The percentage (%) of income that is being contributed to retirement in B20 is found to be 15%. With the help of Gross income and total contribution to the retirement, we calculated it.
Using PMT function, the amount of money in the account would be $11951.68 according to the monthly contribution of $574.08, years until retirement 30and average annual return 4%. The total amount of money would be $218062.48. We assumed that there is no money currently in the account and payments would be applied at the end of every month.
If the average annual return is changed from 1%,2%,3% 4% ,5%, 6%, 7% and 8% respectively, then amount of money are $6888.96, $9227.75, $10544.09, $11951.68, $13444.10, $16654.70 and $18357.86. The annual return is found to be $11951.68. This would move me toward over-saving rather than over-estimating and being caught short retirement.
As per PMT function, we calculated the monthly payment value at retirement in cell B5. It is found to be = $ 218620.48.
Now, we used NPER function to get the years of retirement plan. B20 is already given in the B20 cell as 13%. We calculated the total contribution at retirement as $497.54 instead of $574.08. Now, applying the new monthly amount of contribution with respect to the same amount of yearly interest rate and average annual return, we found the years in retirement 13.4 years.
According to the B20, I am going to work in bank for 13.4 years. Therefore, it could be said that I want to retire early. If I wanted to have money left at my death to leave behind as an inheritance, the amount is = $ 218620.48.
The PMT formula changed to NPER formula.
Considering the assumptions that has been in the computation of the retirement is the use of the PMT functions. Additionally, monthly rate has been assumed in deriving the contributions that has to be made in the retirement plan. On the other hand, the contribution treatment of 15% has been considered to derive gross income generated from the retirement plan.
On analysing the project an important consideration that can be introduced in this context is that I have learned that a monthly contribution of $574.08 for a span of 30 years at the interest rate would result in yearly contribution of $6,888.96. Additionally, I have learned that on my contributions of 8% I can gain a yearly return of 3,674.11 and on the other hand from my company match I can attain a yearly contribution of 2.296.32. As understood from the contribution margin I have understood that based on the monthly basis my contribution value stands $306.18for each month while the company match based on the monthly contribution stands 191.36.
I have learned that the total amount of the monthly retirement contribution stands 547.08 based on the company match of 5% while my contribution based on my retirement has stood 8%. As evident from the analysis I have understood that there are certain excel functions that make the computations easy for me to compute my retirement plan based on the amount of contribution that would be made by me. Additionally, I have also learned regarding the use of the PMT functions that have contributed to my learning knowledge and have contributed significantly to my practical skills.
The retirement plan has provided me significant understanding regarding the future. As evident from computation retirement plans is considered as the investment plans that lets me to allocate my portion of savings to get accumulated over the period of time and given that I am provided with the steady source of income after my retirement. I have learned from the retirement computation that if though a person has a better amount of savings, a retirement plans is considered as a vital source of income for an individual. I have realised that savings get exhausted in no span of time and I have also understood that they are at times used in emergencies to meet the need of urgency. Hence, computing and investing through careful means in the retirement plan serves me with secure amount of cash flow for meeting my basic regular needs following the retirement.
I have understood that on making a constant investment in return the amount grows manifold times because of the compounding impact that makes lot of difference to my final savings. A correct computation of the retirement plan would help in planning for retirement in the phased manner. On practically breaking down the returns based on the yearly and monthly basis pension plan have been considered as the better mode of investment plans which helps in ensuring that I have secured life following retirement. Additionally, the use of excel tools have been help to me in understanding the appropriate calculation tools that are needed in the computation of the retirement plan. Conclusively, having a right pension plan enables me to plan for my retirement in a phased manner and simultaneously acts as the saviour in the future period.
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Franzoni, F. and Marin, J.M., 2006. Pension plan funding and stock market efficiency. the Journal of Finance, 61(2), pp.921-956.
Kotlikoff, L.J., 1995. Generational accounting. NBER Reporter, p.8.
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