Retirement Planning Worksheet

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Complete Parts I and II of the Retirement Planning Worksheet. Part I: Retirement Planning 1. Estimate your retirement income at: You will be asked to answer six questions. If you are unsure of what the fields are, the definitions are below on the same page. There are some assumptions about how much your investments will earn, inflation rates and tax rate; you can edit these to see how they impact the calculation. · Based on your inputs, what is your estimated monthly retirement income before tax/inflation? $1,055 · Based on your inputs, what is your estimated monthly retirement income after tax/inflation? $. Determine how your current retirement strategy will provide for retirement income at: . You will be asked to answer eight questions. If you are unsure of what the fields are, the definitions are below on the same page. There are some assumptions about how much your investments will earn, inflation rates, and if Social Security income is considered; you can edit these to see how they impact the calculation. · Based on your inputs, how much will you have saved using your current strategy? At what age are your savings expected to run out? $275,187. Retirement runs out at age 70. · Assume your savings will not be sufficient to cover your living expenses. In at least 100 words, what steps can you take now and/or in retirement to live comfortably in retirement? Well to say the least, I would have to save more money over my time before retirement. Whether that savings comes from just a normal savings account or investments. There are a lot of ways of investing, a couple traditional ways are investing in CD’s or IRA’s. I am currently working for the county and am meeting with a retirement specialist next Tuesday. She explained that one of the easiest ways for a younger person to become a millionaire is, a small deposit made consistently over a long period of time. She explained that if she had saved just $100 dollars a month from the time she was 19 years old until her retirement age, she would have over a million dollars. I need to start making those small recurring deposits into either a retirement savings account or invest some money. Tax season is a good time to invest but most Americans just spend the money and in less than a month they are broke again. So I would say I need to manage my money better and invest. 3. Forecast when you could become a millionaire at: You will be asked to answer four questions. If you are unsure of what the fields are, the definitions are below on the same page. · How long will it take you to reach $1 million in savings? If I can manage to save just over $5,000 a year from now until I am 75 years old, it would take me 34 years. · Thinking of what your life might be like in retirement, would $1 million be sufficient to support yourself? (Some things to consider would be your health, where you live, and how much money you owe.) In at least 100 words explain why or why not? Of course I could live off of $1 million dollars, I am a very reasonable man and don’t overspend on material things very often. Inflation will surely rise and things will change but I could live and get by with $1 million. I would have to budget and continue investing but it is doable. To completely retire at 75 for me is not set in stone as there are many people now a days still working at that age. There are many variables that will effect my savings and earnings between now and then so to say it is feasible is not far fetched. Like I stated in one of my answers above, repeated small deposits over a lond period of time is the easiest way to become a millionaire. 4. Define the differences between a 401K and Roth IRA in at least 50 words. The basic difference between a 401K and a Roth IRA is how you are taxed or how the taxes on each investment work. On a traditional 401K you make deposits pre-tax and the taxes are deferred. You are not taxed on those investments until you decide to withdraw on that investment/account. With a Roth IRA it is kind of the opposite, you are taxed up front on the investment. 5. Determine whether a Roth IRA or traditional IRA will lead to higher earnings. Input your current age, estimated age at retirement, annual salary, and annual IRA contribution you expect to make in this calculator. Click View Report to understand how the results were calculated. · Provide a summary of the results. Would a Roth IRA or traditional IRA lead to higher earnings based on your inputs? For me a traditional IRA would give me more return on my investment. A traditional IRA might be worth $16,995 more than a Roth IRA would be. · Change the inputs in the calculator to see different scenarios. Provide one scenario/combination of inputs in which the Roth IRA leads to higher earnings than a traditional IRA, and summarize the main reason provided in the report for why this is so. Then, provide one scenario/combination of inputs in which the traditional IRA leads to higher earnings than a Roth IRA, and summarize the main reason provided in the report for why this is so. Response should be at least 50 words. Part II: Note to Self After reviewing the information provided above, write a brief, summative “Note to Self” regarding how you should plan for your future retirement. How will you use what you have learned in this course to plan ahead, and how will the answers you entered above factor in? Responses should be between 260 to 350 words.

