Question: You are 25 years old and expect to retire at 70 with a 20 year retirement. You are just starting to plan for retirement and have no money in the plan yet. You expect to earn an average of 7% in accumulation and 4% in retirement.
(a) If you want a retirement income of $100,000 per year how much will you need the day you retire and how much must you contribute during accumulation?
(b) You are now 45 and have been contributing the amount you calculated in part (a). You have $200,000 in the plan. Can you still expect the $100,000 per year with the same contributions?
(c) A bad week in the stock market takes away 30% of that $200,000. If you decide to increase your contribution to make up for it, what is the new contribution?
(d) If you stick to your contribution from part (a), can you retire two years later with at least $100,000 per year income?