John Doe, a 23-year young newly graduated engineer just got a job in a major engineering firm. Human resources told him that he could join the company's 401K Plan, and if his maximum contribution is 10 percent of his gross annual salary then company will match another 5% to his contribution. He is paid $38 per hour, and he gets a 2.5% raise every other year and after 20 years of work he is laid off. Roth IRA is $6000 per year during this period (Age 23-42). He finds another job with an annual salary of $120'000 per year and works till his retirement (age 43-67). The new company doesn't have a retirement plan and he can only save in his Personal IRA $15000 per year on the average. During second half of his career the salary increase is only 3% every five years and there are no medical benefits either. John was assuming that at retirement he has paid off his mortgage, he doesn't have a major consumer debt and based on today's buying power he only needs $5000 to live well. For this project you are required to examine: 1. His NEED during retirement if inflation rate is 5% and his life expectancy is 95 years. 2. How much does he need to retire @ ages 50, 55, 60, 65 and 67? 3. If he invests in Roth IRA account at what age he could take early retirement? 4. You may go to Morningstar.com to research and use the funds that their performance is about 10% or more and site your source. 5. Must use Excel to show work. th 6. Complete project is due April 19
John Doe, a 23-year young newly graduated engineer just got a job in a major engineering firm. Human resources told him that he could join the company's 401K Plan, and if his maximum contribution is 10 percent of his gross annual salary then company will match another 5% to his contribution. He is paid $38 per hour, and he gets a 2.5% raise every other year and after 20 years of work he is laid off. Roth IRA is $6000 per year during this period (Age 23-42). He finds another job with an annual salary of $120'000 per year and works till his retirement (age 43-67). The new company doesn't have a retirement plan and he can only save in his Personal IRA $15000 per year on the average. During second half of his career the salary increase is only 3% every five years and there are no medical benefits either. John was assuming that at retirement he has paid off his mortgage, he doesn't have a major consumer debt and based on today's buying power he only needs $5000 to live well. For this project you are required to examine: 1. His NEED during retirement if inflation rate is 5% and his life expectancy is 95 years. 2. How much does he need to retire @ ages 50, 55, 60, 65 and 67? 3. If he invests in Roth IRA account at what age he could take early retirement? 4. You may go to Morningstar.com to research and use the funds that their performance is about 10% or more and site your source. 5. Must use Excel to show work. th 6. Complete project is due April 19
Chapter15: Choice Of Business Entity—other Considerations
Section: Chapter Questions
Problem 55P
Related questions
Question
Transcribed Image Text:John Doe, a 23-year young newly graduated engineer just got a job in a major engineering firm. Human
resources told him that he could join the company's 401K Plan, and if his maximum contribution is 10 percent
of his gross annual salary then company will match another 5% to his contribution. He is paid $38 per hour,
and he gets a 2.5% raise every other year and after 20 years of work he is laid off. Roth IRA is $6000 per year
during this period (Age 23-42).
He finds another job with an annual salary of $120'000 per year and works till his retirement (age 43-67). The
new company doesn't have a retirement plan and he can only save in his Personal IRA $15000 per year on the
average. During second half of his career the salary increase is only 3% every five years and there are no
medical benefits either.
John was assuming that at retirement he has paid off his mortgage, he doesn't have a major consumer
debt and based on today's buying power he only needs $5000 to live well.
For this project you are required to examine:
1. His NEED during retirement if inflation rate is 5% and his life expectancy is 95 years.
2. How much does he need to retire @ ages 50, 55, 60, 65 and 67?
3. If he invests in Roth IRA account at what age he could take early retirement?
4. You may go to Morningstar.com to research and use the funds that their performance is about 10% or more
and site your source.
5. Must use Excel to show work.
th
6. Complete project is due April 19".
(You are required to show all your work and make valid assumptions)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Individual Income Taxes
Accounting
ISBN:
9780357109731
Author:
Hoffman
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Pfin (with Mindtap, 1 Term Printed Access Card) (…
Finance
ISBN:
9780357033609
Author:
Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:
Cengage Learning