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

See similar textbooks

Similar questions

George plans to retire in 15 years. His current household expenses are $91000 per year. He estimates that when he retires, he will no longer have $4400 in monthly mortgage payments, $6600 in annual commuting expenses, and $28000 in annual budgeted 401(k) contributions. However, he does expect that his health-care costs will rise by $5300 per year and his entertainment expenses to total $8800 each year. What will be his estimated retirement expenses, in today’s dollars, if using the adjusted expense method? $17700 $8950 $60800
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
Jordan is 55 and wants to retire in 12 years. His family has a history of living well into their 90s. Therefore, he estimates that he will live to age 97. He currently has a salary of $100,000 and expects that he will need about 82% of that amount annually if he were retired. He can earn 9 percent in his portfolio and expects inflation to continue at 3 percent. Jordan currently has $325,000 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 save each year at year end to meet his retirement goals? 1. $6,245. 2. $7,659. 3. $8,432. 4. $9,252.
Oscar is looking forward to retirement in a few years when he will have completed 20 years of pensionable service. Oscar's pension plan provides an annual pension benefit of 1.5% of average career earnings for each year of pensionable service. Using information from Oscar's pension statements, he estimates his career average annual earnings will be $50,000 when he retires with 20 years of service. Given these assumptions, calculate Oscar's annual pension benefit that he can expect to receive when he retires. $7,500 $10,000 $15,000 $20,000
The Ali plan to retire and start receiving their Social Security benefits at the same time, when Jimmy is 67 and Lucy is 62 years old. Their monthly Social Security retirement benefits at those ages in today's dollars are estimated to be $3,200 for Jimmy and $2,000 for Lucy. They think their expenses in retirement in today's dollars will be 70% of their total cash outflows now. Other than Social Security, they will rely on their retirement savings in order to meet their retirement expenses. They want to assume they will die in the same year, when Jimmy is 95 and Lucy is 90 years old.Determine what the payments will be in the distribution phase. These will be the withdrawals Jimmy and Lucy will need to take monthly from their accounts, in order to meet their retirement expenses. How much is that monthly amount?Note: this question is asking about the withdrawals they will need, not about the expenses they will be incurring monthly.
Rajesh and Priya plan to retire at age 60 with a retirement income of $48,000 a year from their savings. Rather than pay themselves the whole amount at the beginning of each year, they have decided that withdrawing payments of $12,000 at the beginning of each quarter of gives them the right balance of liquidity and maximized interest earnings. They feel they can safely earn an interest rate of 5.75%, compounded quarterly, on their money and they are budgeting based on the prediction that they will live until they are 90 years old. How much money will they have to have saved by the time they are 60 and ready to begin their retirement, in order fulfill this plan? [Blank-1]If the same total calculated above was to be saved, but no interest earned whatsoever, how much would be available to live on each quarter? [Blank-2]If the full 30 years are lived and quarterly budget spent, how much money in total will have been utilized in retirement? [Blank-3]How much will have been earned in…
Devin has an opportunity to save $285 per month at an APR of 4.8% in a 401K plan through work. He plans to retire in 25 years. The income taxes are at 32% for him. (1) How much will Devin have deposited into the account by the time he retires? (Express your answer rounded correctly to the nearest cent!) (2) How much interest will Devin have earned on his investment by the time he retires? Use Excel's FV function to help answer this question. (Express your answer rounded correctly to the nearest cent!) 2$ (3) If Devin's company offers a 30% matching contribution, use Excel's FV function to determine how much his investment will be worth when he retires. (Express your answer rounded correctly to the nearest cent!)
Joe's starting salary as a mechanical engineer is around $100,000. Joe is planning to place a total of 8% of his salary each year in the mutual fund. Joe expects a 5% salary increase each year for the next 30 years of employment. If the mutual fund will average 9% annual return over the course of his career, what can Joe expect at retirement?
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

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS