Create a multi-year annual budget in Microsoft Excel. The budgeting task assignment due on 2/6 required the submission of an outline for the budget project.
Begin with year 2023 and end at your projected life expectancy (average life expectancy is about 80 years old). Estimate the year of your retirement.
Include the following in your budget. More information to assist you in completing the budget will be provided throughout the semester.
– Income from wages, retirement plan distributions, taxable investment distributions, savings account withdraws and social security benefits. Increase for raises, promotions, cost of living adjustments. Project your social security benefit in a separate worksheet.
– Living expenses such as rent or mortgage, food, clothing, transportation, utilities, healthcare, etc… Purchase a home with a mortgage at a time determined by you. Create an amortization schedule for the mortgage in a separate worksheet. Include property taxes, home insurance and inflation. Ensure you subtract money from your assets if used for down payment.
– Debt (liability) payments like card cards and student loans are optional. Keeping track of the balance is optional too. Ensure you estimate when payments end.
– Income taxes (20% of taxable income after deducting $25k) and other payroll taxes (10% of taxable wages). Include income from investment distributions as necessary.
– Contributions, investments and distributions for a Traditional 401K (include company match), Roth IRA, Taxable Investments and Savings Account (from annual difference in cash sources and cash uses on budget). Adhere to all limits. Keep track of account balances in a separate worksheet. All investments earn a return (varies before and after retirement). Assume taxable investments only earn income/capital gain in retirement.
– Inflation/Cost of Living Adjustments where necessary.
– Time value of money calculations where appropriate.
– Account for all retirement plan contribution, investment and distribution rules and limits in a separate worksheet. Limits are 401k Max Contribution Limit, 401k Max Salary Limit, 401k EE/ER Limit, IRA Max Contribution Limit. Increase limits for inflation.
– Required Worksheets are Assumptions, Budget, Social Security, Taxes, Mortgage, Account Balance (Assets=Investments, Liabilities=Debt-Optional), Limits
