Essentials of Business Analytics 1st Edition by Jeffrey Camm,James Cochran,Michael Fry,Jeffrey Ohlmann ,David Anderson

Exercise 20

Retirement Plan
Tim is 37 years old and would like to establish a retirement plan. Develop a spreadsheet model that could be used to assist Tim with retirement planning. Your model should include the following input parameters:
Tim's current age = 37 years
Tim's current total retirement savings = $259,000
Annual rate of return on retirement savings = 4 percent
Tim's current annual salary = $145,000
Tim's expected annual percentage increase in salary = 2 percent
Tim's percentage of annual salary contributed to retirement = 6 percent
Tim's expected age of retirement = 65
Tim's expected annual expenses after retirement (current dollars) = $90,000
Rate of return on retirement savings after retirement = 3 percent
Income tax rate postretirement = 15 percent
Assume that Tim's employer contributes 6% of Tim's salary to his retirement fund. Tim can make an additional annual contribution to his retirement fund before taxes (tax free) up to a contribution of $16,000. Assume he contributes $6,000 per year. Also, assume an inflation rate of 2%
Managerial Report
Your spreadsheet model should provide the accumulated savings at the onset of retirement as well as the age at which funds will be depleted (given assumptions on the input parameters).
As a feature of your spreadsheet model, build a data table to demonstrate the sensitivity of the age at which funds will be depleted to the retirement age and additional pre-tax contributions. Similarly, consider other factors you think might be important.
Develop a report for Tim outlining the factors that will have the greatest impact on his retirement.