In: Finance
For an individual that starts working at age 25 and continues to age 70, calculate the lump sum savings that the individual will have by age 70 in both nominal and real dollars .Also calculate the level 30 year annuity that the individual could collect until age 100 by annuitizing the lump sum at age 70. Beginning Salary is 85,000.
1. Pick a starting salary at age 25. Pick an average annual salary percent increase to age 50. After age 50 assume the salary grows at the rate of inflation only.
2. Use a constant percent of salary saved each year.
3. Use a constant rate of inflation of 2%.
4. Use a constant annual portfolio return of 6% nominal.
5. Assume no taxes.