1. What is the target amount he would need in this investment fund?
2. What is his current savings target, given the target investment fund?
3. Where might Steve consider placing these additional funds for retirement?
Steve Deutsch’s company pension and his expected Social Security benefits are his only sources of retirement income. He would like to retire in 10 years at age 62, but he is worried that these programs will not provide enough in early retirement benefits for him to live in his normal style. He figures he would need to generate an additional income of $10,000 from a supplemental investment fund for him to live comfortably in early retirement. He expects that the after-tax returns on his investments will average 9 percent, and future inflation will average 5 percent.