Question: Background Information : Mr. and Mrs. Chan are both 35 years old now. They want to retire at 60. Current annual income and annual expenses

Background Information :

Mr. and Mrs. Chan are both 35 years old now. They want to retire at 60.

Current annual income and annual expenses are HK$1,000,000 and HK$800,000 respectively.

Lump-sum pension at retirement is estimated to be HK$1,200,000.

Assume their annual expenses (at present value term) after they retired will be 60% of their current level.

Current resources available : HK$500,000.

Assume the average inflation rate and after-tax investment return will be 3% and 7% per year.

Estimated life expectancy : 90 years old.

How much additional fund, if applicable, Mr. and Mrs. Lee has to save/invest per year until they retire so that they have sufficient funds for retirement ? In your answers, you should state all necessary assumptions.

Now assume that, for some reasons, they are not able to keep regular annual savings but they will inherit a 15-year old residential property from their parents in a few years. Are there any alternatives for them to ensure that they will have sufficient funds for retirement ?

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