Your client, Steven, age 43, has come to you for assistance with retirement planning. He provides you with the following facts. He earns $80,000 annually.
Your client, Steven, age 43, has come to you for assistance with retirement planning. He provides you with the following facts.
He earns $80,000 annually.
His wage replacement ratio has been determined to be 80%.
He expects inflation will average 3% for his entire life expectancy.
He expects to work until 68, and live until 90.
He currently has $60,000 saved, and he is averaging a 9% rate of return and expects to continue to earn the same return over time.
He has been saving $3,000 annually in his 401(k) plan.
Additionally, Social Security Administration has notified him that his annual retirement benefit, in todays dollars will be $26,000.
4. Provide Steven with 3 alternatives for meeting his retirement goal. In doing so, use calculations to show the impact of each alternative.
Before hiring you as his financial planner, Steven was going to another planner. He mentions that the other planner calculated this retirement needs another way, so he asks you to calculate his retirement needs using other methods.
5. Using the capital preservation method, calculate how much capital Steven needs in order to retire at 68.
6. Using the purchasing power preservation method, calculate how much capital Steven needs in order to retire at 68.
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