John Doe, a 23 years young newly graduated engineer just got a job in a major engineering firm. Human resources told him that he could join the company’s 401K Plan, and his maximum contribution can’t exceed 10 percent of his gross annual salary and the company will match 50% to his contribution. He is paid $35 per hour and he gets a 4% raise every other year, after 20 years of work he is laid off. Roth IRA is $5500 per year during this period. (Age23-42)
He finds another job with an annual salary of $120’000 per year and works till his retirement (43-67). The new company doesn’t have a retirement plan and he can only save in his Personal IRA $15000 per year on the average. During second half of his career the salary increase is only 3% every three years and there are no medical benefits either. John was assuming that at retirement he has paid off his mortgage and he doesn’t have major consumer debt and based on today’s buying power he only needs $4000 to live well.
For this project you are required to examine:
How much money he needs during retirement? His life expectancy is 95 years.
How much does he need to retire @ age 67?
If he wants to retire sooner when should he start his investments in Roth IRA account & at what age he could take early retirement?
Research and use the funds that their performance is above 10% and show source.
Must use Ms-Excel to show work.
(You are required to show all your work and make valid assumptions)