a. How much will they need to save each year to meet their retirement goal? They will make their first payment today. b. If they wait until age 40, how much will they need to save each year? C. Assume they will save $3,000 per year, how long will they be able to live off of their retirement savings before having to move in with their children?
a. How much will they need to save each year to meet their retirement goal? They will make their first payment today. b. If they wait until age 40, how much will they need to save each year? C. Assume they will save $3,000 per year, how long will they be able to live off of their retirement savings before having to move in with their children?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Aa.68.
Transcribed Image Text:Flo and Joe Bagadonuts are planning their retirement. They are both 35 years old and plan
to retire at 65. Their income is currently $55,000 per year. They expect their income to
grow at 2% per year until they retire. They want their annual retirement income to be
80% of their household income at the time they retire. Assume they will need 25 years
of retirement income, they will put their savings into a value-oriented equity mutual fund
earning 8% per year. At retirement they will switch their savings to a balanced
income fund which will earn 6 percent.
a.
How much will they need to save each year to meet their retirement goal? They will
make their first payment today.
b. If they wait until age 40, how much will they need to save each year?
C.
Assume they will save $3,000 per year, how long will they be able to live off of
their retirement savings before having to move in with their children?
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