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.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 42P

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