You have recently been hired as a consultant for a personal financial planning firm.One of your first projects is creating a retirement plan for a...

You have recently been hired as a consultant for a personal financial planning firm. One of your first projects is creating a retirement plan for a young couple, Cameron and Gabriella Travis. They have just celebrated their 35th birthdays and have decided to get serious about saving for retirement.

Cameron and Gabriella hope to retire 30 years from now (on their 65th birthdays), and they expect to live until age 90. Their hope is to be able to withdraw $125,000 a year from their retirement account - the first withdrawal will occur on their 65th birthdays, and the 25th and final withdrawal will occur on their 89th birthdays. They expect to leave their children a total inheritance of $1.5 million to split amongst themselves. So, on their 90th birthdays, the account is expected to have a $1.5 million value (i.e., they expect to leave their children a total inheritance of $1.5 million).

Cameron and Gabriella currently have $50,000 saved in a retirement account, which consists of a portfolio of mutual funds that is expected to produce an annual return of 7%. To accomplish their goals, they would like to deposit an equal annual amount into their account starting one year from today (on their 36th birthdays) and continue to make those deposits through age 65. (Again, the account has an expected annual return of 7%.) Thus, they will make 30 annual end-of-year deposits to this account.

1. How much do Cameron and Gabriella need to deposit into the account at the end of each of the next 30 years to accomplish their goals? 
2. Cameron and Gabriella recognize that the value of their $125,000 annual withdrawals during retirement will steadily decline because of expected inflation. Assume that they want to have the value of these withdrawals increase by 4% a year during retirement to account for expected inflation. In other words, they want to withdraw $125,000 at age 65, $130,000 at age 66, and $130,000 × 1.04 at age 67, etc. How much would they need to deposit into the account at the end of each of the next 30 years to meet this revised goal, which protects them against rising inflation? Assume they still plan to leave their children a total inheritance of $1.5 million. Set up this problem using Excel. Here you might find it helpful to refer to the Growing Annuity Example on the class e-Learning site.