Magdalena, age 35, has $72,000 accumulated in savings. She projects she will save $23,000 a year until her retirement at age 67. Her current cost of living is $100,000. In retirement, she will receive $31,704 per year in Social Security and $20,000 in pension, both in today’s dollars and both expected to rise by the rate of inflation. Her retirement cost of living is expected to decline by $6,000, in current dollars in the first year of retirement and thereafter grow at the projected inflation rate of 3%. Her projected annual investment return is 6%. a. Calculate her accumulated savings at retirement. b. Calculate her annual income, expenditures, and annual withdrawal for the first year of retirement. c. Develop a withdrawal rate. d. Does she meet the withdrawal rate method of deciding whether she will have sufficient funds to retire? If not, what do you recommend and why?
Magdalena, age 35, has $72,000 accumulated in savings. She projects she will save $23,000 a year until her retirement at age 67. Her current cost of living is $100,000. In retirement, she will receive $31,704 per year in Social Security and $20,000 in pension, both in today’s dollars and both expected to rise by the rate of inflation. Her retirement cost of living is expected to decline by $6,000, in current dollars in the first year of retirement and thereafter grow at the projected inflation rate of 3%. Her projected annual investment return is 6%.
a. Calculate her accumulated savings at retirement.
b. Calculate her annual income, expenditures, and annual withdrawal for the first year of retirement.
c. Develop a withdrawal rate.
d. Does she meet the withdrawal rate method of deciding whether she will have sufficient funds to retire? If not, what do you recommend and why?
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
