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Saben is 40 and wants to retire in 20 years. His family has a history of living well into their 90s. Therefore, he would like to plan on living until age 100, just in case. He currently needs \$100,000 and expects that he will need about 80% of that if he were retired. He can earn 9 percent in his portfolio and expects inflation to be 3 percent annually. Some years ago, he purchased an annuity that is expected to pay him \$30,000 per year beginning at age 60. It includes an inflation rate cost of living adjustment. In addition, he received \$500,000 from his uncle BJ when he died. Saben has spent \$200,000 on his home, but is investing \$300,000 for his retirement. His Social Security benefit in today’s dollars is \$20,000. Which of the following statements is true?

 Saben needs to accumulate approximately \$1,205,578 by age 60 to fund his retirement. Saben’s current savings and other sources of income are adequate to satisfy his retirement needs.
 Saben needs to save approximately \$9,300 per year for the next 20 years to fund his retirement. Saben needs to save approximately \$7,926 per year at year end for the next 20 years to fund his retirement.

Beth just read that 40 years ago, milk was about \$1.15 per gallon and today it is about \$6 per gallon. She thought that seemed very high, especially if she can only earn 7% from her investments. She also thought that she would need about \$3 million for retirement in today’s dollars. If inflation is the same in the future as it has been over the last 40 years for a gallon of milk, how much will she need to have accumulated when she retires in 30 years?

 \$3.00 million. \$6.84 million.
 \$10.35 million. \$22.84 million.

Steven, age 43, earns \$80,000 annually; and his wage replacement ratio has been determined to be 80%. He expects inflation will average 3% for his entire life expectancy. He expects to work until 68, and live until 90. He anticipates an 8% return on his investments. Additionally, Social Security Administration has notified him that his annual retirement benefit, in today’s dollars will be \$26,000.

Using the capital preservation model, calculate how much capital Steven needs, in order to retire at 68.

 \$154,974.9475. \$1,061,342.08.
 \$1,217,311.57. \$1,317,564.25.

Steven, age 43, earns \$80,000 annually; and his wage replacement ratio has been determined to be 80%. He expects inflation will average 3% for his entire life expectancy. He expects to work until 68, and live until 90. He anticipates an 8% return on his investments. Additionally, Social Security Administration has notified him that his annual retirement benefit, in today’s dollars will be \$26,000.

Using the purchasing power preservation model, calculate how much capital Steven needs, in order to retire at 68.

 \$1,061,342.08. \$1,216,317.03.
 \$1,317,564.25. \$1,505,091.23.

Elin wants to retire in 20 years when she turns 60. Elin wants to have enough money to replace 120% of her current income less what she expects to receive from Social Security. She expects to receive \$20,000 per year from Social Security in today’s dollars. Elin is conservative and wants to assume a 6% annual investment rate of return and assumes that inflation will be 3% per year. Based on her family history, Elin expects that she will live to be 95 years old. If Elin currently earns \$100,000 per year and expects her raises to equal the inflation rate, approximately how much does she need at retirement to fulfill her retirement goals?

 \$3,880,831. \$3,930,814.
 \$3,997,256 \$4,045,303.