Compensation (human resources management)

“Retirement Part 1”

The purpose of this exercise is to help you understand how much money you will need at retirement to maintain a reasonable standard of living, accounting for a company retirement/savings plan and you own personal savings.

Instructions:

Read the short case below and answer each question. This is an opportunity to see how certain course apply concepts to the real-world (and learn about real-world examples).

You can submit your responses through Canvas via copy/paste text, or by submitting a work document.

The Excel spreadsheet provides a spreadsheet for retirement planning. It focuses on a “budget rule,” where you budget of how much you want to spend (in today’s $) during retirement.

Answer the following questions using the spreadsheet.

1. Look at the formulas in the following columns. Pretend you are explaining the formulas to an Excel novice. How would you explain what the formulas in the following cells are doing?

Excel Column	How would you explain this column to an Excel novice? Try interpreting the formulas in simple terms.
401k Employee Contribution (C)
401K Company Match (D)	Check if your 401k contribution is below match. IF BELOW MATCH: Salary x Employee contribution IF ABOVE MATCH: Salary x Company Match (Remember, under a 401k matching plan, the company matches your contributions up to a certain limit [4%, 5%, 6%, etc]. The IF statement accounts for whether you reached the company’s matching limits)
Total savings (E)
Invest return (G)
Retirement spending (H)
Total (I)
Inflactor (K)	Calculates the total amount of inflation (Remember, inflation reduces the value of your $$ each year. This formula calculates how much value your $$ decreases)
Inflation Adjusted Total (L)	Calculates inflation-adjusted retirement balance (Remember, you may have $1M in retirement 40 years from now, but 40 years from now $1M is only worth about $306K in today’s $$. The formula in column L accounts for this, and calculates how much your future $$ is worth in today’s value)

2. Look at the current averages for income, raise, inflation, etc (found in column Q). Does the average worker have enough savings for retirement? If you followed the inputs of the average worker, when will their retirement balance turn negative?

3. Think of your own personal retirement, and experiment with the inputs to the Excel file. Besides a higher investment rate of return, which factors have the biggest improvement on your total amount saved at retirement? Try to find the three most important factors.

4. Think about your own personal retirement. What features would you want added to the Excel spreadsheet? Think through how you might add one of these features (you don’t have to do it, but this about how you would try to do it)

IF Statement Reminder:

=IF ( Condition , Value if True, Value if False )

Is D2 = “Gryffindor”?

If True, then give 10 points. If false, give 0 points