Wage replacement ratio using the top-down approach

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Reference no: EM131958892

1. Ralph, a 40-year-old nurse who earns $80,000 a year, saves 14% of his annual gross income. Assume that Ralph wants to maintain his exact pre-retirement lifestyle. Calculate Ralph’s wage replacement ratio using the top-down approach (round to the nearest %) and using pre-tax dollars.

a. 70%. b. 78%. c. 86%. d. 92%.

2. Sean will be retiring soon. All of the following expenditures could be eliminated in his retirement needs calculation except:

a. The $2,200 per year he spends on his work suits and dress clothes.

b. The $18,000 annual mortgage payment he makes that is scheduled to end seven years into retirement.

c. The FICA taxes he pays each year.

d. The $22,000 per year he contributes to his 401(k) plan.

Reference no: EM131958892

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