Lucy Cook

Mr. Wilson
Finance 1380
11.24.2023
Signature Assignment B1-B4

B 1.1
In order to plan my retirement, I first made a budget for my ideal retirement and worked

backward. I consulted my retired grandparents about their expenses, as well as income from

retirement plans. I cross-referenced the information they gave me with national averages to try to

achieve a realistic outline.

 RETIREMENT BUDGET

AGE

Age today 18 Years to retirement 42

Age at retirement 60

RETIREMENT INCOME SOURCES

Weekly Bi-Weekly Monthly Quarterly Annually
5,000.0 60,000.0
401k Income
0 0
1,200.0 14,400.0
Company Pensions
0 0
3,000.0 12,000.0
Shares/Investments Income
0 0
220.0 2,640.0
Annuity Income
0 0
6,420.0 3,000.0 89,040.0
TOTAL
0 0 0
HOUSING COSTS
Weekly Bi-Weekly Monthly Quarterly Annually
Mortgage or rent
9,000.0
Real estate taxes
0
300.0 1,200.0
Maintenance and repair
0 0
160.0 1,920.0
Home insurance
0 0
160.0 300.0 12,120.0
TOTAL
0 0 0
PERSONAL EXPENSES
Weekly Bi-Weekly Monthly Quarterly Annually
50. 2,600.0
Grooming
00 0
300.0 1,200.0
Clothing
0 0
4,800.0
Holidays
0
4,200.0 16,800.0
Travel
0 0
600.0
Auto expense
0
180.0 2,160.0
Auto insurance
0 0
50. 180.0 4,500.0 28,160.0
TOTAL
00 0 0 0
DAILY LIVING EXPENSE
Weekly Bi-Weekly Monthly Quarterly Annually
150. 7,800.0
Groceries
00 0
300.0 3,600.0
Entertainment
0 0
150.0 1,800.0
Utilities
0 0
20.0 240.0
Telephone
0 0
150. 470.0 13,440.0
 Based on the spreadsheet I’ve made; I need to make $75,680 per year of my retirement.
However, by the time I retire in 42 years, inflation will have caused the cost of living to rise. I’ve
calculated that I will actually be spending Approx. $270,000 annually based on the formula
below.
Future Value (FV) = Present Value (PV) x (1 + r) ^ n
Where:
• PV = $75,680 (your estimated annual retirement expenses)
• r = 0.03 (the inflation rate)
• n = 42 (the number of years until you retire)
FV = $75,680 x (1 + 0.03) ^ 42 FV = $269,763 (rounded to the nearest dollar)
B 1.2

The impact inflation can have on projected expenditures needs to be considered when

preparing for retirement. The value of a dollar will drastically change over our lifetimes, and we

need to factor in the effects to our budget. We do this by using a baseline inflation rate of 3%,

but we need to review our plan to change with the economy. For example, a retirement plan

created five years ago may no longer be fit for the current high interest rates and inflated market.

B 1.3

Upon retirement, our monthly expenditures will fluctuate. In my own plan, I decided not

to include mortgages fees in hopes that I will own my own home by then. Transportation may

also decrease without a commute to work. The two categories that went up the most were the

holiday and travel budget. I imagined that I would want to buy my hypothetical grandchildren

lots of gifts and go on quarterly trips.

B 1.4
 Ultimately, I think the transformation from your working budget to your retirement

budget is indicative of the quality of life you wish to have in each stage. I don’t mind making a

few sacrifices while I’m young to help me live comfortably when I’m older, but it’s important to

keep a steady balance. I will still be able to retire comfortably without achieving the retirement

fund I have planned, which gives me peace of mind, but I’d still like to aim high with my saving.

B 2.1 Annualized budget already shown in spreadsheet.

RETIREMENT BUDGET

AGE

Age today 18 Years to retirement 42

Age at retirement 60 Annual Income required at 60 269,763
Years after retired 30 Amount Required 7

INFLATION RATE

Annual Inflation Rate 3.00%

Age Year Inflation Rate % Annual Budgeted Cumulative

61 1 3.00% 1 277,856 277,856

62 2 3.00% 2 286,191 564,047
63 3 3.00% 3 294,777 858,824
64 4 3.00% 4 303,620 1,162,444
65 5 3.00% 5 312,729 1,475,173
66 6 3.00% 6 322,111 1,797,283
67 7 3.00% 7 331,774 2,129,057
68 8 3.00% 8 341,727 2,470,785
69 9 3.00% 9 351,979 2,822,764
70 10 3.00% 10 362,538 3,185,302
71 11 3.00% 11 373,415 3,558,717
72 12 3.00% 12 384,617 3,943,334
73 13 3.00% 13 396,156 4,339,489
74 14 3.00% 14 408,040 4,747,529
75 15 3.00% 15 420,281 5,167,811
76 16 3.00% 16 432,890 5,600,700
77 17 3.00% 17 445,877 6,046,577
78 18 3.00% 18 459,253 6,505,830
79 19 3.00% 19 473,030 6,978,860
80 20 3.00% 20 487,221 7,466,082
81 21 3.00% 21 501,838 7,967,920
82 22 3.00% 22 516,893 8,484,813
83 23 3.00% 23 532,400 9,017,212
84 24 3.00% 24 548,372 9,565,584
85 25 3.00% 25 564,823 10,130,407
86 26 3.00% 26 581,768 10,712,175
87 27 3.00% 27 599,221 11,311,396
88 28 3.00% 28 617,197 11,928,593
89 29 3.00% 29 635,713 12,564,307
B 3.1

This spreadsheet represents how inflation will impact my retirement years. By the time

I’m 90, I am projected to have spent over $13 million on my retirement. However, we cannot

take this number at face value, because budgeting is more complicated than a set number. For

instance, when estimating medical costs, I chose to round up from the national average, which

for a 60–72-year-old would normally be about 10% lower. I did this to give my self some extra

money in case of medical complications, but if I happen to stay healthy, my annual income

shortfall will increase. Speaking of which, year 1 I’m projected to save $46,234.90 of my

income, which is 17.14% of my $269,763 annual budget (numbers have been adjusted for

inflation). In total the money carried over in the 30 years will be more than 2.2 million.

B 3.2

Retirement can be hard to visualize when you’re young, since everything seems so

abstract. But the best way to keep up with inflation is to start exploring your options early.

Compound interest should be taken advantage of and utilized for as long as possible. Putting

money into 401ks instead of just letting them sit in your bank account helps your money grow

with the ever-changing economy instead of depreciating.

Diversifying your portfolio ensures multiple streams of income during retirement. You want a

good deal of low-risk, long-term investments such as bonds and CDs. Stocks and Mutual Funds

are also important, although you may need to watch them and reevaluate more often than other

investments. The most important thing is to stay organized with monthly budgets, so that you can

keep track of exactly where your money is going.