Question

QUESTION 5

You would like to plan for your retirement. You have gathered or assumed the following information:

 You just turned 30 years of age, and currently have zero savings.

 You plan to work until you turn 50 years old, at which time you would like to retire. During retirement, assume that you will have no sources of income other than what you can earn on the money that you have saved up for retirement.

 For the purpose of retirement planning, you assume that you will live for 20 years during your retirement period (that is, you assume that your life span will not exceed 70 years of age).

 Your current salary is RM4,000. For simplicity, you will assume that your salary will be increased every 5 years by 40%.

 You plan to diligently save 30% of your salary every month. Each month these savings will be put into an investment instrument, at the end of the month, and will earn an annual return of 8%. Assume monthly compounding.

 Assume also that throughout your retirement, you will continue to invest your accumulated savings and that it will earn the 8% per annum return. Again, assume monthly compounding. Required: i. How much money would you have accumulated when you retire? ii. How much money would you be able to spend, a month, during your retirement? Assume that you would need the same monthly expenditure amount throughout retirement. For the purpose of calculating this amount, assume that you will spend that monthly amount at the beginning of each month.

Answer 1

The Calculation in excel is pasted below as follows,

Here we have calculated the Savings, the Investment done @8% and the amount for the retirement i.e. after completion of 50 years of age for next 20 years i.e. till 70 yrs the invested amount and the 30% expenses.

Current Age	Total Salary	Increased@8%	Saving@30%	Investment Return @8%	After Retirement Investment @8% for 20 Yrs	Exps after retirement
30	4000	0	1200	1299.6	70971	21291.3
31	4320	320	1296	1403.57	76861	23058.3
32	4665.6	345.6	1399.68	1516.2	83240	24972
33	5038.848	373.248	1511.65	1637.5	90148	27044.4
34	5441.956	403.10784	1632.59	1768.54	97630	29289
35	5877.312	435.356467	1763.19	1909.33	105733	31719.9
36	6347.497	470.184985	1904.25	2062.03	114508	34352.4
37	6855.297	507.799783	2056.59	2227.73	124012	37203.6
38	7403.721	548.423766	2221.12	2405.34	134304	40291.2
39	7996.019	592.297667	2398.81	2598.12	145451	43635.3
40	8635.7	639.681481	2590.71	2806.05	157523	47256.9
41	9326.556	690.855999	2797.97	3030.23	170597	51179.1
42	10072.68	746.124479	3021.8	3272.82	184756	55426.8
43	10878.49	805.814437	3263.55	3534.91	200090	60027
44	11748.77	870.279592	3524.63	3817.57	216697	65009.1
45	12688.68	939.90196	3806.6	4122.98	234682	70404.6
46	13703.77	1015.09412	4111.13	4452.21	254160	76248
47	14800.07	1096.30165	4440.02	4808.52	275255	82576.5
48	15984.08	1184.00578	4795.22	5192.98	298101	89430.3
49	17262.8	1278.72624	5178.84	5608.85	322843	96852.9
50	18643.83	1381.02434	5593.15	6057.22	349638	104891.4
				65532.3