Adam, 52, and Eve, 50, have 2 children, Mark, 25, and Mandy, 24. Adam is a senior manager in an engineering firm with annual income of $100,000. Eve is a teacher and draws annual income of $80,000. Mark has just graduated and is looking for a job while Mandy has been a marketing executive for the past 2 years and is thinking of quitting to pursue a full time MBA programme in 3 years time.

Adam and Eve are concerned about their retirement and have engaged you to help them. You have a first meeting with them and gather the following facts:

The family stays in a 5 room HDB flat which is fully paid up. Estimated Valuation is about $600,000. Adam and Eve also have a condominium, which will be ready in 2 years for occupancy. The purchase price was $1.2m and they took a loan of $800,000. Adam has invested $100,000 over time in Singapore stocks. He is unaware of his current stock holdings and market value. Eve has also invested $100,000 using unit trusts as an investment vehicle. She too is unaware of the funds she has selected and its market value. The whole family is insured with an integrated private shield plan. Adam and Eve are insured for $500,000 each in the event of death or total permanent disability. Both of them also have a $100,000 coverage in the event of critical illnesses. The couple has a current cash standing of $200,000.

Adam & Eves current CPF Balances:

(a) Adam and Eve would like to retire together in 10 years time. They estimated their current living expenses as a couple to be $60,000 a year. Compute their future living expenses, assuming annual inflation is 5%.

(b) Assuming the couple is to work for another 10 years and they would like to use 60% of their last drawn income then as their retirement income needs. Determine the retirement capital they would require as a couple for the next 20 years when they retire. Assume that the investment return net of inflation is 3% and their pay increment is 4% every year for the next 10 years.

(c) With regards to their condominium, Adam and Eve have a few options which they are considering. Option 1: To sell it for a 20% profit of purchase price. Option 2: To rent it out as a form of retirement income. Compute the monthly instalment of their condominium, assume the loan tenure is 25 years, fully drawn down loan and an interest rate of 2%. Determine the monthly rental they need to receive in order to achieve a $500 surplus per month.