Question

(Planning for Retirement LC)

An employee's current annual gross wage is $65,400. For retirement, the employee wants to have enough saved to live off 80% of the current annual gross wage and withdraw 4% the first year. Calculate the total the employee will need in retirement savings to achieve their retirement goal.

$1,308,000
$1,380,000
$130,800
$138,000

Answer 1

So first we need to calculate 80% of the current annual gross wage: 80% * 65,400 = 52,320.
Then we have to determine the total amount needed for retirement savings using the 4% withdrawal rate: 52,320 / 0.04 = 1,308,000. So, that means A is your answer.

Answer 2

great!