The annual income of Erwin, age 40, is USD90,000. When he retires at 55 years old, he would like his annual retirement income to be at 75% of his last drawn salary. His annual salary increment, which takes place at the beginning of the year, is averaging 4%. Throughout his lifetime, the average inflation rate will be 3%. His investment rate of return is averaging 6% per annum.

Required:

1. Calculate the annual income required in the first year of his retirement.

2. Assume that Erwin lives until the age of 75, calculate the capital sum needed to enable him to retire comfortably.

3. In addition to a comfortable retirement, Erwin also wants his children to inherit USD800,000. Calculate the capital sum needed.

4. You have analyzed Erwin needs and found that he is not financially ready to retire. Propose FOUR (4) course of actions may be taken by Mr. Erwin