Question

Suppose you are 40 years old and plan on retiring in 25 years, and then living for another 15 years after retirement.  Your current income is $70,000 per year.  If you pay $3,000 in Social Security taxes each year, how much do you need to save per year in order to have enough to replace 75% of your preretirement income at retirement when combined with Social Security

Answer 1

Particulars	Working	Amount
Your current annual income		70,000
Expected income after retirement	= 70000*75%	52,500
Total money required after retirement	= 52500*15 years	787,500
Amount saved by investing social security	= 3000*25 years	75,000
Total savings required over span of 25 years	= 787500-75000	712,500
Each year savings to be done	= 712500/25 years	28,500

Note: Time value of money needs to be adjusted. In case it is considered, Interest income will be added in savings made each year and accordingly savings amount will change.