Assignment
DIRECTIONS:
Here is the Discussion #1 Retirement Needs Analysis Discussion Problem. Please refer to the following documents (located in Content, Week
1) to assist you in solving the following capital needs problem.
1. What makes Capital Needs Analysis so Important?
2. A financial planner capital needs analysis for a client exemplar
3. Calculator capital needs analysis example
4. Capital needs analysis MS Excel spreadsheet
Submit your Capital Needs Analysis in MS Word format (with an accompanying MS Excel Spreadsheet, if you so desire) with the following file name: LastNameFirstInitial_CapitalNeedsAnalysis01.docx. For example, if you name is John Smith, the file name of your solution(s) should be SmithJ_CapitalNeedsAnalysis01.docx. Submit your Capital Needs Analysis solution to your Homework #1 Assignment Folder.
HERE IS THE CAPITAL NEEDS PROBLEM YOU ARE SOLVING:
The Smith's had $110,000 in savings at age 51. They had a desired retirement age of 65. They want to fund through age 92. Assume a 4 percent inflation rate and a 5 percent after-tax rate for investment both pre and post- retirement. They have household income of $140,000, which is increasing at the rate of inflation. Their expenditures including taxes are $125,000 a year. They estimate that in retirement they will receive $28,000 a year together in Social Security and Mr. Smith will receive a $12,000 a year pension, both in today's dollars. Their retirement expenditures would be $90,000 a year in today's dollars.
1. Calculate
a) The lump sum needed at retirement
b) Current assets available at retirement
c) The difference between needs and resources
d) Yearly savings needed
Note: When using your calculator, remember that payments need to be received at the beginning of the year and not at the end of the year.
Here is the Discussion Question
How important is a capital needs analysis for retirement planning? Can the Smith's achieve their goal?