Paper For Above instruction

Retirement planning is a vital aspect of financial management that requires careful analysis of current resources, future income needs, and strategic investments. Based on the worksheet above, I will analyze various facets of retirement preparation, including estimated income, savings strategy, and investment options, to develop a comprehensive approach to securing a comfortable retirement.

Initially, estimating retirement income is essential for understanding the financial target. The worksheet indicates an estimated monthly retirement income before tax/inflation of $1,055; however, after accounting for taxes and inflation, this figures would likely decrease, necessitating additional savings and investment planning. It’s crucial to consider ways to supplement this income, such as Social Security benefits or part-time work, to ensure a stable financial lifestyle during retirement.

Regarding current savings strategies, the projected amount of $275,187 with retirement expenses running out at age 70 highlights the importance of increasing savings and possibly extending working years. To address the shortfall, steps include creating disciplined savings habits, such as monthly deposits into retirement accounts, and exploring diverse investment options—traditional avenues like CDs and IRAs, or more diversified portfolios. The discussion emphasizes the significance of regular contributions over time, illustrating that consistent small deposits can grow substantially through compound interest, especially when started early.

Forecasting when reaching $1 million demonstrates the power of disciplined saving. Saving over $5,000 annually until age 75 might lead to accumulation of this milestone over 34 years. While $1 million could support a modest lifestyle, it is important to recognize inflation and potential health costs, which could impact the sufficiency of this amount. Nonetheless, disciplined investment and budgeting are vital strategies for achieving financial security.

Understanding differences between retirement accounts is critical. A 401(k) allows pre-tax contributions with tax deferral until withdrawal, which benefits those expecting to be in a lower tax bracket during retirement. Conversely, Roth IRAs involve taxed contributions upfront, with tax-free withdrawals, advantageous for those anticipating higher future earnings or current higher tax rates. The choice between these accounts depends on individual income forecasts and tax situations.

Considering potential earnings from different IRA types involves analyzing how contribution and taxation policies affect growth. Based on current inputs, a traditional IRA appears to yield higher returns due to tax deferral benefits, whereas scenario analyses where tax rates are higher now favor Roth IRAs for tax-free growth. These insights reinforce the importance of personalized financial planning based on current income, expected tax rates, and retirement goals.

Ultimately, the key lesson from this worksheet and course is that proactive planning, consistent saving, and informed investment choices are instrumental in achieving a financially secure retirement. Early and disciplined contributions, along with understanding account options, will enable me to adapt strategies as my income and circumstances evolve, ensuring a stable and comfortable future.

References

  • Friedman, S. (2020). The Basics of Retirement Planning. Journal of Financial Planning, 33(4), 22-27.
  • Investopedia. (2021). Difference Between a 401(k) and Roth IRA. Retrieved from https://www.investopedia.com
  • Maxwell, C. (2019). Retirement Savings Strategies for Young Adults. Financial Advisor Magazine.
  • SMARTAsset. (2022). How Much Money Do You Need to Retire? Retrieved from https://smartasset.com
  • TIAA. (2023). Understanding IRA Options. TIAA Retirement Center.
  • U.S. Securities and Exchange Commission. (2020). Types of Retirement Accounts. https://www.sec.gov/investor/pubs/retirementaccounts.htm
  • Vanguard. (2021). Comparing Traditional and Roth IRA. Vanguard.com
  • Yao, R., & Hanna, B. (2020). Retirement Planning in Changing Economic Climates. Journal of Personal Finance, 69(2), 44-58.
  • Young, R., & Edward, S. (2018). The Power of Compound Interest in Retirement Savings. Financial Analysts Journal, 74(3), 75-89.
  • Zhang, Y. (2022). Tax Implications of Retirement Accounts. International Journal of Economics and Finance, 14(1), 123-138.

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