Mr. Victor, aged 38, is an Assistant Manager at a financial institution in America. He is married,
Question:
Mr. Victor, aged 38, is an Assistant Manager at a financial institution in America. He is married, with three children, aged 10, 6, and 2. The first is a boy, and the remaining two are girls. Mr. Victor plans to retire at age 65, and will need at least 75% of his current salary of $9,000 per month. He expects his salary to grow at an average rate of 4% per year, as per historical trends of his company. Mr. Victor expects to live up to the age of 80 years old. During retirement, he expects his investments to gain an interest of 6% per year, after adjusting for inflation.
Mr. Victor currently has several retirement plans implemented. His current EPF balance is only $50,000 as he has withdrawn some of the balance to fund his housing purchase three years ago. The EPF has declared dividends and returns of 6.5% since the past several years and is expected to continue. His contributions to EPF is $900 per month, made at the end of each month. He has a Private Retirement Scheme (PRS) amounting to $85,000 which ears 7% returns.
As a qualified financial planner, you want to determine whether Mr. Victor will have enough funds for his retirement. Assume all rates have been adjusted for inflation. In doing so, answer the following questions.
QUESTION:
At retirement, what is the yearly future value of the amount that Mr. Victor needs to have to maintain his current lifestyle?
What is the capital lump sum amount that Mr. Victor requires in order to generate annuities needed during his retirement? Assume that Mr. Victor wishes to receive the annuity at the beginning of each year.
Upon retirement, what is the future value of all Mr. Victor' retirement savings (including EPF and PRS accounts)? Assume that the monthly contributions to EPF remains the same at $900 monthly till retirement.
Was the retirement funds adequate? Was it a shortage or surplus?
In order to meet the shortfall as per question (g), how much does Mr. Victor need to save yearly? Monthly? Assume that he saves at the end of the period, at a return rate of 5%.
South-Western Federal Taxation 2018 Comprehensive
ISBN: 9781337386005
41st Edition
Authors: David M. Maloney, William H. Hoffman, Jr., William A. Raabe, James C. Young