Matthew, age 37, currently makes $90,000. His wage replacement ratio is determined to be 85 percent. He expects inflation will average 2.5 percent for his entire life expectancy. He expects to earn 7 percent on his investments and retire at age 70. Based on family history, he expects to live to age 95. He has received his Social Security benefits statement, which indicated that his Social Security retirement benefit in today's dollars is $13,000 per year. Calculate the amount Matthew must save at the end of each month, assuming that he has current retirement savings of $50,000, to accumulate the capital needed for retirement at age 70.
Matthew, age 37, currently makes $90,000. His wage replacement ratio is determined to be 85 percent. He expects inflation will average 2.5 percent for his entire life expectancy. He expects to earn 7 percent on his investments and retire at age 70. Based on family history, he expects to live to age 95. He has received his Social Security benefits statement, which indicated that his Social Security retirement benefit in today's dollars is $13,000 per year. Calculate the amount Matthew must save at the end of each month, assuming that he has current retirement savings of $50,000, to accumulate the capital needed for retirement at age 70.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
M6
Transcribed Image Text:Matthew, age 37, currently makes $90,000. His
wage replacement ratio is determined to be 85
percent. He expects inflation will average 2.5
percent for his entire life expectancy. He expects to
earn 7 percent on his investments and retire at age
70. Based on family history, he expects to live to
age 95. He has received his Social Security benefits
statement, which indicated that his Social Security
retirement benefit in today's dollars is $13,000 per
year.
Calculate the amount Matthew must save at the
end of each month, assuming that he has current
retirement savings of $50,000, to accumulate the
capital needed for retirement at age 70.
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