Assignment 4-2

Celisteela Moonn met one of SchoolStreet’s clients, Caleb Jamal, to discuss his retirement income.

Moonn plans to invest Caleb’s money in a risky portfolio that might have a long-run low return of 1.0%, medium return of 5.0%, and a high return of 12.0%.

Caleb asked Moonn what would be his annual retirement income in the low, medium, and high return scenarios when saving with a taxable plan, a traditional IRA or 401(k) plan, or a Roth IRA or 401(k) plan?

Caleb provided following info to SchoolStreet:

  • Age 25 years
  • Expect to earn a constant salary of $50,000.
  • Planning to retire at age 65 and expects to live at age 85.
  • Caleb saves at a 10.0% rate.
  • Current tax rate is 18.0% and Caleb expects his retirement years tax rate to be 23.0%.

Using the template provided, calculate Caleb’s annual retirement income for Low Return, Medium Return and Hight Return for:

  • Taxable Investment
  • Traditional IRA or 401(k)
  • Roth IRA or 401(k)