Personal Income Statement

Salary $64,000$

Rent $-13,000$

Food $-7,800$

Entertainment $-10,400$

Utilities $-3,600$

Petrol and Car Maintenance $-3,600$

Mobile Phone Plan $-960$

Clothes $-1,800$

Car Insurance $-1,200$

Credit Card Debt Payment $-2,400$

Overdraft Payment $-1,260$

Car Loan Payment $-3,600$

Total living expenses $42,360$

Total cash outflows $52,580$

Net Discretionary Cash Flow $11,420\mathrm{.}00$

Mai wants to retire at $67$ with an annual income of $$64,000$ per year $($in today$$s dollars$).$ Mai expects to live until $95.$ She expects to earn $7\mathrm{.}25\%$ on her KiwiSaver retirement fund after fees and taxes. Assume that the inflation rate, as shown by the Reserve Bank of New Zealand, will remain the same over the entire period. Analyse whether her retirement income goal of $$64,000$ per year is reasonable.

How much money needs to flow into her KiwiSaver $($from all sources$)$ per year in order to meet her retirement needs? What is her KiwiSaver contribution rate? How much does she need to contribute voluntary on top of her automated contributions, if at all?

Calculate the appropriate retirement income need $($WRR ratio$)$ and choose either the annuity or capital preservation approach and justify your choice.