QUESTIONAPR

Use Worksheet 14.1 to help Andy and Rachel Cutler, who’d like to retire while they’re still relatively young – in about 20 years. Both have promising careers, and both make good money. As a result, they’re willing to put aside whatever is necessary to achieve a comfortable lifestyle in retirement. Their current level of household expenditures (excluding savings) is around $85,000 a year, and they expect to spend even more in retirement; they think they’ll need about 125% of that amount. (Note: 125% equals a multiplier factor of 1.25). They estimate that their Social Security benefits will amount to $21,000 a year in today’s dollars and they’ll receive another $31,000 annually from their company pension plans. They feel that future inflation will amount to about 3% a year, and they think they’ll be able to earn about 6% on their investments before retirement and about 4% afterward. See Appendix A and Appendix B.

Use Worksheet 14.1 to find out how big Andy and Rachel’s investment nest egg will have to be. Round your answer to the nearest dollar.

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How much they’ll have to save annually to accumulate the needed amount within the next 20 years. Round your answer to the nearest dollar

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