Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
7th Edition
ISBN: 9780357033609
Author: Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher: Cengage Learning
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Question
Chapter 14, Problem 3FPE
Summary Introduction
To calculate: The annual savings
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Determine how much George and Jude Sullivan need to retire early in about 20 years. Both have promising careers, and both make good money. As a result, they’re willing to put aside whatever is necessary to achieve a comfortable lifestyle in retirement. Their current level of household expenditures (excluding savings) is around $75,000 a year, and they expect to spend even more in retirement; they think they’ll need about 125 percent of that amount. (Note: 125 percent equals a multiplier factor of 1.25.) They estimate that their Social Security benefits will amount to $20,000 a year in today’s dollars and that they’ll receive another $35,000 annually from their company pension plans. George and Jude feel that future inflation will amount to about 3 percent a year, and they think they’ll be able to earn about 6 percent on their investments before retirement and about 4 percent afterward. Find out how big their investment nest egg will have to be and how much they’ll have to save…
to help George and Jude Sullivan determine how much they need to retire early in about 20 years. Both have promising careers, and both make good money. As a result, they’re willing to put aside whatever is necessary to achieve a comfortable lifestyle in retirement. Their current level of household expenditures (excluding savings) is around $75,000 a year, and they expect to spend even more in retirement; they think they’ll need about 125 percent of that amount. (Note: 125 percent equals a multiplier factor of 1.25.) They estimate that their Social Security benefits will amount to $20,000 a year in today’s dollars and that they’ll receive another $35,000 annually from their company pension plans. George and Jude feel that future inflation will amount to about 3 percent a year, and they think they’ll be able to earn about 6 percent on their investments before retirement and about 4 percent afterward. Find out how big their investment nest egg will have to be and how much they’ll have…
Molly Lincoln, a 30-year-old personal loan officer at First National Bank, understands the importance of starting early when it comes to saving for retirement. She has committed $4,000 per year for her retirement fund and assumes that she'll retire at age 65.
How much will Molly have accumulated when she turns 65 if she invests in equities and earns 10 percent on average? Round your answer to the nearest dollar.
Molly is urging her friend, Isaac Stein, to start his plan right away, too, because he's 45. What would his nest egg amount to if he invested in the same manner as Molly and he, too, retires at age 65? Round your answer to the nearest dollar.
2A. Nest egg amount at 6%
2B. Nest egg amount at 10%
Chapter 14 Solutions
Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
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Similar questions
- Your parents will retire in 18 years. They currently have $250,000 saved, and they think they will need $1,000,000 at retirement. What annual intrest rate must they earn to reach their goal, assuming they don't save any additional funds?arrow_forwardYour parents will retire in 20 years and currently have $108,000 saved in a retirement account. They think they will be okay with $700,000 at retirement since your mom also has a pension and they should both get some money from Social Security. What annual interest rate must they earn to reach their goal, assuming they don't save any additional funds? 7.02% 8.36% 8.97% 9.80% 10.31%.arrow_forwardYour parents will retire in 19 years. They currentlyhave $350,000 saved, and they think they will need $800,000 at retirement. What annual interest rate must they earn to reach their goal, assuming they don’t save any additional funds?arrow_forward
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