Joe has just retired.  He is 55 years old.  He wants to figure out how much he can withdraw from his account each year starting today and increasing at the rate of inflation, assuming his life expectancy is 85 and that he wishes to leave $120,000 to is favorite charity when he dies.  Assume a nominal rate of return of 8% with inflation of 3.5%.  Joe’s retirement account today is valued at $3.0 million.  Verify with a schedule of annual cash flows – assume all money moves at the beginning of the year.

Run a two-way data table that varies inflation from 2.5-7% (increments of 0.5%) and his nominal rate of return between 4-10% (increments of 0.5%).  Analyze your findings with reference to his initial withdrawal amount.   What is the worse case scenario?  How does the amount he wishes to leave impact the amount he can withdraw – analyze with a one-way data table varying the amount from $70,000 to $150,000 in increments of $10,000.  Examine how his retirement age impacts the amount he can withdraw.  You should use a 1 way data table to examine this

You are 41 years old today and want to plan for retirement at age 65. You want to set aside an equal amount every year from now to retirement. You expect to live to age 87 and want to withdraw a fixed amount each year during retirement that at age 65 will have the same purchasing power as $99,349 has today. You plan on withdrawing the money starting the day you retire. You have not saved any money for retirement. Inflation is assumed to be 4.0% in the future. You expect to earn an 8.5% return on your investments in the future. How much do you need to save each year until retirement to meet your goal?

Assume you are planning on your retirement today, you decide to invest part of your salary every month in your retirement account. Suppose you will retire when you are 67 years old, your life expectancy is 87 if you are male and 90 if you are female and the inflation rate will be 2.5% a year. For your retirement account the rate of return is 6.5% a year before you retire and after retirement, you will invest more conservatively and the rate of return will be 4.5% a year. To figure out how much you need to save in your retirement account a month before you retire, you ask yourself the following questions

1. Tell us you age today

2. You believe you will live comfortable today with $2,000 a month, how much do you need a month after you retire at 67? Assuming you will need the same amount during the retirement period

3. How much do you need when you are at 67 so you can withdraw the amount we discussed in the question 2 until the last day of your life?

4. Suppose your salary will increase 3% a year and your saving will also increase 3% a year, tell us how much do you need to save in the first month so you will have the same amount we calculated in question 3. (Hint suppose your saving will be increasing .5% a month)

5. Redo question 4 if you will start to save 10 years, instead of today, how much do you need to save in the first month?

Cash Flow Evaluation. You want to retire in 20 years from today and then start making withdrawals from your savings every year, with the first withdrawal coming one-year after retirement (or 21 years from today) for 25 total annual withdrawals (at 21 years through 45 years from now, annually). You want your annual withdrawals to be $75,000 per year. Additionally, you want to take a world tour in 25 years from now when you turn 70, with an additional cost of $35,000 that would occur exactly 25 years from today.

-You assume that you can earn a nominal APR rate of 4%, with monthly compounding, on your savings over the next 45 years.

a) How much money must you have in your retirement savings account at the beginning of your retirement (20 years from now) to fund this future retirement withdrawal stream, assuming that you make no new deposits after retirement.

b) Assume that you want to save up the sum calculated in a) above. If you make monthly deposits into your retirement account, with the first deposit made one-month from today and the last deposit made just as your retire (or 20 years from today for 240 total monthly deposits), then how much must you deposit monthly to fund this retirement? (such that your retirement account will have an approximate balance of zero after the last $60,000 withdrawal at time-45).