Maddie is preparing for retirement and wants to ensure that she has the savings needed to comfortably retire. His current situation includes the following items:

• Maddie is currently 45 years old and will retire in 20 years.
• She expects to live for 30 years in retirement.
• She currently has $1,150,000 saved in retirement.
• She is saving up to buy a house soon (so brokerage, checking, and savings accounts will go towards a home and not be used for retirement).
• She is currently making $150,000 a year.
• Once she retires, she expects her annual budget to stay mostly the same as today except he will not need to set aside any money for taxes and retirement contributions. Additionally, she plans on adding travel expenses of $2,000 a month while she's retired.
• Her investments market they expect to provide an average of a 6% rate of return each year.
• She expects inflation to be 3%.
• Once she retires, she plans to move his retirement savings to safer investments that will provide returns 1% above inflation.

Her budget and net worth are shown below:

Monthly Budget & Net worth Income Liquid assets Salary $ 12,500.00 Brokerage account $ 50,000.00 Checking account $ 5,000.00 Fixed expenses Savings account $ 15,000.00 Taxes $ 3,500.00 $ 70,000.00 Insurance $ 1,000.00 Nonliquid assets Rent & Utility Payments $ 2,000.00 Retirement account $ 1,150,000.00 Car Payments $ 500.00 $ 1,150,000.00 Retirement contribution $ 2,000.00 $ 9,000.00 Total assets $ 1,220,000.00 Variable expenses Entertainment monthly $ 2,000.00 Current liabilities Groceries monthly $ 600.00 Rent & Utilities $ 24,000.00 Car maintenance / gas $ 400.00 Car $ 6,000.00 Charity $ 500.00 $ 30,000.00 $ 3,500.00 Long-term liabilities Car $ 24,000.00 Total expenses $ 12,500.00 $ 24,000.00 Net worth $ 1,166,000.00

Answer the following:

1. How much does Maddie need to be saving for retirement each year?

2. Is she on track to reach his retirement goals with his current savings rate? If she's not in track, what expenses should she change to fit her retirement goals?

Answer rating: 100% (QA)

1 Calculating Savings Needed for Retirement Step 1 Project Retirement Spending Annual spending Consider her current budget and adjust for changes afte... View the full answer