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financial planning for the retirement

Subject: Consumer Behavior

Paper Model: APA

Paper Type: Article Review

Total Words: 713

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This case study is comprised of the financial planning for the retirement. This financial planning is helpful in order to make projections for the future and regarding the expenses and income in the coming years. The financial planning is important to secure future in term of financial obligations


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This case study is comprised of the financial planning for the retirement. This financial planning is helpful in order to make projections for the future and regarding the expenses and income in the coming years. The financial planning is important to secure future in term of financial obligations. This case study is based on the projection of expenses annually. All the aspects of financial planning like the social security benefit and the tax rate application are included in the analysis. The life expectancy and and the concept of TVM is used in determining the value of cash flows. The financial planning is basically a management plan for the retirement which incorporates the cash inflows and the cash outflows of a person’s life. Most of the people do not take into account these financial obligation and they find it difficult to cope up with these problems after their retirement. This retirement planning helps to explicitly realize the expenses and the income in the coming years. This planning process also set a target for cash inflows in order to cover up the said expenses.

The estimation of the annual retirement expense projection is made using the MS excel tools. The expenses include a few broad categories like the food, clothing, entertainment, transportation and life care. The estimated annual expenses are calculated to be $31456.56. In this study the net income on annual basis is supposed to be $ 4166.67. Thus, the income tax calculations are based on this supposition. After calculating the total annual expenses, the pre tax amount is calculated by dividing the expense amount by 0.8, which yields the value of $ 39320.7.

The social security benefits are supposed to be $14,760, which is subtracted from the total annual expenses. In addition to the social security benefits, the pension must also be subtracted from the total expenses. This pension is predicted to be 8400 on annual basis, which is also subtracted from the total expenses. Thus the remaining expenses are calculated to be $10,500, while the pension amount is calculated considering the tax and dividing the pension amount by 0.8. Another important aspect in calculated the cash flows, the time value of money. TVM incorporates the discount or rate of return for the future years. In this study, the TVM is used to determine to present value of future cash flows using a 3% discount rate. For this purpose, the current age is chosen to be 25 which helps in determining the age of retirement which is selected to be 60 years


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