$Boy,$ this $is$ all $so$ confusing,$$ said Jason $ashe$ stared $at$ the papers $on$ his desk. $If$ only I had taken the advice $ofmy$ finance instructor, I would not $bein$ such a predicament today.$$ Jason Welch, aged $27,$ graduated five years ago with a degree $in$ food marketing and $is$ currently employed $as$ a middle$-$level manager for a fairly successful grocery chain. His current annual salary $of$ $$75,000$ has increased $atan$ average rate $of5\%$ per year and $is$ projected $to$ increase $at$ least $at$ that rate for the foreseeable future. The firm has a voluntary retirement savings program $in$ place, whereby employees are allowed $to$ contribute $upto11\%of$ their gross annual salary $(upto$ a maximum $of$ $$12,000$ per year$)$ and the company matches every dollar that the employee contributes. Unfortunately, like many other young people who start out $in$ their first $real$ job, Jason has not yet taken advantage $of$ the retirement savings program. $He$ opted instead $to$ buy a fancy car, rent $an$ expensive apartment, and consume most $of$ his income.

However, with wedding plans $on$ the horizon, Jason has finally come $to$ the realization that $he$ had better start putting away some money for the future. His fianc$,$ Jillian, $of$ course, had a lot $todo$ with giving him this reality check. Jillian reminded Jason that besides retirement, there were various other large expenses that would $be$ forthcoming and that $it$ would $be$ wise for him $to$ design a comprehensive savings plan, keeping $in$ mind the various cost estimates and timelines involved.

Jason figures that the two largest expenses down the road would $be$ those related $to$ the wedding and a down payment $on$ a house. $He$ estimates that the wedding, which will take place $in12$ months, should cost about $$22,000in$ today$s$ dollars. Furthermore, $he$ plans $to$ move into $a$ $$300,000$ house $(in$ today$s$ terms$)$ after five years, and would need $20\%$ for a down payment. Jason $is$ aware that his cost estimates are $in$ current terms and would need $tobe$ adjusted for inflation. Moreover, $he$ knows that $an$ automatic payroll deduction $is$ probably the best way $togo$ because $heis$ not a very disciplined investor. Jason $is$ really not sure how much money $he$ should put away each month, given the inflation effects, the differences $in$ timelines, and the salary increases that would $be$ forthcoming. All this number crunching seems overwhelming, and the objectives seem insurmountable. $If$ only $he$ had started planning and saving five years ago, his financial situation would have been $so$ much better. But, $as$ the saying goes, $Its$ better late than never!$$

Questions

$1.$ What was Jason$s$ starting salary? How much could $he$ have contributed $to$ the voluntary savings plan $in$ his first year $of$ employment?

$2.$ Had Jason taken advantage $of$ the company$s$ voluntary retirement plan $upto$ the maximum, every year for the past five years, how much money would $he$ currently have accumulated $in$ his retirement account, assuming monthly deposits and a nominal rate $of$ return $of7\%?$ How much more would his investment value have been had $he$ opted for a higher risk alternative $(i.e.100\%in$ common stocks$),$ which was expected $to$ yield $an$ average annual return $of12\%?$ Use annual compounding for this question.

$3.If$ Jason starts his retirement savings plan from January $of$ next year $by$ contributing the maximum allowable amount into the firm$s$ voluntary retirement savings program, how much money will $he$ have accumulated for retirement, assuming $he$ retires $at$ age $65?$ Assume that the rate $of$ return $on$ the account $is7\%$ per year, compounded monthly, and that the maximum allowable contribution does not change. Calculate the value $of$ his retirement portfolio under a monthly saving plan. Use monthly compounding for this question.

$4.$ How much would Jason have $to$ save each month, starting from the end $of$ the next month, $in$ order $to$ accumulate enough money for his wedding expenses, assuming that his investment fund $is$ expected $to$ yield a rate $of$ return $of7\%$ per year? Assume inflation rate remains $tobe$ zero.

$5.$ After preparing a detailed budget, Jason estimates that the maximum $he$ will $be$ able $to$ save for retirement $is$ $$500$ per month, for the first five years. After that $heis$ confident that $he$ will $be$ able $to$ increase the monthly saving $to$ $$750$ per month until retirement. $If$ the account provides a nominal annual return $of7\%,$ how much money will Jason $be$ able $to$ withdraw per month during his retirement phase $upto$ his age $of85?$ Use monthly compounding for this question.