Please use Excel financial functions or algebraic time value of money equations to answer these questions in your spreadsheet in order to receive any credit.

Part 4: Financing Your Retirement

You will graduate in a few years and start working and its never too early to start planning for your retirement and other financial events. Lets fast forward to the beginning of your career. Heres some assumptions to help you get started.

Your starting annual salary will be $70,000.

You plan to work for 43 years before retiring. You expect your salary to grow at an annual average rate of 4%.

When you retire you want a 24-year retirement annuity that begins 43 years from today with an equal annual payment equal to 80% of your final working year salary. Assume the first retirement annuity payment would occur immediately upon retirement 43 years from today. You realize your purchasing power will decrease over time during retirement.

Assume any retirement fund savings will earn an 8% compounded annually before and after retirement. Answer the following questions to help finalize your retirement planning.

1. What is your expected final year working salary?
2. What is your desired annual retirement income?
3. How much will you need at retirement 43 years after the beginning of your career to fund your desired retirement annuity?
4. Imagine you get $30,000 in graduation gifts from your family that you deposit into your retirement savings account at the beginning of your work career. How large does your annual end of the year deposit over your working career (43 years) need to be in addition to the initial $30,000 to fund your desired retirement annuity from #3?
5. Looking at your answers in the last two questions, the annual amount, while doable, might be a bit of a financial stretch for you especially early in your career. Lets assume you will deposit $7500 at the end of each year for 43 years in addition to the initial $30,000. Please answer the following
   • How much will you have in retirement savings at retirement after 43 years?
   • How large of an annual retirement annuity can you withdrawal at the beginning of each year for 24 years upon retirement?