Introduction Jennifer is a 23-year-old woman who has just finished her university studies and started full-time work. She is concerned about her retirement and wants to make sure that she has enough money saved to live comfortably. She has come to me for financial advice. In this report, I will investigate the different superannuation strategies that Jennifer could use to save for her retirement.

I will consider the following factors: The amount of money that Jennifer can contribute and from her employers contribution to her superannuation fund each year. The investment options available to her for example: (t The rate of return that she can expect to get on her retirement whether she can afford to live with the amount. The effect of inflation on her savings. I will then make a recommendation to Jennifer about the best superannuation strategy for her.

Explanation:

Mathematical Investigations Jennifer has a job as a Software Engineer in (company). Her annual pay is $78,000 which equates to $3000 per fortnight shown in Appendix 1. Her weekly pay is $1,500.

Her employer contributes 9% of her annual pay per quarter to her superannuation fund and Jennifer contribute 6% of her annual pay per quarter as well. Her overall contribution is $2925 per quarter as shown in appendix 2.

The Australian Super superannuation fund was selected for Jennifer. This fund has a high rating from independent financial rating agencies and offers a range of investment options to suit different risk profiles. The chosen investment option is a balanced risk profile. This option invests in a mix of growth and defensive assets, which should help to reduce the risk of Jennifer's investments losing money.

The average annual return for this investment option over the past 10 years is 7% but currently the interest rate is3.5% per annum compounded quarterly.

The interest rate is 3.5% pa compounded quarterly for 42 years (65-23)

When she retire at 65 the amount she will have is shown below:

n=42X4=168

I%=3.5

PV=0

PMT= -2925

FV= ?

P/Y= 4

C/Y= 4

The amount is $1,110,335(research on the cost of living for another 20 years)

Jennifer is now 65 years old and calculations below show how much she can get per fortnight:

n=26x20=520

I%=4%

PV=-1110335

PMT= ?

FV= 0

P/Y= 26

C/Y= 26

The fortnightly payment is $3,103.61 which is about $3,100.

The interest rate is a compound interest rate from Commonwealth Bank.

On Jennifer retirement at 65 years old she has about $1,110,000 and to last for another 20 years until she is 85 years old she can collect about $3,100 per fortnight.

Assumptions made are:

• She will be working for the next 42 years continuously. She may not be working when she start a family for a 5 years until the child goes to primary school. She may get sick long-term and be off work.
• Her pay annually will stay the same at $78,000 pa over the next 42 years. If she stays with the same company she may get promoted and so can increase her quarterly contribution or she may seek for a higher paying job.
• The interest rate of the superannuation fund stays at 3.5% pa compounded quarterly. If the interest rate goes down she may not get $1,110,000 but if the interest rate goes up above 3.5% pa she will get more than $1,110,000 which is great because she can live longer or she can have more pension per fortnight.
• She is going to live up to 85 years old. She will run out of money if she lives longer than 20 years after retirement. If she lives shorter than 20 years she will have some money left.
• She stays in the same house. The house may need maintenance and therefore higher cost and more expenses so her fortnightly pension of $3,100 may not be enough.

Jennifer superannuation fund contribution per fortnight which is 6% works out to be:

=6% of $78,000/26

=$180 per fortnight

Her tax which is shown in Appendix 3 is $608.35 so her take home (after tax) pay is $2211.65 The Consumer Price Index (CPI) is currently 2.5%. This means that the cost of living is increasing by 2.5% each year. To maintain her standard of living in retirement, Jennifer will need to receive an income that is 2.5% higher each year than the amount she is receiving today which is $2211.65. n=42x1=42

I%=2.5

PV=-2211.65

PMT= 0

FV=?

P/Y= 1

C/Y= 1

This means that she will need to receive an income of $6239.05 per fortnight in her first year of retirement to have the same spending of $2211.65 42 years ago.

Can you continue this investigation so Jennifer can survive?