Question

1. After taking into account the income that Sophia will receive from Social Security and her company sponsored pension plan, the financial planner has estimated that her investment assets will need to provide her with about $15,000 a year to meet the balance of her retirement income needs. Assuming a 6 percent after-tax return on her investments, how big a nest egg will Sophia need to earn that kind of income?
2. Suppose she can invest the money market securities, stocks, and bonds (the $72,600) at 5 percent after taxes and can invest the $47,400 accumulated in her tax-sheltered IRA and 401(k) at 7 percent. How much will Sophia’s investment assets be worth in eight years, when she retires?
3. Sophia’s employer matches her 401(k) contributions dollar for dollar, up to a maximum of $3,000 a year. If she continues to put $3,000 a year into that program, how much more will she have in eight years, given a 9 percent rate of return?
4. What would you advise Sophia about her ability to retire in eight years, as she hopes to?



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  • CreatedFebruary 13, 2015
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