Bill, age 45, wants to retire at age 60. He currently earns $60,000 per year. His goal is to replace 80% of hispreretirement income. He wants the retirement income to be adjusted for inflation. Bill has an investmentportfolio valued at $150,000, which is currently earning 10% average annual returns. Bill expects inflation toaverage 2% and, based on his family health, predicts he will live to age 90. Bill is currently saving 7% of his grossincome at each year-end and expects to continue this level of savings. Bill wants to ignore any Social Securitybenefits for purposes of retirement planning. How much total capital will Bill need at age 60?

Retirement income needed depends the income needed in retirement depending on the period of…

Bill, age 45, wants to retire at age 60. He currently earns $60,000 per year. His goal is to replace 80% of preretirement income. He wants the retirement income to be adjusted for inflation. Bill has an investme portfolio valued at $150,000, which is currently earning 10% average annual returns. Bill expects inflatio average 2% and, based on his family health, predicts he will live to age 90. Bill is currently saving 7% of income at each year-end and expects to continue this level of savings. Bill wants to ignore any Social Se benefits for purposes of retirement planning. How much total capital will Bill need at age 60?

Bill, age 45, wants to retire at age 60. He currently earns $60,000 per year. His goal is to replace 80% of preretirement income. He wants the retirement income to be adjusted for inflation. Bill has an investme portfolio valued at $150,000, which is currently earning 10% average annual returns. Bill expects inflatio average 2% and, based on his family health, predicts he will live to age 90. Bill is currently saving 7% of income at each year-end and expects to continue this level of savings. Bill wants to ignore any Social Se benefits for purposes of retirement planning. How much total capital will Bill need at age 60?

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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A woman is planning for retirement in 30 years and decides she can deposit $6,000 each year on December 31 into a retirement savings plan that she expects will pay 6% interest. In 20 years she also expects to receive a small inheritance of $12,000 that she can also put into her retirement fund. The woman anticipates that her retirement fund will need to last 20 years; she estimates that she will need $60,000 at the end of each year in retirement to cover her living expenses. Her plan is flawed. How much extra does she need to save every year (rounded to dollars and cents) to achieve her goals? (Do not round interim calculations)
Bella is 23 years old and wants to invest money for her retirement. She wants to have $2,000,000 saved up when she retires at age 65. A) If she can earn 10% per year in an equity mutual fund, calculate the amount of money she would have to invest in equal annual amounts to achieve her retirement goal. B) Alteratively, how much would she have to invest in equal monthly amounts starting at the end of the current year or monthly respectively.
Simon just turned 66 and is trying to decide whether to take his Social Security benefits today or to wait until he is 70. The risk-free rate of interest is 2%, and Simon anticipates that this rate will not change in the foreseeable future. If Simon decides to take his benefits at age 66 (his current age), he will get 12*$2,216 = $26,592 per year. If he waits 4 years, he will get $3,067 per month. 1) Simon estimates that he will die on his 85th birthday. Should he wait until 70 or take the Social Security now? Note: In doing this problem, assume that benefits are paid at the end of the year in which they are taken. Also assume that Simon will die exactly on his birthday. Your Retirement Benefit Estimate The amount you receive when you first start your benefits sets the base amount you will get for the rest of your life. You can get lower monthly payments for a longer period of time or higher monthly payments over a shorter period of Jime. Assuming you continue earning about the same…
Ruby is 25 and has a good job at a biotechnology company. She currently has $10,400 in an IRA, an important part of her retirement nest egg. She believes her IRA will grow at an annual rate of 8 percent, and she plans to leave it untouched until she retires at age 65. Ruby estimates that she will need $875,000 in her total retirement nest egg by the time she is 65 in order to have retirement income of $20,000 a year (she expects that Social Security will pay her an additional $15,000 a year). a. How much will Ruby's IRA be worth when she needs to start withdrawing money from it when she retires? Use Exhibit 1-A (Round FV factor to 3 decimal places and final answer to the nearest whole dollar.) Future value of IRA b. How much money will she have to accumulate in her company's 401(k) plan over the next 40 years in order to reach her retirement income goal? (Round your answer to the nearest whole dollar.) Required future value of 401(k)
Colin is 40 years old and wants to retire in 27 years. His family has a history of living well into their 90s. Therefore, he estimates that he will live to age 95. He currently has a salary of $150,000 and expects that he will need about 75% of that amount annually if he were retired. He can earn 8 percent from his portfolio and expects inflation to continue at 3 percent. Some years ago, he worked for the government and expects to receive an annuity that will pay him $20,000 in today's dollars per year beginning at age 67. The annuity includes a cost of living adjustment, which is equal to inflation. Colin currently has $200,000 invested for his retirement. His Social Security benefit in today's dollars is $30,000 per year at normal age retirement of age 67. How much does he need to accumulate at age 67 exclusive of his pension and Social Security benefits? ANSWER CHOICES: $2.2 million $2.1 million $2.8 million $2.9 million
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Alex Moore is 43 years old and has accumulated $78,000 in his self-directed defined contribution pension plan. Each year he contributes $1.500 to the plan, and his employer contributes an equal amount. Alex thinks he will retire at age 60 and figures he will live to age 83. The plan allows for two types of investments. One offers a 4% risk-free real rate of return. The other offers an expected return of 10% and has a standard deviation of 34% Alex now has 40% of his money in the risk free Investment and 60% in the risky Investment. He plans to continue saving at the same rate and keep the same proportions invested in each of the investments His salary will grow at the same rate as inflation. of the total amount of new funds that will be invested by Alex and by his employer on his behalf, how much will he put into the safe account each year, how much into the risky account? Mumple Choice C $1.500 $1.500 $1,200 $1,800 $2,000, $1,000 $2.500 $500

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