Personal Financial Plan Assignment 8 There is no illustration for this assignmen

Personal Financial
Plan Assignment 8
There is no illustration for this assignment. What you need to
do is prepare a cash budget for one year with the same format as you used for
the Week 3 assignment. But the similarity
ends with the format. This will be your retirement budget. You
must have a minimum of 18 expense lines. Make sure you include the
Cumulative Surplus line and that the cumulative surplus number for December
matches the Total column total.
First, you must decide
what do you want to do when your retire – travel around the world, buy a motor
home and see the country, buy a cabin on a lake and fish, visit your children
and grandchildren, etc. After you’ve given much thought to what kind of life
you want when you retire, then you will prepare a monthly annual budget –
January to December with a total column for the year to see what it will cost
you.
You will have to do a lot of work to determine what your
retirement revenue and expenses will be for this assignment. The amounts for both will be based on how much
you will need to cover your expenses for the year you retire and the following
years. Here are the assumptions you will make when preparing your budget:
1. First, I want
everyone to assume they will retire at age 65. So if you’re 25 now (I am 29 years old now),
you will have to be projecting what things are going to cost 40 years from now.
The best way to do this is to look at the cost of things 40 years ago – 1980,
and compare that to what they cost today. This is going to take
research. For example, if a new car cost $7,000 in 1980 and $25,000
now, the increase is 357% (the formula for this is the amount of the new car –
$25,000 – divided by the amount of the old car. So you could project that in
2060 an equivalent car would cost $89,250 ($25,000 x 357%). There are websites
that will give you some historical cost information. Be prepared for some
surprises. I would figure all of my expenses first, and then figure where the
money was coming from. You must be realistic to receive any credit for this
assignment. If you’re going to retire in 40 years, your total expenses per year
will probably be between $350,000 and $400,000. But don’t be discouraged –
wages also increase over 40 years. Google and you’ll come up with websites like
ttp://www.thepeoplehistory.com/1970s.html
2. The second
assumption is that you are not going to work after retirement. After
you’ve figured out how much it will cost you to live and do the things you want
to do, you need to determine where the money is going to come from – IRA’s,
retirement accounts, social security, savings – to cover these expenses. Then
you must look at the number of years you’ll be retired.
3. The third
assumption is that you’re going to live for 20 years after you retire – to 85. So
you will have to have enough funds to cover your expenses for 20 years. And
these expenses will be changing each year. Just look at how much prices have
changed since 1990.
4. Also assume
that you own your own home, but you will have all the expenses associated
with it including property taxes, insurance, utilities, maintenance and
repairs. Each of these items will be on a separate line on your budget..
5. Another thing
that will play a big role in your budget is how you’re going to cover your
medical expenses. You’re old and your body is starting to shut down. You
may assume Medicare will be available, but limited. You will have to have
adequate medical insurance to cover your medical expenses. You’ve already done
the insurance research in an earlier project. Now you can project how much one
of these policies is going to cost when your retire and use that for your
monthly premium. This is another line item on your budget. And don’t forget a
line for medical expenses not covered by insurance. Make sure you have
a line on your budget for health care and another for medical insurance. You’ll
also need lines for car insurance and house insurance.
6. You will
assume that you are single when you retire.
FINALLY, be absolutely realistic in all of
your numbers. At the bottom of your budget you will need to tell me what year
you plan on retiring and what sources you used to determine your expenses and
any assumptions you made. You must have realistic numbers and assumptions in
order to receive any credit for this assignment.
Do not resubmit the Week 3 budget with a few changes – this is
an automatic zero. There will be no second chances on this assignment – no
revisions for credit. What you submit by Sunday midnight will be final as in
all assignments.