Dave is 35 years old and Margaret is 37. Dave earns $43,000 per year and Margaret $52,000 per year. They would like to retire when Margaret is 66. Social security will be $21,000 each in today’s dollars. Dave has a 401(k) with a balance of $62,000, is saving $500 per month while earning 6.3% per year. Margaret has a 457 with a balance of $78,000, contributing $375 per month and is earning 7.8% per year. Inflation is at 1.8% and you should plan on age 100 for both. They would like to retire with $145,000 in today’s dollars in their first year of retirement.
- How much will they need at retirement?
- Can they reach their goal, if not what should they do?
- What rate of return will they have to achieve in retirement to maintain their goal with inflation?