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How much do you want to spend monthly when you retire? To determine if your goal is feasible and /or adequate, you must determine how big of a nest egg you need when you retire. The optimal size of the nest egg is influenced by your age at retirement, life expectancy, savings, life style and the interest you earn. Historically, the stock market provides an average return between 8%-12%. However, if you do not want your life savings to be 100% invested in the stock market; you may use a lower interest rate, say 5%.

In this course, as previously stated, I want you to apply what you learn to your life.

Useful links are provided below. You do not need to use them. In fact, you may just pick any life expectancy or base it on your relatives. It is up to you but you will find the websites interesting, Feel free to discuss this project with your classmates.

Answer the following:

A. How much money do you want to spend monthly after retiring? PMT = __1500____

B. At what age do you expect to pass away? (You can go to http://www.livingto100.com/calculator or Http://www.deathclock.com/ to estimate your life expectancy or utilized the attached acturary table.) _93____

C. At what age do you expect to retire? _65___

D. Subtract C from B. _28___

E. Multiply D by 12. N = ___336_____

F. What annual rate of interest do you expect to earn on your nest egg? (State I as percentage not in decimal form) I = __9__/ 12 = __.75_ (Example I =10/12 = .833 NOT .10/12 = .0083)

G. Let FV = 0. Solve for PV. PV = _________

Now, we need to determine how much you must save monthly to achieve your goal.

H. Let FV = the PV you calculated in G above. FV = ________

I. At what age will you retire (see C above)? ____

J. At what age will start saving for your retirement? ____

K. Subtract J from I and multiple by 12. N= _______ * 12 = _____

L. What annual rate of interest do you expect to earn on your savings? (Realistically, it may be more than the rate you used in F above. As people get older, they reduce their exposure to risk, i.e., willing to accept a lower return on their savings.) Use whatever interest rate you think is reasonable.

I = _____/12 = _____ (Example I =10/12 = .833 NOT .10/12 = .0083)

M. Let PV = 0. (If you already have savings, you may rework this later with PV equaling your current savings.)

N. Solve for PMT. PMT = ________

Do you think your goal is obtainable? (Underline your decision.) Yes No

Do you think your goal is adequate? (Underline your decision.) Yes No

P.Now, let:

N= E + K = _______

PMT = 0

FV = A =_______

I = .25 (I represents an inflation rate of 3% / 12.)

Solve for PV = _______

PV indicates approximately how much your last withdrawal from your nest egg is worth in todays dollars. If PV seems inadequate, in the real world you would change your plans. Note: these calculations do not factor in the taxes you would have to pay or other sources of income such as social security and pensions. ASSUME THIS IS ALL THE MONEY YOU WILL HAVE TO LIVE ON TILL YOU PASS AWAY.

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