Question

For the investment assignment, I am to provide you with a sample individual for you to conduct your research and submit results. Let's go as follows:

35 years old Earns $150,000 Single parent (you decide male or female: report on a person, with a name, etc) of two kids Has $250,000 in liquid assets. $20,000 in car loans. The individual bought his/her first home a year ago. Current market value is $500,000, with a 30-year mortgage of $360,000 at a 5% interest rate. This person tends to move every five to ten years. The individual wants to retire at age 62, and to live off of $120,000 per year (in today's purchasing power). Hopefully this provides the guidelines that you need to work the assignment. Please feel free to add in any extra interesting details that you would like to thicken out the narrative.

Answer 1

The provided scenario focuses on investment planning for a fictional 35-year-old named Alex Smith who seeks to retire with the equivalent of today's $120,000 annual income. Alex's financial strategy should emphasize early savings, smart investing for compound interest, and possibly further education for increased earnings. The key to Alex's retirement plan is leveraging compound interest and making informed financial choices.

Step-by-step explanation:

The scenario provided involves an investment strategy for a 35-year-old single parent named Alex Smith, who has the goal of retiring at age 62 with an annual retirement income that maintains their current purchasing power, equivalent to $120,000 per year in today's dollars. Alex has $250,000 in liquid assets and earns an annual income of $150,000. Alex's financial obligations include a 30-year mortgage on a $500,000 home, with $360,000 remaining at a 5% interest rate, and $20,000 in car loans.

Additionally, Alex exhibits a pattern of relocating every five to ten years. To achieve Alex's retirement goals, it is vital to factor in their ability to save, invest wisely, and leverage the power of compound interest. Considering the transformative power of compound interest, as demonstrated by the example where $3,000 grows to $44,923 over 40 years with a 7% annual return, Alex should begin saving as soon as possible to maximize their retirement funds. Education and career advancements also contribute to higher lifetime earnings and, subsequently, greater ability to accumulate wealth for retirement, as seen by the correlation between education levels and median weekly earnings reported by the Bureau of Labor Statistics.

Answer 2

Jane Doe, a 35-year-old single parent earning $150,000 with two children, has substantial liquid assets and a home with a mortgage. She aims to retire at 62 and live off $120,000 per year. Through early investment and leveraging compound interest, Jane can create a diversified portfolio to meet her retirement goals.

Step-by-step explanation:

For the investment assignment, we are analyzing a scenario involving an individual named Jane Doe, a 35-year-old single parent earning an annual income of $150,000, with two children. Jane has $250,000 in liquid assets and has a $20,000 car loan. She recently purchased her first home, currently valued at $500,000 with a 30-year mortgage of $360,000 at a 5% interest rate. Jane frequently relocates, usually every five to ten years. Her retirement goal is to retire at the age of 62 with a desired retirement income of $120,000 per year, in today's purchasing power.

Following the principles of early saving and the power of compound interest, Jane should prioritize investing parts of her income and liquid assets early. A 7% real annual rate of return over a significant period can result in noteworthy growth of initial savings. By using the compound interest formula, such as the $3,000 turning into $44,923 in 40 years mentioned before, Jane can project her potential savings growth over time.

Considering she has a high income and substantial liquid assets, Jane has a good starting point for her investment strategy. However, it's also essential to consider her children's future needs, the potential increase in house value upon selling due to frequent moves, and how much she would need to save annually to meet her retirement goals. A diversified portfolio and consistent savings can enable her to meet the desired retirement income of $120,000 per year. Jane might also explore other income-generating investments such as real estate or dividend-paying stocks to create additional streams of income for her retirement.