Bill has an emergency fund already set aside, so he can use his $400,000 of savings for retiremenr. How much can he withdraw on a monthly basis to supplement his retirement annuity if his investments return 5 percent annually and he expects to live 30 years? 2. Ignoring his Social Secuirty benefit, is the amount determined in question 1 sufficient to meet his current monthly expenses (keep in mind that he will receive a pension of $2,800 per month)? If not, how long will his retirement last if his current expenses remain the same? What if his expenses are reduced to $4,500 per month?
Bill has an emergency fund already set aside, so he can use his $400,000 of savings for retiremenr. How much can he withdraw on a monthly basis to supplement his retirement annuity if his investments return 5 percent annually and he expects to live 30 years? 2. Ignoring his Social Secuirty benefit, is the amount determined in question 1 sufficient to meet his current monthly expenses (keep in mind that he will receive a pension of $2,800 per month)? If not, how long will his retirement last if his current expenses remain the same? What if his expenses are reduced to $4,500 per month?
Chapter12: Tax Credits And Payments
Section: Chapter Questions
Problem 35P
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Question
1. Bill has an emergency fund already set aside, so he can use his $400,000 of savings for retiremenr. How much can he withdraw on a monthly basis to supplement his retirement
2. Ignoring his Social Secuirty benefit, is the amount determined in question 1 sufficient to meet his current monthly expenses (keep in mind that he will receive a pension of $2,800 per month)? If not, how long will his retirement last if his current expenses remain the same? What if his expenses are reduced to $4,500 per month?
Transcribed Image Text:Mini-Case
Bil Petty, 56, just retired after 31 years of teaching. He is a hus-
band and father of two children who are still dependent. He re-
ceived a $150,000 lump-sum retirement bonus and will receive
$2,800 per month from his retirement annuity. He has saved
$150,000 in a 403(b) retirement plan and another $100,000 in
other accounts. His 403(b) plan is invested in mutual funds, but
most of his other investments are in bank accounts earning 2 or
to invest his lump-sum bonus and other accounts now that he
has retired. He also wants to know how much he can withdraw
per month, considering he has two children and a nonworking
spouse. Because he has children, his current monthly expenses
total $5,800. He is not eligible for Social Security until age 62,
when he will draw approximately $1,200 per month; however,
he would rather defer drawing on Social Security until age 67 to
3 percent annually. Bill has asked your advice in deciding where increase his monthly benefit amount to $1,550.
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