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Tonya Woodward, age forty-four, plans to retire at age sixty-seven. She expects to live until age ninety-seven. She is single and earns $56,000 per year. At her retirement she expects to receive $28,700 in Social Security benefits (in today’s dollars). She will also receive a small defined benefit pension in the amount of $13,500. She has come to you to determine if she is on track to meet her retirement goal. Use the following assumptions and information to answer questions a. through f:

• 90% percent income replacement ratio, based on current earnings.
• She currently contributes $2,400 per year into a 403(b) plan (no employer match).
• Assume inflation of 3.5%.
• She will earn a 6.5% after tax rate of return on assets before retirement.
• She will earn a 4.5% after tax rate of return on assets after retirement.

a. How much does Tonya need, on her first day of retirement, to fund a annuity method model of retirement?

b. Given her current level of savings, is Tonya on target to reach her retirement goal?

c. If she has a capital needs shortfall, how much more must she save per year to reach her retirement goal?

d. If she would like to obtain a capital preservation goal for retirement, how much will she need to have saved on her first day of retirement?

e. Given a capital preservation goal, is she currently saving enough on a yearly basis?

f. How much, in total, must she save yearly to reach a capital preservation model of retirement?