Question
You are a Financial Planner and you have been provided details for a new client Rose Tran. Rose is 35 and she plans to retire
You are a Financial Planner and you have been provided details for a new client Rose Tran. Rose is 35 and she plans to retire when she is 65 year old.
Rose has $80,000 in a balanced managed fund. She will not add any further savings to this fund however it will remain in place until retirement. This fund earns 6% p.a. compounded annually after tax on average. Rose's superannuation fund has a balance of $85,000, which she contributes $1,500 per month. The superannuation fund earns 7% p.a. compounded monthly.
When Rose retires, she will add both her super and investment balances together and purchase an annuity, which will provide her with a regular income stream throughout retirement. Her life expectancy is 83 years old, but she is concerned that if she reaches life expectancy and has spent all of her savings she will have nothing left to fund further lifestyle comforts she may need in her advanced years. To ensure she has some money left over to supplement her aged pension, she would like to have a balance of $200,000 remaining in the fund at age 83.
Rose's retirement annuity will earn 7% p.a. which will be compounded monthly.
a.Calculate the total value of Rose's financial assets when she retires at age 65.
b.Calculate the monthly pension amount that Rose will receive in retirement to age 83.
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