Lesson 27: Final Project
April 20, 2020
Zoom Meeting at 11am
Meeting ID: 961 1089 6385
Zoom Meeting at 1pm
Meeting ID: 945 0246 0526
- DataCamp Assignments and Extra Credit
- Course Evaluations
- Final Exam (Project) exemptions
- Final Project
- Extend your stock market simulation by adding 40 more years to simulate retirement fund balances while you are withdrawing money and no longer contributing.
- The total length of the simulation is 80 years with the first 40 years for growing your retirement fund and the next 40 years for using your retirement fund to provide income.
- Purpose of the simulation is to estimate how much you will need to contribute annually to reach a comfortable retirement.
- You have 40 years to build your retirement fund.
- Your beginning balance is fixed at $10,000.
- Your annual contribution amount will vary. See below.
- Your % bond allocation must begin at 20% and increase by 1% each year (every year for 80 years).
- Beginning in year 41, you must withdraw between $60k and $69k per year to cover living expenses. The last digit of your PID determines your required withdrawal amount. If the last digit of your PID=0, your withdrawal amount must equal $60k; if last digit of PID=1, your withdrawal amount must equal $61k; if last digit of PID=2, your withdrawal amount must equal $62k; and so on.
- The balance of your retirement fund will continue to be invested, earning returns (or losses) in the stock/bond markets.
- Run simulations using varying annual contribution amounts.
- Calculate the probability of depleting retirement funds 40 years after retirement (i.e., what % of simulated ending balances are less than or equal to zero at year 80).
- The objective is to identify a contribution level that’s both reasonable/affordable and unlikely to lead to a shortage of funds at the end of 80 years.
- Write a 2-page paper describing your approach and summarizing your findings.
- The paper must include a recommended contribution level along with your estimated probability of running out of money.
- Google Sheets file with simulation also due.
- Paper and Sheets file are due at the time of our Final Exam.
- I will provide a file upload link on Wednesday.