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Josh and Millicent are age 35 and 33, respectively. Josh works as a sales manager for a prosthetics company that specializes in plastic hip joints and artificial noses, where he earns $42,000 per year. He hopes that he himself will never need his company's products. Millicent is a stock clerk for a local auto parts company. She loves her job and has a special fondness for carburetors. She earns $30,000 annually. Together, they can fix just about anything. Josh wants to retire at age 55. Millicent will retire the same year he does. Both expect to work part-time in retirement until age 62. Josh assumes he will earn $1,500 per month, while Millicent expects to make $1,000.

Josh and Millicent expect their lifetime inflation rate to average 4% per year. They assume their wages from work will keep pace with inflation. They also assume in retirement they will have the same 25% federal and 7% state income tax rates as they do now. At this time, they do not want to rely on any Social Security in retirement.

Based on their latest account statements, they have the following amounts currently devoted to retirement savings:

Money market account         $10,000 
Josh's 401(k) plan            70,500 
Millicent's 401(k) plan       50,250 
Josh's traditional IRA         6,000 
Millicent's traditional IRA    2,000 
Josh's Roth IRA                2,000 
Millicent's Roth IRA           2,000 

They expect the money market account to earn 4% annually, and will make a deposit of $35 monthly to that account. Josh invests more aggressively than Millicent. Consequently, on his investments, he expects an annual return of 9% before retirement, and 8% after he retires. Millicent expects to earn 8% annually before she retires, and 7% afterwards.

Josh gets paid twice a month. He makes a $250 contribution to his 401(k) plan from his paycheck each pay period. His employer will match his 401(k) contributions dollar-for-dollar up to a maximum of 6% of his pay. Millicent gets paid weekly, and she contributes 14% of her pay to her 401(k) plan. Her employer contributes 3% of her pay to her 401(k) account regardless of whether she contributes to the plan or not. Both Josh and Millicent may contribute up to the smaller of $10,500 or 25% of their pay to their 401(k) plans. Both also contribute $2,000 per year each to a Roth IRA.

Josh and Millicent expect to spend $60,000 per year in retirement, or about 83% of their gross income today. At death, they wish to have at least $15,000 in their estates regardless of who dies first.

When they retire, both Josh and Millicent will receive from their employers early pension payments that are reduced from those normally available and payable at age 62. Their pension plan administrators estimated an early life-only annuity payment in today's dollars as $1,500 monthly for Josh and $1,000 monthly for Millicent. Because these are life-only payments, no part of the pensions will pass to a surviving spouse. The payments are based on the average of the retiree's final three years of pay, and are not adjusted for inflation after they begin.

Assume you are Josh and your spouse is Millicent. Enter the information from above into the calculator. If you want to check your entries before you move on click here. 

Now it's time to have some fun. After you're sure your inputs are correct, scroll to the bottom of the page, click "Results," and answer the following.

Questions to answer:

1. Under the assumptions entered, at what age will your income be insufficient?
   
   
2. At that age, your pensions will cover what percentage of your expenses?
   
   
3. How many more years must you work to ensure the income will last?

More questions to answer:

Now, click on the "Inputs" tab to return to the data entry part of the calculator. Assume both Josh and Millicent (i.e., you and your spouse) will collect Social Security beginning at age 62. Go to the Social Security section and check the item "Estimated by this calculator," and then scroll to the bottom of the page and click on "Results."

1. Under the assumptions entered, at what age will your income be insufficient?
   
   
2. Does the model project you will leave an estate to heirs?
   
   
3. The calculator shows your 401(k) contribution as $500 per month and your employer's as $210 per month. How were those amounts determined?

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