Fred And Wilma Are 48 Years Old; Their Only Daughter Pebbles

Question

Fred And Wilma Are 48 Years Old Their Only Daughter Pebbles Recentl Fred and Wilma are 48 years old. Their only daughter, Pebbles, recently graduated from Winthrop and is off the payroll. They both work and have incomes of $65,000 and $58,000 per year respectively. They have not been saving as much as they should for retirement and currently have $120,000 in Fred's 401(k) and $75,000 in Wilma's 401(k). Fred, the higher earner, gets a company match of up to 5% of his salary. Wilma gets 3% of her salary automatically added to her 401(k) each year. They recently heard that they will need a million dollars to retire. How long will it take them and how will they get to $1 million dollars in these two 401(k)s? Will $1 million dollars be enough for them to retire? Make some assumptions about taxes and replacement rates, explain them and show the numbers. Then write a short email (1/2 page to one page single spaced) to Fred and Wilma giving them some basic guidance on retirement savings.

Dr. Jack HW Helper · Accepted Answer

Introduction Fred and Wilma’s current retirement savings status highlights a common challenge faced by many Americans nearing retirement age: insufficient accumulation of retirement funds. Although both are actively employed with steady incomes, their savings are below recommended levels, emphasizing the importance of strategic planning to meet their retirement goals. This paper aims to analyze their current savings trajectory, project the growth of their 401(k) plans, evaluate whether their target savings of $1 million is sufficient for retirement, and provide practical guidance to improve their retirement readiness. Current Financial Situation and Retirement Goals Fred, earning $65,000 annually, has accumulated $120,000 in his 401(k), while Wilma, with a $58,000 salary, has $75,000 in hers. Their respective employer contributions are noteworthy: Fred receives up to 5% company match, equating to $3,250 annually, assuming he contributes at least 5%. Wilma contributes 3% of her salary, adding approximately $1,740 annually to her 401(k). Their goal is to amass enough savings—at least $1 million—to ensure a comfortable retirement. Projection of Retirement Savings To determine how long it will take to reach $1 million, several assumptions are necessary: - Consistent annual salary increases of 3% - Investment returns averaging 7% annually after taxes - Current contributions: Fred contributes 5% of his salary, Wilma contributes 3% - Employer match for Fred is maximized; Wilma’s contributions grow at the same rate - Both portfolios grow tax-deferred until withdrawal Using these assumptions, calculations indicate that Fred’s 401(k) will take approximately 16-20 years to reach the $1 million mark, while Wilma’s will take slightly longer due to smaller contributions. The combined savings growth depends on investment performance, future salary increases, and additional contributions. Will $1 Million Be Enough? Assuming a sustainable withdrawal rate of 4%—a common rule of thumb

Fred And Wilma Are 48 Years Old; Their Only Daughter Pebbles

Fred And Wilma Are 48 Years Old Their Only Daughter Pebbles Recentl

Paper For Above instruction

Introduction

Current Financial Situation and Retirement Goals

Projection of Retirement Savings

Will $1 Million Be Enough?

Assumptions about Taxes and Replacement Rates

Recommendations and Guidance

Conclusion

Sample Retirement Savings Guidance Email

References