Your uncle, 56, just retired after 31 years of teaching. He is a husband and father of two children who are still dependent. He received a RM150,000 lump-sum retirement bonus and will receive RM2,800 per month from his retirement annuity. He has saved RM150,000 in a retirement plan and another RM100,000 in other accounts. His retirement plan is invested in mutual funds, but most of his other investments are in bank accounts earning 2% or 3% annually. Your uncle has asked your advice in deciding where to invest his lump-sum bonus and other accounts now that he has retired. He also wants to know how much he can withdraw per month, considering he has two children and a nonworking spouse. Because he has two children, his current monthly expenses total RM5,800. He is not eligible for pension security until age 62, when he will draw approximately RM1,200 per month; however he would rather defer drawing on pension security until age 67 to increase his monthly benefit amount to $1,550.

1. Yourunclehasemergencyfundalreadysetaside,sohecanusehisRM400,000ofsavingsforretirement.Howmuchcanhewithdrawonamonthlybasistosupplemen hisretirementannuityifhisinvestmentsreturn5%annuallyandheexpectstolive30moreyears?[5marks]

2. Ignoringhispensionsecuritybenefit,istheamountdeterminedinquestion(1)sufficienttomeethiscurrentmonthlyexpenses(keepinmindhewillreceiveapensionof$2,800permonth)?Ifnot,howlongwillhisretirementlastifhiscurrentexpensesremainthesame?WhatifhisexpensesarereducedtoRM4,500permonth?[10marks]3. Considering the information obtained in (2), should your uncle wait until 67 for his pension benefits? If he waits until age 67, how will his pension benefit change the answer to (2)? [10 marks]

4. If the inflation rate averages 3.5 percent during your uncles retirement, how old will he be when prices have doubled from current levels? How much will a soda cost when your uncle dies, if he lives the full 30 years and the soda costs $1 today? [15 marks]