Yesterday, Megan received a note from her father, who is now 47 years old, asking for advice in starting his plans for retirement. The relevant parts of that note are as follows:

'. . and you know how much your mum and I like to travel. I was thinking that my pension from the business plus social security wouldn't be enough to allow us much travel during those years while we're still young enough to be active. Assuming our health continues, we'd like to supplement our retirement income until we're about 75 . I thought you might be able to clear my thinking a bit since you're taking those business classes at the university.

'It isn't investment advice that I'm asking for. You know that I'll just put anything I save in the bank. I think I should be able to average about 6 per cent interest per year there. The main things I'm having trouble thinking about are whether I should start saving now or wait until you finish university, and whether to retire at 55,60 or 65 .

'Incidentally, your Grandpa just told me that he placed \(\$ 20000\) in a fixed deposit in my name when he sold his business. I was 20 years old then. This has probably earned only about 5 per cent per year, so I doubt whether it will help much. What do you think?

'Someone at work told me that if I had a certain amount of money saved when I retired, I could withdraw about 8 per cent of that amount every year for 20 years before the money ran out. Could that be possible? By my reckoning that would be 160 per cent of what I started with. If it's true, maybe I could retire at 55 after all. I'd like your explanation though, before I rely on that idea.' Required:

Assuming that you are Megan, write a note to your dad to answer his questions in order to help him begin his retirement planning. (Ignore income tax considerations.)