INSTRUCTIONS
Complete the assignment as outlined below.
Place all required documents in one file and submit for grading
OBJECTIVES
Estimate the future cost of your retirement.
Identify an average rate of return from a selected asset allocation model.
Determine the required target year savings amount you need to fund the estimated future cost of your retirement.
Compare the required target year savings amount you need to fund your retirement with the maximum amount that you can reasonably save for retirement during your target year.
Decide if you will fund employer-provided retirement options, an IRA, or both.
Step 1: Evaluate Your Financial Health
Let's focus Your Financial Plan far into the future and start investing for retirement now.
Step 2: Define Your Financial Goals
To estimate your salary, just prior to retirement, enter your target year salary and the number of years from your target year until you reach age 65 into the Retirement Planning Calculator (see attached on eCourses). Use this resource as an example https://www.transamericacenter.org/tools-and-resources/retirement-calculators?gclid=CJLBo_DW5b0CFZJj7AodJREA_Q
Complete the next two sections of the Retirement Planning Calculator by choosing your pre- and post-retirement asset allocation models. Change the scenarios on the Portfolio Allocation Calculator to develop your portfolios on the basis of desired rate of return, your risk tolerance, and your time horizon. Use the Social Security Estimator (see attached on eCourses) to determine your possible future benefits.
Enter your projected number of years in retirement (think about your family members' longevity to answer this question), your current retirement savings (Do you have any?), and, if applicable, your projected annual Social Security benefits to complete the Projected Retirement Savings Need section of the Retirement Planning Calculator. Now you have an estimate of the total savings you need to fund your retirement years as well as the required monthly and annual tax-deferred savings amounts. Enter your total savings needs at retirement, your expected tax-deferred rate of return, and your required annual savings in columns 5, 6, and 7 of the Your Personal Financial Goals Worksheet (see attached on ecourses). (NOTE: If you are including a spouse or partner in your target year plans, you will need to complete this step again.)
Step 3: Develop a Plan of Action
Balance the target year Uncommitted Expense Costs in the Master Plan Calculator with your long-term future costs for retirement.
Although just a rule of thumb, consider this simple approach.
First priority, save enough in your employer-provided account to get the full match for the year. Don't pass up "free" money in the match!
Second priority, assuming you can still afford to save more for retirement, fund an IRA.
Third priority, if you can still save more, then invest the remaining balance in your employer-provided retirement account or in a non-tax deferred account to give you more goal flexibility.
Refer to the Retirement Planning Calculator to confirm your expected rate of return. Do the amounts you have chosen to save match the suggested total annual savings amount? Use Internet sites to assist you in estimating retirement benefits using different types of accounts.
Step 4: Implement Your Plan
You may need to reconsider your priorities and review the results of Your Financial Plan. Implement your plan for your target year by committing to the retirement savings and completing one or more of these steps: (Use your critical thinking skills as this is hypothetical)
If your employer offers a cash-balance plan or pension plan that is fully funded by the employer, enter "0" in the Salary Reduction for Employer-Provided Benefits Section of the Income Page in the Master Plan Calculator.
If your employer offers a retirement plan that you must fund with pre-tax salary deferrals or contributions to your employer-provided retirement account enter the amount in the Salary Reduction for Employer-Provided Benefits Section of the Income Page in the Master Plan Calculator. (NOTE: Enter only your contribution, regardless of the employer match. The employer match amount will be contributed to your retirement account, but will not be deducted from your salary.)
If you choose to fund a Traditional or Roth IRA, enter the annual after-tax contribution amount in the Savings/Investments Section of the Committed Expense Page in the Master Plan Calculator.
If you choose to fund a taxable account to maintain flexibility for achieving other goals, enter the annual after-tax contribution amount in the Savings/Investments Section of the Committed Expense Page in the Master Plan Calculator.
If you will be in graduate or professional school or are involved in a service activity that precludes sufficient income for any retirement investment, enter "0" in the Salary Reduction for Employer-Provided Benefits Section of the Income Page in the Master Plan Calculator and enter "0" in the Savings/Investments Section of the Committed Expense Page in the Master Plan Calculator. However, it will be important for you to consider the effects of waiting as illustrated in the Retirement Planning Calculator.
Step 5: Review Your Progress, Reevaluate, and Revise Your Plan
Remember your priorities!