please help me answer this question

Retirement Planning Assignment

Now that weve concluded the time value of money chapter, you are going to calculate your nest egg. The nest egg is the holy grail of numbers for potential retirees. Its the pool of funds you want to acquire to retire, and it needs to sufficiently cover your needs from that pointright up until you no longer need money. To complete the assignment, youll have to make a few assumptions, as well as acquire a few important pieces of information, and finally make some decisions.

To begin, youll need to assume a retirement age. Some use 65, some 63, but most of us like to think we could retire a bit sooner. At any rate, decide the age you believe youll retire, and explain why you believe thats a possibility.

Then youll need to investigate your life expectancy. Look to your family for help here, but err on the side of caution and plan for a long life! Once you have an idea of how long you expect to live, youll know how many years of money youll need in retirement. For instance, if you want to retire at 55, and most people in your family live until their mid 90s, youll need approximately 35 years worth of retirement money.

Now youll have to make some decisions. How much you need to live off each year!!! Youll have to factor in everything from basic like food, shelter, clothing, carsbut also travel and medical costs and. Whatever you spend money on has to be factored in. Then, youll have to adjust for inflation, as well as the changing needs over the period. For instance, at age 65 you wont need as much medical budget as you will at 85. Youll need credible sources to find inflation data and interest rate info. Lastly, youll have to investigate and decide on your investment style and the rates that will coincide. These will apply to the nest egg when you retire.

Once you have all the costs adjusted for inflation and on a timeline, youll need to discount that back to the retirement year (using NPV function)and there youll have ityour nest eggbut Im not done with you yet. Nowtell me how old you are currently. Lets say youre 22. If youre 22 and retiring at the aforementioned 55, you have 33 years to save up the nest egg figure. I want you to work a time value of money problem and tell me how much youll need to put into the account each year (annually, not monthly) from now until retirement. Youll need to factor in your investment style during the period, to choose the rate youll use to find the future value at retirement. Sounds fun, no? Get to it. Youll be able to complete this entire assignment in Excel. Ill need your explanations and documentation, but it should work fine. If you feel desperate to write your explanation in Word or otherwise, thats fine.

To do well on the assignment, make sure youve noted your assumptions and credible sources, along with your explanations. Good luck and have fun!