1.After taking into account the income that Felicia will receive from Social Security and her company-sponsored pension plan, the financial planner has estimated that her investment assets will need to provide her with about $25,000 a year to meet the balance of her retirement income needs. Assuming a 6 percent after-tax return on her investments, how big a nest egg will Felicia need to earn that kind of income?
2.Suppose she can invest the money market securities, stocks, and bonds (the $147,000) at 5 percent after taxes and can invest the $372,000 accumulated in her tax-sheltered IRA and 401(k) at 7 percent. How much will Felicia’s investment assets be worth in 8 years, when she retires?
3.If Felicia continues to put $10,000 a year into her 401(k) program, how much more will she have in 8 years, given a 7 percent rate of return?
4.What would you advise Felicia about her ability to retire in 8 years, as she hopes to?