Section 1 - Required Savings for Retirement The Association of Super Funds Australia (ASFA) suggests that...

Transcribed Image Text:

Section 1 - Required Savings for Retirement 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 $70,000 a year (based on today currency). The current plan is for the couple to retire at the same time when David is 63 and Belinda 60 and they expect to have 25 years in retirement. i. Assuming that inflation is 3% per annum, how much do David and Belinda need a year for them to achieve a modest retirement lifestyle when they retire. How much do they need a year for a comfortable lifestyle? ii. If David and Belinda expect to have 25 years in retirement, how much money do they need at the time of retiring to achieve a modest and comfortable lifestyle? Note from Clive: Include the following tables in your report and explain to the clients how these figures are derived at. Calculate the amount required for retirement in Table 1.2 for three different scenarios with the discount rates ranging from 4% per annum to 8% per annum. Table 1.1 - Annual retirement expense ($) Modest retirement Comfortable retirement Modest Lifestyle Comfortable Lifestyle Table 1.2 - Savings required at the time of retirement ($) Medium return scenario Discount rate = 6% Low return scenario Discount rate = 4% High return scenario Discount rate = 8% Section 1 - Required Savings for Retirement 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 $70,000 a year (based on today currency). The current plan is for the couple to retire at the same time when David is 63 and Belinda 60 and they expect to have 25 years in retirement. i. Assuming that inflation is 3% per annum, how much do David and Belinda need a year for them to achieve a modest retirement lifestyle when they retire. How much do they need a year for a comfortable lifestyle? ii. If David and Belinda expect to have 25 years in retirement, how much money do they need at the time of retiring to achieve a modest and comfortable lifestyle? Note from Clive: Include the following tables in your report and explain to the clients how these figures are derived at. Calculate the amount required for retirement in Table 1.2 for three different scenarios with the discount rates ranging from 4% per annum to 8% per annum. Table 1.1 - Annual retirement expense ($) Modest retirement Comfortable retirement Modest Lifestyle Comfortable Lifestyle Table 1.2 - Savings required at the time of retirement ($) Medium return scenario Discount rate = 6% Low return scenario Discount rate = 4% High return scenario Discount rate = 8%

Answer rating: 100% (QA)

Section 1 Required Savings for Retirement Table 11 Annual retirement expense Modest Lifestyle Comfor... View the full answer