You are 25 years old and expect to retire at 70 with a 20 year retirement. You are just starting to plan for retirement and have no money in the plan yet. You expect to earn an average of 7% in accumulation and 4% in retirement.

(a)  If you want a retirement income of $100,000 per year how much will you need the day you retire and how much must you contribute during accumulation?  $1,359,033 and $4,756 per year.

(b)  You are now 45 and have been contributing the amount you calculated in part (a). You have $200,000 in the plan. Can you still expect the $100,000 per year with the same contributions?  Yes

(c)  A bad week in the stock market takes away 30% of that $200,000. If you decide to increase your contribution to make up for it, what is the new contribution?   $9,474 per year.

(d)  If you stick to your contribution from part (a), can you retire two years later with at least $100,000 per year income?  Almost, projected income is $96,703/yr.