USA How much to set aside for pension?

[Rajan Shah]

Students are asked to consider how much they should be setting aside for their pension.


Considerations to be taken into account:


·Students will graduate at the age of 25.

·Students will receive a starting salary of $50,000

·During the course of a 40 year working career students will expect a 2% increase in salary coming at the end of each year of employment.

·Students will change jobs every 10 years and on each occasion move for a salary increase of $15,000 a year

·During their working life period students may anticipate they will encounter the historically normal rate of inflation of 3% a year.

·Students will need to then determine how much they will need to save each year (in a Sec 401 k or equivalent) to provide a capital sum that will enable them to receive a 4% annuity providing them with 50% of their final salary for the remainder of their actuarial life (85 years).

 

[kirby]

And if student is in US, there will be fed and state tax on the payout of the annuity because it was sheltered from tax when earned and now is exposed to tax.

 

[Rajan Shah]

And if student is in US, there will be fed and state tax on the payout of the annuity because it was sheltered from tax when earned and now is exposed to tax.

Considering only the given bullets can you solve the problem?

 

[kirby]

Student hired. Caught cheating on accounting board. Fired. No income to project over next 40 years of career.