Construct a Personal Retirement Problem and Solve It

·  The following assignment will require you to use your personal balance sheet to apply the future value compounding concepts for single and multiple payments coupled with market investment returns to determine the amount of funds you will have at retirement. Then you will see how a change in the return rate or the compounding periods will alter the future value figures. You are required to work this problem with you own numbers and the work can be posted as an attachment. If you do not want to share personal information, the posting can use made up beginning values of assets and fake annual savings and investment figures. I will review the work to determine your understanding of the concepts involved in calculating future values and in your approach to logical retirement planning

·  Construct a personal retirement problem and solve it

·  You should determine the amount of invest funds you currently have available in all personal investments and self-directed and vested retirement accounts

·  If you have investment in real estate include the value in your calculations of an investment that should appreciate and help support retirement

·  Then determine how much you will be adding to your investments each year in the future

·  Next, decide at what age you plan to retire

·  Determine what annual investment return you expect to earn on your investments. You can use a different rate on each asset class

·  Now calculate the future value of your current investments at retirement age

·  Calculate the future value of your additional annual savings

·  Add all of the future values to determine the level of retirement funds or assets you will have at retirement

·  Justify your return rate by explaining what you plan to invest in and its historic returns (see page 212 for investment returns or use your historical returns or what you project your returns to be)

·  After determining your nest egg at retirement, adjust one of the variables of return rate, annual savings rate, or years to retirement and rerun the numbers. Make two additional variable changes and calculate the future values. Try to adjust the variables in order that you can develop a retirement value that will make you happy. There will be a total of four retirement figures, the original figure and the three changed ones

·  Comment on the lessons you have learned in solving this retirement problem and how you plan to apply this knowledge to your personal life

·  Now post the numerical results and your discussion of them

·  Attachments are acceptable in this lesson as are excel spreadsheets. You can either post real numbers and discuss the results based upon these real numbers, or if uncomfortable with providing personal information, use hypothetical numbers

·  The purpose of this exercise is to force the use of the chapter’s concepts of future values, annuities, and compounding to your personal financial planning