Envision Your Retirement What you can afford to do in retirement depends on your average income while you work, when you start saving, how much you save, where you invest, and a host of other factors. In this activity, you’ll envision your life in retirement based on your “input” from your working years. Part I: Determine Your Retirement “Inputs” To simulate the fact that every retirement plan looks different, fill in this profile for the “Future Retired You” based on the factors below: Factor Your Factor Rule Your Retirement Input Annual Salary What are the last 2 digits of your phone number? Multiply by 100 to your find monthly income, then multiply by 12 for annual salary. *Note: If your last digits are 19 or lower, use $45,000 (the US average salary) instead. Age You’ll Retire What is the last 1 digit of your social security number or student ID number? Add that number to 62 Age You Start Saving for Retirement In your current address (or most recent US address), what type of street do/did you live on? ● Dr = 25 ● St = 30 ● Ave = 35 ● Blvd = 40 ● other = 45 How Much You Save Annually for Retirement What month were you born? Jan = 1% May = 5% Sep = 9% Feb = 2% Jun = 6% Oct = 10% Mar = 3% Jul = 7% Nov = 11% Apr = 4% Aug = 8% Dec = 12% Do you own a home? What is the first letter of your last name? If your last name starts with A-J, you rent. If your last name starts with K-Z, you own. RCSC 150B2 – Retirement Planning Project Adapted from a project from: Last updated: 10/01/19 2 Part II: Determine Your Social Security Benefit Use the Social Security Administration’s Quick Calculator to determine how much income you can expect, per month, from Social Security, using the details you filled in in Part I (above) and the directions below. ❏ For birthday, use your birth date. However, for the birth year, put the year that makes you at least 22 years old – otherwise, the calculator won’t work. ❏ Use your Annual Salary from the chart above. ❏ For future retirement date, use the month of your birthday and calculate the year of your retirement based on the Age You’ll Retire from the chart above. (ex: If your birthday is 10/15/1993, and you’re retiring at age 63, your retirement is 10/2056). If you had to adjust your birth year in part 1, calculate your year of retirement based on your adjusted birth year. ❏ Choose to see your benefit in today’s dollars. 1. My estimated Social Security income per month is: __________________. Part III: Determine Your Retirement Savings Available Use Vanguard’s Retirement Income Calculator to determine how much income you can expect, per month, from the investments you made in saving for your retirement, using the details from the chart in Part I and the directions below. ❏ For how old are you, use the Age You Start Saving for Retirement from the chart above. For when will you retire, use the Age You’ll Retire from the chart above. ❏ Use your Annual Salary from the chart above (round to nearest $5000). ❏ For your annual savings rate, use How Much You Save Annually from the chart above (use the highest value in that percentage range). ❏ You have $0 already saved. ❏ For what percent of your current income you expect to need, click “Learn more” and use their recommended percent. ❏ For expected average rate of return, use 7%. 2. My estimated investment income per month is: __________________. Sample chart from the Vanguard Retirement Income Calculator: Use the number below the green bar (What you may have) for your estimated investment income per month. Adapted from a project from: Last updated: 10/01/19 3 Part IV: Budget for Retirement 3. My total income per month is (SS + investment income): __________________. Now that you know how much total income you’ll have per month in retirement, it’s time to form a monthly budget to help you envision what retirement looks like for you. A. Open the Excel Spreadsheet called “Retirement Planning Project Budget Worksheet” and the PowerPoint slides called “Retirement Planning Project – Budget Slides” in D2L for the directions on how to create a monthly budget. You’ll walk through step-by-step instructions to create a budget for your retirement. Note that you’ll want to download the worksheet and open in Excel so formulas work. The PowerPoint Budget Slides can be viewed in D2L browser if desired. B. When you get to the end of the worksheet, you’ll need to balance your budget ($0 it out). If you have a deficit (not enough money), redo your budget until you’re able to make the finances work. You may have to cut things you want! If you have a surplus (extra money), you may be able to spend more on categories you value to enjoy your retirement more (Travel? Gift giving to family? Fun experiences?). If you have no additional discretionary spending you want to do and you still have a surplus, put the extra funds into charitable giving or savings. Part V: What have you learned? Once you’ve finished your budget, reflect on the experience of calculating your retirement income and creating a retirement budget by answering the following questions. All answers must be given as full sentences (single word answers are not acceptable). Be sure to explain your answers when asked. 4. Which factors from Part I impacted your monthly income the most? If you aren’t sure, go back and experiment with the calculators to see how each factor influenced the amount you eventually had available for you to spend. Be sure to explain your answer. 5. Roughly ⅓ of retired Americans rely on Social Security income for 90% or more of their monthly income. Looking at your budget, would you be able to live on just your income from Social Security (no investment income)? What, if any, changes would you have to make in your budget to live on your social security income alone? 6. What aspects of your circumstances made your budget work out well (easy to balance)? Or what aspects made it hard to balance your budget? For instance, did being a renter make things more difficult? Did living in a less expensive state make things easier? Explain your answer. 7. Daydream about your ideal retirement. How would you spend your time? What would you value doing? Does your monthly retirement budget allow you to achieve these dreams? What, if any, aspects of your ideal retirement did you have to give up or change to stay within your budget based on your allotted retirement income? Adapted from a project from: Last updated: 10/01/19 4 8. Someday in the not-too-distant future, you’ll be entering the full-time workforce (very soon, for some of you!), and it will be time to start planning for your retirement. While this project is fresh in your brain, write 5 TIPS for your future self on planning for your ideal retirement: Upon completion of this assignment, assemble a document containing all of the following: 1) The chart from part 1 of this document showing your retirement inputs; 2) Your filled out (and balanced) retirement budget worksheet – based on PowerPoint slide instructions; 3) Your answers to the reflection questions in part 5 (can be formatted as short answers, rather than an essay). APA formatting not required.