TT06 - Retirement Planning Needs

8/12/2019 TT06 - Retirement Planning Needs

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Teaching Tool 6 - Worksheet for Funding Your Retirement Needs

Directions: Fill the green cells with your data. Be careful not to modify the blue cells.

Percentages must be converted to decimal form.

Key Data: 58 years

Number of Years Till Retirement 20

Estimated Average Growth Rate of Investments Until Retirement 9.3%

Estimated Average Annual Rate of Inflation Until Retirement 5.0%

83

Number of Years In Retirement 25

Estimate Growth Rate of Investments During Retirement 9.5%

Estimated Annual Rate of Inflation During Retirement 5.0%

Estimated Tax Rate In Retirement 10%

Step 1: Estimate Your Annual Needs at Retirement 40000

A. Present level of your living expenditures on an after-tax basis in today's dollars Rs 480,000

B. Percentage of income you want to replace (e.g., 80% in decimal form) 100%

C. Base retirement expenditure level in today's dollars at replacement level 480,000

D. Anticipated change in living expenditures after retirement

E. Annual living expenditures at retirement in today's dollars on an after-tax basis 480,000

F. Estimated tax rate in retirement (from above) 10.0%

G. Before-tax income necessary for retirement in today's dollars 533,333

H. Before-tax income necessary at retirement in future dollars after inflation Rs 1,415,092

Step 2: Estimate Income Annually from Social Security and Pensions at Retirement

A. Projected annual Social Security benefits (in today's dollars)

B. Projected annual defined-benefit pension (in today's dollars)

C. Projected total pension benefits in today's dollars for all vehicles -

D. Estimated average growth factor in percent 0.0%

E. Estimated number of years until you retire (from above) 20

F. Anticipated Social Security and Pension income in future dollars $0

Step 3: Estimate your total Retirement Needs After Inflation at Retirement

A. Target Annual retirement income in future dollars (from line 1.H) Rs 1,415,092

B. Combined Social Security and Pensions in future dollars (from line 2.F) -

C. Target Annual Income Needed from Investments, in future dollars (A+B) 1,415,092

D. Monthly Income Needed from Investments, in future dollars (C/12) 117,924

E. Number of Years in retirement (from above) 25

F. Expected interest rate in retirement (from above) 9.5%

G. Expected inflation rate in retirement (from above) 5.0%

H. Inflation adjusted return (1+nominal return)/(1+inflation)-1 4.2857%

I. Total inflation adjusted Annuity required to give annual income (beginning of period) (PV) 22,373,394

J. Total inflation adjusted Annuity required to give monthly income (beginning of period) (PV) Rs 21,765,097

Step 4. Determine how much have you Accumulated so far in Today's and Future Dollars

A. Current value of taxable investment and savings account assets Rs 0

B. Current value of Retirement account assets (401K, IRAs, SEPs, etc.) in today's dollars

C. Total Value of Taxable and Retirement Accounts Rs 0

D. Number of years till retirement (from above) Rs 20

E. Estimated growth rate in investments until retirement (from above) Rs 0

F. Estimate annual rate of inflation until retirement (from above) Rs 0

G. Inflation adjusted return (1+nominal return)/(1+inflation)-1 Rs 0

H. Projected value of current savings at retirement in future dollars Rs 0

Personal Finance: Another Perspective

- Retirement Planning Worksheet 1 -


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Step 5. How much will you draw from home equity?

A. Current value of your home in today's dollars

B. Estimated growth in your home's market value (may be different from inflation) Rs 0

C. Number of years to retirement (from above) Rs 20

D. Estimated value of your home at retirement in future dollars Rs 0

E. Mortgage remaining at retirement (should be negative)

F. Price of new home at retirement (should be negative)

G. Home's estimated contribution to total investment needed in future dollars Rs 0

Step 6. How much more do you need to save?

A. Preliminary Total Investment needed in future dollars for monthly income (from 3.J) Rs 21,765,097

Preliminary Total Investment needed in future dollars for annual income (from 3.J) Rs 22,373,394

B. Current savings in future dollars (from 4.H) Rs 0

C. Contribution from home equity in future dollars (from 5.G) Rs 0

D. Total Investment Shortfall in future dollars for monthly income Rs 21,765,097

Total Investment Shortfall in future dollars for annual income Rs 22,373,394

E. Number of years until retirement (from above) 20F. Estimated growth rate in investments until retirement (from above) 9.25%

I. Total Investment Amount needed monthly to reach your monthly goal in today's dollars Rs 31,567

J. Total Investment Amount needed annually to reach your annual goal in today's dollars Rs 425,203

Step 7. Start saving now!!!!!!!!!

This spreadsheet was adapted from the article in Kiplinger's, dated March 2001, by Mary Beth Franklin.


TT06 - Retirement Planning Needs

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