Calculate the lump sum needed at retirement

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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.

SHOW ALL WORK.

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

Reference no: EM131504197

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