What do you expect Lori's wage replacement ratio to be at retirement based on the provided information?
Based on the information provided, we can calculate Lori's wage replacement ratio at retirement. First, we need to determine Lori's annual savings. Since she saves 15% of her annual schedule C net income, we can calculate this by multiplying her annual income by 15%: $200,000 * 0.15 = $30,000
Next, we need to calculate Lori's total annual mortgage payments. Given that she pays $4,333.33 per month, we can multiply this by 12 to get the annual amount: $4,333.33 * 12 = $51,999.96 (approximately $52,000)
Now, we can determine Lori's annual disposable income by subtracting her savings and mortgage payments from her annual income: $200,000 - $30,000 - $52,000 = $118,000
Finally, we can calculate Lori's wage replacement ratio by dividing her annual disposable income by her annual income and multiplying by 100: ($118,000 / $200,000) * 100 = 59%
Therefore, we expect Lori's wage replacement ratio at retirement to be 59%. This means that after retirement, Lori will have approximately 59% of her pre-retirement income available for living expenses, as she will no longer have the mortgage payment and will continue to save the same amount.
Calculation of Lori's Wage Replacement Ratio at Retirement
Annual Savings:
Lori saves 15% of her annual schedule C net income, which is $200,000. Therefore, her annual savings amount to $30,000.
Total Annual Mortgage Payments:
Mortgage Payment Calculation:
Lori pays $4,333.33 per month towards the mortgage, totaling approximately $52,000 annually.
Annual Disposable Income:
Disposable Income Calculation:
By subtracting Lori's savings and mortgage payments from her annual income, we find that her disposable income is $118,000.
Wage Replacement Ratio:
Calculation of Ratio:
Dividing Lori's annual disposable income by her annual income and multiplying by 100 gives us a wage replacement ratio of 59%.
Therefore, based on the provided information, we expect Lori's wage replacement ratio at retirement to be 59%. This indicates that she will have 59% of her pre-retirement income available for living expenses post-retirement, considering the absence of mortgage payment and consistent savings.