Question 1: Using Indices and Compounding Interest (15% out of 45%) A 61-year-old employee considers their retirement savings strategy. Based upon the year in which they were born, the employee will be eligible to retire at the age of 67. The employee is aiming to have $750 000 in their superannuation account upon reaching retirement. Task Part 1 Using information given, determine the average rate of return required for the employee to reach this savings target. Useful Information The employees current superannuation balance (at age 61) is $500 000. The employees current annual salary (at age 61, after tax) is $72 000, of which they can contribute between 9.5% and 12% towards superannuation Contributions towards superannuation are themselves taxed at a rate of 15% The employees salary over the next 6 years is predicted to change as follows: At the end of Year 2, a pay increase of 1.5% At the end of Year 4, a pay increase of 2.25% At the end of Year 5, a final pay increase of 0.75% Steps to help answer Part 1 1. Determine the employees salary for each of the six years. 2. Determine the employees superannuation contributions for each of the six years. For this section you must pick your own value between 9.5% and 12% and use this values for all six years. 3. Determine the employees superannuation account balance assuming zero returns on the account balance each year. Then, from there, determine the average annual return in percentage terms - required for the employee to achieve their savings target.