Question

Monica became concerned about the stock market due to recent losses, and moved $350,000 into a fund of 60% T-bills, 20% stocks, and 20% bonds. Her salary is currently $92,000 per year, and she expects raises of 2.0% each year. Her employer will match retirement savings up to 5% of her salary. If she wants $500,000 in her account in 5 years, what percentage of her salary does she need to save?

Salary - 92,000 Employer % - 5% Salary Increase - 2% Employee % - 5.13% i = 6.20% Present Worth - 350,000 Future Worth - 500,000

Answer 1

Given Information:
		Tbills	Stocks	Bonds
Present Networth	$ 3,50,000.00	60%	20%	20%
		Hike	Employer Contribution	Employee Contribution	Interest Rate
Salary	$    92,000.00	2%	5%	5.13%	6.20%
Future Networth	$ 5,00,000.00
Solution:	Calculation of Savings per Annum
Years	Salary	Employee Contribution	Employer Contribution	Interest on Present Networth	Total	Savings Per Annum
		5.13%	5%	6.20%		3.67%
1	$    92,000.00	$      4,719.60	$      4,600.00	$       21,700.00	$    26,300.00	$   3,376.40
2	$    93,840.00	$      4,813.99	$      4,692.00	$       21,700.00	$    26,392.00	$   3,443.93
3	$    95,716.80	$      4,910.27	$      4,785.84	$       21,700.00	$    26,485.84	$   3,512.81
4	$    97,631.14	$      5,008.48	$      4,881.56	$       21,700.00	$    26,581.56	$   3,583.06
5	$    99,583.76	$      5,108.65	$      4,979.19	$       21,700.00	$    26,679.19	$   3,654.72
Total	$ 4,78,771.69	$   24,560.99	$   23,938.58	$   1,08,500.00	$ 1,32,438.58	$ 17,570.92
Calculation of Savings	= $ 5,00,000 - $3,50,000
	=$ 1,50,000 - $ 1,08,500
	=$ 41,500 - $ 23,938
	=$ 17,561.42
Calculation of Saving %	=$ 17,561.42 / $ 4,78,771.69 *100
	=3.67%

Total Savings	=$ 3,50,000 + $ 1,08,500 + $ 23,930 + $ 17,570
	=$ 5,00,000