Most financial advisors stress that financial planning requires an individualized approach and no one set of...

Transcribed Image Text:

Most financial advisors stress that financial planning requires an individualized approach and no one set of advice will fit everyone's situation. However, a number of "rules of thumbs" exist regarding financial planning. According to the article 4 Rules of Thumb for Retirement Savings posted on the website for Fidelity Investments in 2021, to retire at age 65, most people should plan to have retirement savings that will replace 50% of their pre-retirement income. This is based off of an assumption that social security will also be contributing towards the individual's living expenses during retirement. We are going to look at a case study of that this means for a fictious person, Jennifer. Your job is to come up with a retirement plan for Jennifer. Profile of Jennifer Age Anticipated Retirement Age Profession Current Earnings Anticipated increases in earnings (advancement and inflation) Retirement Savings Goal Market Assumptions Retirement Strategy 30 65 Elementary School Teacher $54,000 per year or $4,500 per month 3% increase in earnings each year Enough to replace 50% of her income at the time she retires. Sufficient funds to provide for withdrawals from age 65 to 95. Assume that her investments can earn 8% annual interest (compounded monthly) before retirement and 4% annual interest (compounded monthly) after she retires Jennifer plans to begin saving a specific amount of money each month and will continue contributing the same dollar amount every month until she retires. Upon retirement she will begin making fixed monthly withdraws from her account, withdrawing the same amount every month from age 65 to 95. 1. Fill in Jennifer's retirement plan below. Give your answers in the box below. Fully explain how your arrived at each answer on the back of this paper or on attached paper. Clearly point out the formulas from our that class you are using in your work. Jennifer's Retirement Plan Expected Earning Rate at Age 65 a. What is Jennifer's earnings expected to be at the time she retires at age 65? Anticipated monthly withdrawals beginning at age 65 b. C. d. How much money will Jennifer be withdrawing every month after she retires? Target Retirement Savings Amount How much money does Jennifer need to have saved to be ready to retire at age 65 in order to fund the withdrawals mentioned above? Monthly Savings Rate How much money does Jennifer need to save each month from age 30 to 65 to produce the retirement savings goal mentioned above. 2. Are there any things about the way we made this plan for Jennifer that seem unrealistic, or are there anything things. that we didn't include in our plan that should probably be included to make a real retirement plan for someone like Jennifer? Explain. Most financial advisors stress that financial planning requires an individualized approach and no one set of advice will fit everyone's situation. However, a number of "rules of thumbs" exist regarding financial planning. According to the article 4 Rules of Thumb for Retirement Savings posted on the website for Fidelity Investments in 2021, to retire at age 65, most people should plan to have retirement savings that will replace 50% of their pre-retirement income. This is based off of an assumption that social security will also be contributing towards the individual's living expenses during retirement. We are going to look at a case study of that this means for a fictious person, Jennifer. Your job is to come up with a retirement plan for Jennifer. Profile of Jennifer Age Anticipated Retirement Age Profession Current Earnings Anticipated increases in earnings (advancement and inflation) Retirement Savings Goal Market Assumptions Retirement Strategy 30 65 Elementary School Teacher $54,000 per year or $4,500 per month 3% increase in earnings each year Enough to replace 50% of her income at the time she retires. Sufficient funds to provide for withdrawals from age 65 to 95. Assume that her investments can earn 8% annual interest (compounded monthly) before retirement and 4% annual interest (compounded monthly) after she retires Jennifer plans to begin saving a specific amount of money each month and will continue contributing the same dollar amount every month until she retires. Upon retirement she will begin making fixed monthly withdraws from her account, withdrawing the same amount every month from age 65 to 95. 1. Fill in Jennifer's retirement plan below. Give your answers in the box below. Fully explain how your arrived at each answer on the back of this paper or on attached paper. Clearly point out the formulas from our that class you are using in your work. Jennifer's Retirement Plan Expected Earning Rate at Age 65 a. What is Jennifer's earnings expected to be at the time she retires at age 65? Anticipated monthly withdrawals beginning at age 65 b. C. d. How much money will Jennifer be withdrawing every month after she retires? Target Retirement Savings Amount How much money does Jennifer need to have saved to be ready to retire at age 65 in order to fund the withdrawals mentioned above? Monthly Savings Rate How much money does Jennifer need to save each month from age 30 to 65 to produce the retirement savings goal mentioned above. 2. Are there any things about the way we made this plan for Jennifer that seem unrealistic, or are there anything things. that we didn't include in our plan that should probably be included to make a real retirement plan for someone like Jennifer? Explain.