Question

In: Finance

Bill​ (age 42) and Molly Hickok​ (age 39), residents of​ Anchorage, Alaska, recently told you that...

Bill​ (age 42) and Molly Hickok​ (age 39), residents of​ Anchorage, Alaska, recently told you that they have become increasingly worried about their retirement.​ Bill, a public school​ teacher, dreams of retiring at 62 so they can travel and visit family.​ Molly, a​ self-employed travel​ consultant, is unsure that their current retirement plan will achieve that goal. She is concerned that the cost of living in Alaska along with their lifestyle have them spending at a level they could not maintain. Although they have a nice income of more than $100,000 per​ year, they got a late start planning for​ retirement, which is now just 20 years away. Bill has tried to plan for the future by contributing to his​ 403(b) plan, but he is only investing 6 percent of his income when he could be investing 10 percent. Use what they told you along with the information below to help them prepare for a prosperous retirement.

​Molly's income

$79,000

​Bill's income

$42,500

Social Security income at retirement

$2,550​/month

Current annual expenditures

$72,500

​Bill's Roth IRA

$20,500

​Bill's 403(b) plan

$47,400

Marginal tax bracket

25 %

4. If the Hickoks want their retirement income to increase annually by 3 percent then they need to increase the annual additional funding requirement to reach their income goal of to what amount?. ​(Round to the nearest​ dollar.)

Solutions

Expert Solution

cur_savings_6% cur_savings_10% Extra Savings Total Savings with 6% Total Savings with 10%
Aftr_tax
Molly's Income 79000 59250 3555 5925 2370 129046.3005 52931.27895 163983.1779 88218.79824
Bill's Income 42500 31875 1912.5 3187.5 1275 181977.5795 252201.9762
Social_Sec_incm/mnt 2550
Annual_SSI 30600 Savings Benefits
Current exp_annual 72500 5467.50 181977.58
Bill IRA 20500 9112.50 252201.98
Bill 403B Plan 47400 3645.00 70224.40
Tax Bracket 25%
Molly 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
6% Savings 3555.0 8401.7 13393.7 18535.5 23831.6 29286.5 34905.1 40692.3 46653.0 52792.6 59116.4 65629.9 72338.8 79249.0 86366.4 93697.4 101248.3 109025.8 117036.6 125287.7
4740 129046.3005
10% Savings 5925.0 12027.8 18313.6 24788.0 31456.6 38325.3 45400.1 52687.1 60192.7 67923.5 75886.2 84087.8 92535.4 101236.5 110198.6 119429.5 128937.4 138730.5 148817.4 159207.0
5925 163983.1779
Bill
6% Savings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
1912.5 3882.4 5911.3 8001.2 10153.7 12370.8 14654.5 17006.6 19429.3 21924.7 24494.9 27142.3 29869.0 32677.6 35570.4 38550.0 41619.0 44780.1 48036.0 51389.6
1912.5 52931.27895
10% Savings
3187.5 6470.6 9852.2 13335.3 16922.9 20618.1 24424.1 28344.3 32382.2 36541.1 40824.8 45237.1 49781.7 54462.7 59284.0 64250.1 69365.1 74633.5 80060.0 85649.3
3187.5 88218.79824

With an increase in annual Savings of 3645$ from 5467.5$ Bill and Molly Both Can save 70224.5$ more

jeff jeffy answered 7 months ago
Next > < Previous

Related Solutions

Bill​ (age 42) and Molly Hickok​ (age 39), residents of​ Anchorage, Alaska, recently told you that...
Bill​ (age 42) and Molly Hickok​ (age 39), residents of​ Anchorage, Alaska, recently told you that they have become increasingly worried about their retirement.​ Bill, a public school​ teacher, dreams of retiring at 62 so they can travel and visit family.​ Molly, a​ self-employed travel​ consultant, is unsure that their current retirement plan will achieve that goal. She is concerned that the cost of living in Alaska along with their lifestyle have them spending at a level they could not...
Bill and Alice Savage, husband and wife and both age 42, have the following transactions during...
Bill and Alice Savage, husband and wife and both age 42, have the following transactions during 2016: a. They sold their old residence on January 28, 2016, for $380,000. The basis of their old residence, purchased in 2006, was $70,000. The selling expenses were $20,000. On May 17, 2016, they purchased and moved into another residence costing $150,000. b. On April 28, 2016, they sold for $8,000 stock that Alice had received as a gift from her mother, who had...
You are planning to conduct a study to determine whether the average age of the residents...
You are planning to conduct a study to determine whether the average age of the residents of Ashland, OR is at least 55.6 years. What is the most appropriate test for conducting the test? One population mean test Two population means test One-way ANOVA Two-way ANOVA with Replication Chi-square Goodness of Fit Test Chi-square Test for Independence Regression and Correlation Analysis A market research firm is testing consumer reaction to a new shampoo among age groups in four regions. There...
1. You have recently decided to create an investment portfolio. You have been told that a...
1. You have recently decided to create an investment portfolio. You have been told that a “standard” portfolio for someone in your age range is 80% equity and 20% debt. Thus, you have specifically honed in on three specific assets that you are going to use: Common Stock A: Firm is expected to pay $5 next year in dividends, with an expected growth rate of 10% for the following three years after that, followed by 2% forever after that. The...
You start a new job at age 39 with a beginning salary of $72,000 per year...
You start a new job at age 39 with a beginning salary of $72,000 per year paid monthly. You expect a 2% increase annually in your salary. You invest 10% of your salary and your employer gives you an additional 3% of your salary each year paid into your retirement account monthly. At the end of year 6 you get a $10,000 raise instead of the 2% increase. At the end of year 10 you get another $10,000 raise instead...
You start a new job at age 39 with a beginning salary of $72,000 per year...
You start a new job at age 39 with a beginning salary of $72,000 per year paid monthly. You expect a 2% increase annually in your salary. You invest 10% of your salary and your employer gives you an additional 3% of your salary each year paid into your retirement account monthly. At the end of year 6 you get a $10,000 raise instead of the 2% increase. At the end of year 10 you get another $10,000 raise instead...
You start a new job at age 39 with a beginning salary of $72,000 per year...
You start a new job at age 39 with a beginning salary of $72,000 per year paid monthly. You expect a 2% increase annually in your salary. You invest 10% of your salary and your employer gives you an additional 3% of your salary each year paid into your retirement account monthly. At the end of year 6 you get a $10,000 raise instead of the 2% increase. At the end of year 10 you get another $10,000 raise instead...
Your friend has recently told you that the federal government effectively subsidizes the use of debt...
Your friend has recently told you that the federal government effectively subsidizes the use of debt financing (vs. equity fi nancing) for corporations. Do you agree with that statement? Explain.
You are the recently hired CFO of MicroMash.  Bill Bates, the CEO wants your advice on the...
You are the recently hired CFO of MicroMash.  Bill Bates, the CEO wants your advice on the sale of a new spreadsheet software called Xcellent.  In conjuction with a two week promotion of at Office Depot stores, customers will be able to purchase the software and have the ability to return the item and receive a full refund up until 6 months from the purchase date.  Please discuss the proper accounting treatment for this transaction; 20,000 units were sold in the two week...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT