Question

with a 3.0% inflation rate (spreadsheet 21.2) by how much would your retirement annuity grow if you increase the savings rate by 1.7%

F В 1Retirement Years Income Growth Rate of Inflation Savings Rate ROR rROR 0291 rConsumption 42,500 44,150 51,419 75,264 110,167 161,257 49,668 .15 Saving 7,500 8,025 10,519 20,693 40,706 80,074 1,116,851 .06 2 25 Age 30 07 Income 50,000 53,500 70,128 137,952 271,372 533,829 7,445,673 03 Cumulative Savings 7,500 15,975 61,658 308,859 943,477 2,457,518 Real Annuity Deflator 1.00 1.03 1.16 1.56 2.09 2.81 5 31 9 35 19 45 29 55 39 65 40 Total E Retirement Years Income Growth Rate of Inflation Savings Rate rROR 1 ROR (E2-C2y(1+C2) rConsumption 2 25 .07 15 .06 .03 Cumulative Savings D4 E4'(1+$E$2}+D5 E38 (1+SE$2)+ D39(B39-D39)/C39 Age Savings -B4 SD$2 C4*(1+$C$2)-B5 SD$2 C38 (1+SC$2-B39 SD$2 Income Deflator (B4-D4))C4 (B5-D5VC5 50000 1 B4"(1+SB$2) B38 (1+$B$2) =SUM(B4:B39) 30 5 31 39 65 =PMT(SF$2,$A$2, SE$39/$C$39,0,0) ESUM(D4:D39) Real Annulty 40 Total

Answer 1

If you increase the savings rate by 1.7%, the new savings rate would become: 15% + 1.7% = 16.7%

Using this savings rate in the cell D2, the calculated figures would get changed as shown below:

A D E 1 Retirement years income growth rate of inflation savings rate ROR rROR 25 2 0.07 0.03 0.167 0.06 0.0291 Saving Cumulative Savings rConsumption Age Deflator 33 Income 30 50000 1.00 8350 8350 41650 8934,5 5 31 53500 1.03 17785.5 43267 32 6 57245 1,06 9559.915 28412.545 44948 89149 158032 39 65 533829 2.81 2736036 Total 12,43,427 Real Annuity 55,281 40 7445673 41 42 Old annuity New Annuity 43 49,668 44 55,281 45 Net increase 5,613 m st LO

So as we see, the Annuity would increased by $5,613 if we increase the savings rate by 1.7%

Hope it resolves your query, if not then please let me know in the comments.