Adelrays Financial Planners
1201 Roosevelt Drive
Havertown, PA 19083
Mr. Mike White
25 Roosevelt Drive,
Theodore, VA 34891
Dear Mr. White,
After carefully analyzing the financial information that you granted us pertaining to your retirement needs, we came up with some solid forecasts on the amounts you will need to retire comfortably. We calculated that the amount you will need on annual basis and the result is $35,000. This was arrived at by multiplying your current salary ($80,000) by your WWR, which is 70%. Your social security benefits are then subtracted from the result i.e. $56,000-$21,000. The result is $35,000, which is the present value of annuity.
We then calculated the future value of annuity using the present value, the number of months in the year and the expected inflation per year. We used the future value formula to calculate the amount you will need in your first year of retirement. The result is $47,071.1088. Now we proceed by calculating the amount that you will need at the age of 65. The number of times the annuity will be paid is derived by subtracting the retirement age from his life expectancy i.e. 78-62=16. The inflation rate at this point will be 5.3659 assuming that you can maintain the 8% return on your investments that you currently receive. The present value of the amount that you will need when you turn 65 is $523,790.3478.
You also asked about the money you would need to contribute in order to accumulate the money you will need for retirement at 65 years old. We can calculate this amount using the inflation per annum and the future value as well as the present value. The inflation rate used at this point is 0.6667 derived by dividing the ROI by 12. Our n in the formula will be 144 which is the WLE*12. As seen above, the future value at retirement will be $523,790.3478. Using these figures, we find that you will need to be making monthly payments of about $2,372.6322 every year until you retire.
You are currently saving $1500 per month towards your retirement. From the analysis, we concluded that you are not saving enough in order to meet your retirement targets. You need to save an additional $872.6322 every month to reach the $2,372.6322 monthly savings required for you to retire comfortably. In addition, it is our company’s prerogative to advice you on any investment options that you could consider in order to reach and exceed your retirement goals. Currently, you are investments have earned you 8% ROI. You need to diversify your investments in order to increase your rate of return. For instance, investing in stocks is an excellent investment option at this point. They are a risky venture but their rate of return can be 2 times-5 times the rate of returns provided by other investment options.
Adelrays Fiancial Planners.