Reference no: EM132186732

Retirement Planning Worksheet

Complete Parts I and II of the Retirement Planning Worksheet.

Part I: Retirement Planning

1. Estimate your retirement income

You will be asked to answer six questions. If you are unsure of what the fields are, the definitions are below on the same page. There are some assumptions about how much your investments will earn, inflation rates and tax rate; you can edit these to see how they impact the calculation.

• Based on your inputs, what is your estimated monthly retirement income before tax/inflation? $1,055

• Based on your inputs, what is your estimated monthly retirement income after tax/inflation?  $531

2. Determine how your current retirement strategy will provide for retirement income

You will be asked to answer eight questions. If you are unsure of what the fields are, the definitions are below on the same page. There are some assumptions about how much your investments will earn, inflation rates, and if Social Security income is considered; you can edit these to see how they impact the calculation.

• Based on your inputs, how much will you have saved using your current strategy? At what age are your savings expected to run out? $275,187. Retirement runs out at age 70.

• Assume your savings will not be sufficient to cover your living expenses. In at least 100 words, what steps can you take now and/or in retirement to live comfortably in retirement? Well to say the least, I would have to save more money over my time before retirement. Whether that savings comes from just a normal savings account or investments. There are a lot of ways of investing, a couple traditional ways are investing in CD's or IRA's.

I am currently working for the county and am meeting with a retirement specialist next Tuesday. She explained that one of the easiest ways for a younger person to become a millionaire is, a small deposit made consistently over a long period of time. She explained that if she had saved just $100 dollars a month from the time she was 19 years old until her retirement age, she would have over a million dollars.

I need to start making those small recurring deposits into either a retirement savings account or invest some money. Tax season is a good time to invest but most americans just spend the money and in less than a month they are broke again. So I would say I need to manage my money better and invest.

3. Forecast when you could become a millionaire

You will be asked to answer four questions. If you are unsure of what the fields are, the definitions are below on the same page.

• How long will it take you to reach $1 million in savings? If I can manage to save just over $5,000 a year from now until I am 75 years old, it would take me 34 years.

• Thinking of what your life might be like in retirement, would $1 million be sufficient to support yourself? (Some things to consider would be your health, where you live, and how much money you owe.) In at least 100 words explain why or why not?

Of course I could live off of $1 million dollars, I am a very reasonable man and don't overspend on material things very often. Inflation will surely rise and things will change but I could live and get by with $1 million. I would have to budget and continue investing but it is doable.

To completely retire at 75 for me is not set in stone as there are many people now a days still working at that age. There are many variables that will effect my savings and earnings between now and then so to say it is feasible is not far fetched. Like I stated in one of my answers above, repeated small deposits over a lond period of time is the easiest way to become a millionaire.

4. Define the differences between a 401K and Roth IRA in at least 50 words.

The basic difference between a 401K and a Roth IRA is how you are taxed or how the taxes on each investment work. On a traditional 401K you make deposits pre-tax and the taxes are deferred. You are not taxed on those investments until you decide to withdraw on that investment/account. With a Roth IRA it is kind of the opposite, you are taxed up front on the investment.

5. Determine whether a Roth IRA or traditional IRA will lead to higher earnings. Input your current age, estimated age at retirement, annual salary, and annual IRA contribution you expect to make in this calculator

• Provide a summary of the results. Would a Roth IRA or traditional IRA lead to higher earnings based on your inputs? For me a traditional IRA would give me more return on my investment. A traditional IRA might be worth $16,995 more than a Roth IRA would be.

• Change the inputs in the calculator to see different scenarios. Provide one scenario/combination of inputs in which the Roth IRA leads to higher earnings than a traditional IRA, and summarize the main reason provided in the report for why this is so.

Then, provide one scenario/combination of inputs in which the traditional IRA leads to higher earnings than a Roth IRA, and summarize the main reason provided in the report for why this is so. Response should be at least 50 words.

Part II: Note to Self

After reviewing the information provided above, write a brief, summative "Note to Self" regarding how you should plan for your future retirement. How will you use what you have learned in this course to plan ahead, and how will the answers you entered above factor in? Responses should be between 260 to 350 words.