Question

Question 1 Jessie has just spoken to a financial planner to make sure she's putting enough money into her superannuation for retirement. Jessie just turned 30 and hopes to retire at age 60. In order to retire that early, Jessie and her financial planner have computed that Jessie will need a superannuation balance of $1,000,000. Her financial planner has determined hat Jesse makes no personal super contributions, her superannuation balance wil be $85000 מ base on required employer payments esses super account has a 6% (APR) return compounded monthly. How much more should Jessie contribute each month to reach her goal? (5 marks)

Answer 1

Required superannuation balance= $1000000

Superannuation balance from employer payments= $850000

So, superannuation balance from own contributions = 1000000 - 850000= 150000

Required Future value= 150000

Retire at 60 and now age is 30. So,

Time 30 years or (n) = 30*12= 360 months

Interest rate 6% compounded monthly

So, Monthly interest rate(r) = 6%/12 = 0.5% or 0.005

Future value of annuity (F) formula = P * { (1+r)^n - 1 } / r

150000 = P* (((1+0.005)^360) -1) / 0.005

150000= P* 1004.515042

P = 150000/ 1004.515042

P = 149.3257877

So, each month contribution need to achieve thier goal is $149.33