CASE PROBLEM RETIREMENT PLAN
Tim is 37 years old and would like to establish a retirement plan. Develop a spreadsheet model that could be used to assist Tim with retirement planning. Your model should include the following input parameters:
Tim’s current age 37 years
Tim’s current total retirement savings $259,000 Annual rate of
return on retirement savings 406 Tim’s current annual salary $145,000
Tim’s expected annual percentage increase in salary = 2%
Tim’s percentage of annual salary contributed to retirement = 6%
Tim’s expected age of retirement 65
Tim’s expected annual expenses after retirement (current dollars) = $90,000 Rate of return on retirement savings after retirement 3%
Income tax rate postretirement 15%
Assume that Tim’s employer contributes 6 of Tim’s salary to his retirement fund. Tim can make an additional annual contribution to his retirement fund before taxes (tax free) up to a contribution of $16,000. Assume that he contributes $6,000 per year. Also, assume an inflation rate of 25%
Managerial Report
Your spreadsheet model should provide the accumulated savings at the onset of retirement as well as the age at which funds will be depleted (given assumptions on the input parameters).
As a feature of your spreadsheet model, build a data table to demonstrate the sensitivity of the age at which funds will be depleted to the retirement age and additional pre-tax contributions. Similarly, consider other factors you think might be important.
Develop a report for Tim outlining the factors that will have the greatest impact on his
retirement
