Reference no: EM131009008
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
Tim's current total savings = 259,000
Annual rate of return on retirement savings= 4 percent
Tim's current salary = 145,000
Tim's expected annual percentage increase in salary = 2 percent
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 percent
Income tax rate postretirement = 15 percent
Assume that Tim's employer contributes 6% of Tim's salary to his retirement fund. Tim can make an addition annual contribution to his retirement fund before taxes (tax free) up to a contribution of 16,000. Assume he contributes 6000 per year. Also assume an inflation rate of 2%.
Your spreadsheet model should provide the accumulated saving at the onset of retirement as well as the age at which funds will be depleted (given assumption 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 pretax 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.