You will start your first job in January 2018. Your financial advisor has recomm

Question

You will start your first job in January 2018. Your financial advisor has recommended saving for retirement to ensure you have enough and to leverage the time value of money. The data for your situation follows:

Starting salary = $60,000 (at end of first year) Annual raises = 5% p.a.
Current age = 25
Career = 40 years

ROR during career = 10%
Amount needed in first year of retirement = 80% of last year’s salary

Inflation in retirement = 3% p.a.

1. Find the FV at the end of your career (year 2057) and conduct a sensitivity analysis to determine if you will have enough for retirement based on the various given savings rates and RORs. Provide your observations about the results.

THIS QUESTION WILL NEED TO BE DONE ON EXCEL

laving, % 209 025 040 175 516 26,327 2030 24 102,620 07,751 15,163 118,796 124,736 130972 13,710 63,000 6,50 6 9,458 72,930 9,323 10,419 10.940 137,521 0,628 44,39 151,617 2,100 159,198 57,158 1A 12,6 13,362 15,333 7,829 22,743 3 8a0 000 1930 31.208 44,747 616 7766497491119.904 145,192 173.673 2500 241.663 281,92327162 377,68 434,178 9241 $57.594 46.013733.36 830572 93,703 281.992 1san 6.879 46

Explanation / Answer

Observations - The FV at the end of your career(Year 2057) as shown in the calculation will be $45,863,120.23 .

Now assuming that I live upto Age 90 and incur expenses equal to 80% of my last salary every year after retirement inflating @3% p.a then I would have sufficient funds to cover my outgoes and also would be left with $33,083,446.09 as my estate for my children and their children.

However I have assumed that my expenses every year during my career would be Zero since there is no information about expenses given in the question.

Also you can vary the age till which you expect to live.

Annual salary Increment rate 5% INPUTS Rate of Return 10% Inflation after retirement 3% Age Year Annual Salary(in Dollars) Savings(Assuming 0 Expenses) After Retirement Expenditure 25 2018 60000 60000 - 26 2019 63000 129000 - 27 2020 66150 208050 - 28 2021 69457.5 298312.5 - 29 2022 72930.38 401074.125 - 30 2023 76576.89 517758.431 - 31 2024 80405.74 649940.013 - 32 2025 84426.03 799360.039 - 33 2026 88647.33 967943.37 - 34 2027 93079.69 1157817.4 - 35 2028 97733.68 1371332.82 - 36 2029 102620.4 1611086.46 - 37 2030 107751.4 1879946.49 - 38 2031 113138.9 2181080.08 - 39 2032 118795.9 2517983.99 - 40 2033 124735.7 2894518.08 - 41 2034 130972.5 3314942.36 - 42 2035 137521.1 3783957.7 - 43 2036 144397.2 4306750.62 - 44 2037 151617 4889042.69 - 45 2038 159197.9 5537144.82 - 46 2039 167157.8 6258017.06 - 47 2040 175515.6 7059334.41 - 48 2041 184291.4 7949559.28 - 49 2042 193506 8938021.2 - 50 2043 203181.3 10035004.6 - 51 2044 213340.4 11251845.4 - 52 2045 224007.4 12601037.4 - 53 2046 235207.7 14096348.9 - 54 2047 246968.1 15752951.9 - 55 2048 259316.5 17587563.6 - 56 2049 272282.4 19618602.3 - 57 2050 285896.5 21866359.1 - 58 2051 300191.3 24353186.3 - 59 2052 315200.9 27103705.8 - 60 2053 330960.9 30145037.3 - 61 2054 347509 33507050 - 62 2055 364884.4 37222639.4 - 63 2056 383128.6 41328032 - time after retirement 64 2057 402285.1 45863120.2 - 1 65 2058 - 45531637.3 331482.8971 2 66 2059 - 45190209.9 341427.384 3 67 2060 - 44838539.7 351670.2055 4 68 2061 - 44476319.4 362220.3117 5 69 2062 - 44103232.5 373086.921 6 70 2063 - 43718953 384279.5287 7 71 2064 - 43323145.1 395807.9145 8 72 2065 - 42915462.9 407682.1519 9 73 2066 - 42495550.3 419912.6165 10 74 2067 - 42063040.3 432509.995 11 75 2068 - 41617555 445485.2948 12 76 2069 - 41158705.2 458849.8537 13 77 2070 - 40686089.8 472615.3493 14 78 2071 - 40199296 486793.8098 15 79 2072 - 39697898.4 501397.6241 16 80 2073 - 39181458.8 516439.5528 17 81 2074 - 38649526.1 531932.7394 18 82 2075 - 38101635.4 547890.7216 19 83 2076 - 37537307.9 564327.4432 20 84 2077 - 36956050.6 581257.2665 21 85 2078 - 36357355.7 598694.9845 22 86 2079 - 35740699.8 616655.834 23 87 2080 - 35105544.3 635155.5091 24 88 2081 - 34451334.1 654210.1743 25 89 2082 - 33777497.7 673836.4796 26 90 2083 - 33083446.1 694051.574

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