B1
Retirement Plan Inputs
Current age 20
Age of retirement 65
Household income $50,000
Current retirement
$0
savings
Annual retirement
12% ($6,000)
savings
Expected income
3%
increase
Years of retirement
30
income
Income required at
50%
retirement
Investment Returns and Inflation
Rate of return before
7%
retirement
Rate of return during
3%
retirement
Expected inflation
3%
rate
Result Summary
Years until
45
retirement
Your last year's
$183,573
income
Estimated annual
retirement $91,786
expenditures
Your ending balance $0
1. With inflation rising, I’ll have to put more of my income into retirement to meet the necessary
requirements to building my retirement fund; This will reflect on my expenditures as well. As
prices go up, I must make sure that I can deal with the changes from inflation to expenses so I
can continue to put forward a portion of my income into my retirement fund. Some of the
expenses that will increase from inflation are taxes, gas, medical, food, housing, and utilities.
2. My expenditures during my retirement will begin to differ as my life changes over time. A few
Expenses that will decrease over time will be mortgage payments and car payments which will
hopefully all be paid off before then, the same will go for any kids I might have, since all of them
will be grown up and moved out. As for increase on expenses, entertainment will be an increase
since I’ll want to have some fun during my retirement, medical expenses will increase as my
body begins to deteriorate from old age, and an increase in spending money on hobbies that I
now or will have in the later future.
3. Thinking about how much I might spend in retirement is a big deal for my planning. I must
consider things like healthcare, daily living costs, and what I want to do for fun. It's like putting
together a puzzle of my future expenses. I need to make sure I'm saving enough and investing
smartly. I also must think about prices going up over time. By keeping an eye on all these factors
and adjusting my plans as needed, I'm working towards a retirement that fits my lifestyle and
won't leave me stressed about money.
B2
Monthly Income - $146,772.00
Monthly Expense - $87,324.00
B3
Dealing with a 3% inflation rate while working means your money's buying power is slowly
shrinking. Even with a 3% pay raise, everything gets more expensive, making it crucial to plan smartly.
With a retirement plan, I must take into account my health and my expenses since they can change over
the span of 30 years. I must work around my budget and expenses, including any inconvenient hiccups
along the way to make sure my retirement will keep me covered for the rest of my life.
If inflation continues its 3% rate of increase, my retirement savings will need to be actively
managed during my 30 years of retirement. My expenses as of right now are around $7,277 and my
income is $12,132 meaning my income overage is $4,954 the first year and decreases by 3% annually for
17 years. At year 17, my income and inflated expenses meet each other at $144k. This leaves 13 years of
expenses inflating higher than my monthly income.
As a result, I will need to save the extra income overage during the first 17 years of my
retirement. If I put it in a traditional bank account, I will have saved $518k. During the final 13 years of
my retirement, I will be able to draw from this account the necessary funds to eliminate the delta
between my expenses and income. After 13 years, I will have withdrawn only $418k, leaving $100k
positive balance.
It is extremely important that I account for inflation during both working years and retirement
years. I will also need to actively manage my budget, income, and expenditures to make sure that I save
enough for retirement, and still be able to enjoy an active lifestyle until I retire.
