MORTGAGE 5106-Saben is 40 and wants to retire in 20 years.

  

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?

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?

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.

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.

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?

Question 7 1 pts Skip to question text.

Martin began saving $5,000 per year from age 25 to age 35 (ten years) and then invested the funds for another 30 years. Bob began saving at age 35 and saved $5,000 each year until he retired at age 65 (30 years). At what rate of return will Martin and Bob have the exact same balance at age 65?