Lily, age 38, currently earns $90,000. Her wage replacement…
Lily, age 38, currently earns $90,000. Her wage replacement ratio is determined to be 85 percent. She expects that inflation will average 2.5 percent for her entire life expectancy. She expects to earn 10.5 percent on her investments and retire at age 67, possibly living to age 94. She has sent for and received her Social Security benefit statement, which indicated that her Social Security retirement benefit in today’s dollars is $22,000 per year. Calculate Lily’s capital needed at retirement age 67 and the amount Lily must save at the end of each year, assuming she has no current savings accumulated for retirement. Solve using the Purchasing Power Preservation Model.