Explore BrainMass

Retirement Planning

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

Thomas is considering retiring and migrating to a rental property in the Virgin Islands. Thomas presently owns a home appraised at $595,000 with $300,000 remaining on the home loan. He has about $350,000 in savings right now. The Virgin Island rent will be $1,000 a month and he estimates that he and his wife can live on $3,000 a month in the Virgin islands. He figures that he will live for 25 additional years and can earn 5% in his funds.

a. Does he have sufficient resources to retire in the Virgin Islands?
b. A friend noted that he also will get social security benefits but also will have top pay taxes on funds coming from his tax-deferred retirement fund and the social security. If he expects $1,500 in social security income and 18% of the income coming from the retirement funds are deducted for taxes, can he afford the retirement plan at this time?

© BrainMass Inc. brainmass.com October 17, 2018, 3:11 am ad1c9bdddf


Solution Preview

Please refer attached file for better clarity of functions in MS Excel.

a. Does he have sufficient resources to retire in the Virgin Islands?

Value of home=$595,000.00
Loan due= $300,000.00
Net expected value of home=595000-300000=$295,000.00
Total worth in hand=350000+295000=$645,000.00

Let us see what monthly payments he can get at 5% rate.
Present value of annuity=PV=$645,000.00
Interest Rate=RATE=5%/12=0.4167% per month
Number of ...

Solution Summary

Solution determines if the current financial resources can meet the retirement target in the given case.

Similar Posting

Retirement Plans and ERISA

How can I distinguish around various types of retirement plans? What are the requirements of ERISA that plan sponsors must fulfill?

What is the difference between defined contribution and defined benefit retirement plans?

What are differences between 401(k) and 401(b) plans?

What are the fiduciary responsibility imposed from ERISA?

What are the non-discrimination rules imposed by ERISA?

View Full Posting Details