1)How would you use the present and future value techniques in preparing a financial plan for retirement?
How would required rates of return affect your decision? Explain your reasoning.
There are six steps involved in arranging the financial plans and framework for a retirement plan. The first step involves analyzing whether how much would want as an annual amount after one has retired. In estimation, how many years would the person be expecting to live after retirement and lastly, is anything required for charity purpose, family payments etc.
The second step would require the calculation of how much savings would be required by the time the person does actually retire. It means calculating the present value of the annuity payments of the retirement amount by the date of the retirement. The third step requires creating a budget for each year of the working life. What job will the person have after graduation, how much would be owed in taxes? What would the monthly expenses be for groceries etc and how much would be required for the purposes of health, insurance etc.