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##### Hanford MacDwaddy is 47 years old today and makes $78,000 per year.

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**Question**

Hanford MacDwaddy is 47 years old today and makes $78,000 per year. His wage replacement ratio has been determined to be 72%.;He expects inflation will average 3.5%/year over his lifetime. He expects to earn 8% on his investments and he plans to retire at age;67. You have helped him determine his estimated social security retirement benefit at his full retirement age of 67 to be $18,000 per;year (in today's dollars). Due to longevity in his family he wants you to help him determine his capital needs for retirement assuming;he lives to age 97.;Answer the following questions on the next Excel worksheet labeled "Capital Needs". Rely on the use of the TVM functions - ke e p;yo urans we rs withinthe s hade dc e lls.;Que s tio ns;1. Calculate Hanford's capital needed at retirement at age 67 using the Pure Annuity, Capital Preservation and PPP models. You will;have 3 separate solutions here. Remember we do this calculation in BEGIN mode since we need the money each year at the start of;each year.;2. Calculate the monthly savings Hanford must make at the end of each month to accumulate the capital needed as ifdentified in;Question 1. Yo uwillhave 3s e parate s o lutio ns he re as we ll.;Allthe s te ps ne e de dto c o mple te this as s ig nme ntare attac he d.;To check your final answer you can actually substitute the data above with the data in the example on page 724 of the text and you;should get exactly the results that you see in the first two rows of Exhibit 15.21 on page 729. Ifyo uc he c kyo urans we rthis way;make s ure yo ure e nte rthe dataas abo ve be fo re s ubmitting !;Given Information: (get all of this from the data on the Instructions worksheet);Current Age;Retirement Age;Mortality Age;Inflation;Investment ROR;Current Salary;Wage Replacement;Social Security Estimate;Calculations;Total Needs in Today's Dollars;Less Social Secuity in Today's Dollars;Annual Amount Needed in Today's Dollars;IARR;Pure Annuity;1st year need at retirement;Capital needed at retirement;Monthly savings to meet Capital Need;Models;CP;PPP;Hints

Paper#29956 | Written in 18-Jul-2015

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