Carlos plans to retire next year. His current household expenses are $85,000 per year. He estimates that when he retires, he will no longer have $3,600 in monthly mortgage payments, $5,000 in annual commuting expenses, and $12,000 in budgeted 401(k) contributions. However, he does expect that his health-care costs will rise by $12,000 and his entertainment expenses to total $38,000 each year. He expects to receive $65,000 annually from his 401(k) and $28,800 in annual Social Security benefits. If he pays an average tax rate of 24%, what will be his estimated retirement income shortfall, if using the adjusted expense method?

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The Answer of Carlos plans to retire next year. His current household expenses are $85,000 per year. He estimates that when he retires, he will no longer have $3,600 in monthly mortgage payments, $5,000 in annual commuting expenses, and $12,000 in budgeted 401(k) contributions. However, he does expect that his health-care costs will rise by $12,000 and his entertainment expenses to total $38,000 each year. He expects to receive $65,000 annually from his 401(k) and $28,800 in annual Social Security benefits. If he pays an average tax rate of 24%, what will be his estimated retirement income shortfall, if using the adjusted expense method?

Carlos Plans to Retire Next Year