Microsoft Word - Ch7-Retirement.docx
Benedict's Retirement Planning
Benedict is 37 years old and would like to establish a retirement plan. Develop a spreadsheet model that could be used to assist Benedict with retirement planning.
Your model should include the following input parameters:
Benedict's current age = 37 years
Benedict's current total retirement savings = $259,000
Annual rate of return on retirement savings = 4 percent
Benedict's current annual salary = $145,000
Benedict's expected annual percentage increase in salary = 2 percent/year Benedict's own percentage of annual salary contributed to retirement = 6 percent Benedict's expected age of retirement = 65
Benedict's expected annual expenses after retirement (current dollars) = $90,000 Rate of return on retirement savings after retirement = 3 percent
Income tax rate postretirement = 15 percent
Assume that Benedict's employer contributes 6% of Benedict's salary to his retirement fund in addition to the money Benedict himself puts aside. Benedict can make an additional annual contribution to his retirement fund before taxes (tax free) up to a contribution of $16,000. Assume he contributes $6,000 per year. Also, assume an inflation rate of 2%.
Managerial Report:
Your spreadsheet model should provide the accumulated savings at the onset of retirement as well as the age at which funds will be depleted (given assumptions on the input parameters). As a feature of your spreadsheet model, build a data table to demonstrate the sensitivity of the age at which funds will be depleted to the retirement age and additional pre-tax contributions. Similarly, consider other factors you think might be important.
Develop a report for Benedict outlining the factors that will have the greatest impact on his retirement.