Your brother, Eric, has asked your advice on creating a retirement plan. He is 35 years old, earns US$55,000 per year with average raises of 4% per year, and plans to work until the age of 65. His company offers a 401(k) plan with matching contributions of up to 8% of his income that has been earning an average of 10% per year.
Your brother is very active and loves to travel. After retirement, he plans to travel the world and be very active. He is unsure how to plan for retirement, does not understand the different retirement investment options, and needs your help.
Individually: Develop a spreadsheet that shows how much Eric can expect to have in his retirement account when he turns 65 if he begins depositing 8% of his salary now.
As a group, prepare a presentation for Eric that explains how to plan for retirement, common retirement investment options, and the tax implications of each investment. Using the spreadsheets prepared by individual team members, explain compounding, the time value of money, and the importance of retirement planning and investing. Make a recommendation to Eric about his retirement account.
Please include the spreadsheet.
For the excel sheet, I am assuming that Eric is depositing his salary at the end of the year. Therefore, he does not receive the 10% investment return for that year. For the following years, formula is entered in the excel sheet. The ending balance of the 401K account at age of 65 is $2,537,132.93
For the group part of the question, I am not sure whether your team members will have different point of view on this issue. I am providing my ideas only for reference.
Plan for retirement: The key to ...
This solution contains an Excel file showing calculations to determine Eric's retirement savings and includes a presentation on how to plan for retirement, common retirement options and tax implications of each investment.