Reference no: EM132879279

This is the beginning of a new year. Having just graduated from college with a degree in finance, you landed a job as a personal finance counselor with a large wealth management firm. Your very first client is a young couple who want to put their financial business in order and develop a plan for their retirement and future family needs. Both the husband and the wife are 31 years old and in stable employment. They want to retire together at the age of 67. They want you to help them in their financial planning by answering a series of questions, as follows:

Problem 1: Assume they have $15,000 already set aside for the purpose of retirement, how much would they have to save every year, at the beginning of each year starting now, in order to attain the goal of $2 million by the time they retire? Assume they are able to achieve an average rate of return on their savings of 8%.

Problem 2: If they have retired with $2 million in savings, and they want to withdraw $120,000 every year for living expenses at the beginning of each year, how long can their retirement nest egg last (in years) if the rate of return on their savings is 5% post-retirement?

Problem 3: Answer Problem 2 again if they want to leave $1 million to their kids when they die (which is timed to be the date when their savings run out).