Question

Jack is getting ready to retire. He has a salary of $100,000 and is saving 15%...

Jack is getting ready to retire. He has a salary of $100,000 and is saving 15% annually in his 401(k) plan and he just made his last principal and interest monthly payment on his mortgage of $2,350. His home is now debt free. What would you recommend regarding a wage replacement ratio, assuming he wants to maintain his lifestyle?

Group of answer choices

80%

75%

50%

60%

Homework Answers

Answer #1

Wage replacement ratio is the ratio of a person's gross income after retirement divided by his gross income before retirement.

We use the given information to asses his spending on his lifestyle

Salary = 100000

Saving = 15% of 100000 = 15000

Mortgage payment = 2350

The amount spent on lifestyle = 100000 - 15000 - 2350

= 82650

Thus considering only the available information

Wage replacement ratio = 82650/100000 = 82.65%

Hence,

among the given option

Jack must have 80% wage replacement ratio

Hence, the answer is option A

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