Problem:
Your brother, Eric, has asked your advice on creating a retirement plan. He is 35 years old, earns US$55,000 per year with average raises of 4% per year, and plans to work until the age of 65. His company offers a 401(k) plan with matching contributions of up to 8% of his income that has been earning an average of 10% per year.
Your brother is very active and loves to travel. After retirement, he plans to travel the world and be very active. He is unsure how to plan for retirement, does not understand the different retirement investment options, and needs your help.
Individually: Develop a spreadsheet that shows how much Eric can expect to have in his retirement account when he turns 65 if he begins depositing 8% of his salary now.
As a group, prepare a presentation for Eric that explains how to plan for retirement, common retirement investment options, and the tax implications of each investment. Using the spreadsheets prepared by individual team members, explain compounding, the time value of money, and the importance of retirement planning and investing. Make a recommendation to Eric about his retirement account.