You just started your internship at Prime Value Asset Management. Your mentor Clive asked

you to write a client report for a couple by the name of David and Belinda Tang.

David is a $45-$year$-$old land surveyor who works for the City of Whitehorse council, while his

wife Belinda is a human resources consultant at Monash University. Due to Belinda$$s

employment at Monash University, both David and Belinda have their superannuation accounts

with UniSuper. David is a risk taker, so he chooses the Growth investment strategy for his

superannuation money while Belinda invests her super in the Conservative investment option.

The couple shares a portfolio of assets comprising of equity in ANZ and BHP as well as a

studio apartment in Bayswater that Belinda inherited from her grandfather. The couple live in

a $3-$bedroom mortgaged house in Clayton and are paying off the mortgage using their salaried

income. Apart from the mortgage payments, they have a range of other living expenses leaving

them with a small combined annual saving.

Clive provided you with the following extract of the client profile that captures important

information regarding David and Belinda assets and incomes. Client profile:

David tang:

Current age $>45$

annual income $>120,000$

superannuation balance $>155,000$

super performance $(5$ years$)>6\mathrm{.}80\%$

super contribution rate $>11\%$

average income tax rate $>30\%$

expected annual saving rate $>10$$

Client Profile Belinda Tang:

age $>42$

annual income $>95,000$

superannuation balance $>88000$

super performance $(5$ years$)>4\%$

super contribution rate $>17\%$

average income tax rate $>26\%$

expected annual saving rate $>6\%$

Combined Assets:

ANZ shares $>10,000$

BHP shares $>15000$

Studio apartment $>300000$

Rental yeild $>4\%$

ANZ historical return inc div $>5\mathrm{.}29\%$

BHP historical return inc div $>11\mathrm{.}80\%$

The Association of Super Funds Australia $($ASFA$)$ suggests that to achieve a modest retirement

lifestyle, a couple would require $$45,800$ a year $($based on today currency$)$ assuming that they

own their home and are relatively healthy. However, David and Belinda aspire to have a

comfortable retirement that allows them some luxuries such as overseas travel and fine dining.

This is estimated to cost $$70,000$ a year $($based on today currency$).$ The current plan is for the

couple to retire at the same time when David is $63$ and Belinda $60$ and they expect to have $25$

years in retirement. While their current plan is to retire when they are $63$ and $60$ respectively, David and Belinda

do not rule out the possibility of early retirement if they can afford to do so$.$ Advise David and

Belinda on whether they can afford to retire $5$ years earlier than planned based on their current

financial situation.

Note from Clive: First, you need to compare their required savings for retirement using the most conservative scenario when the discount rate is $4\%$ per annum and their

expected wealth at retirement under the more realistic scenario of an annual $3\%$ pay increase to determine if early retirement is possible. If their expected wealth at retirement is

more than the required savings, they can afford to retire early. To determine if they can retire

$5$ years earlier $($that is when David is $58$ and Belinda $55),$ work out whether the wealth at

retirement meets the required savings. include them in your

report and provide advice to David and Belinda based on figures in these tables. Apart from addressing their possibility of a $5-$year earlier$-$than$-$planned retirement, highlight

some important factors that may affect the decision of how early they can retire.