Strategies for Retirement Planning

Running head: PERSONAL FINANCE
1
Report to Mr. Max and Mrs. Jenny regarding the decision to draw
down on their superannuation savings
Student’s name
Name of the university
Author’s note

PERSONAL FINANCE 2
1.0 Introduction
This report focuses on the identification of a few strategies that Mr.
Max will have to consider before deciding to retire soon. Before such
decisions are reached at. Mr. max has to consider that all the necessary
key determinants to put into consideration such as his current salary,
how much will be spent in retirement, costs to do with special security at
retirement among others. Mr. max should as well understand the
economic impact of other macro-economic factors such as income tax
payable, inflation rate of a country in which the person resides and fiscal
policy, interest rates, among others.
The decision to retire soon is not the best choice for Mr. Max and the
couple because the funds at their disposal are not sufficient enough to
cater for a moderate type of living. The couple on average will need about
$60457 after tax, and they will have an estimated super income of
$14117 annually, plus an age pension when mr.max retires very soon.
With such information determined mr.max will need an extra $35016 if he
is to retire very soon because his desired income is about $60457. N.B
these calculation have no formula to base on, they are done
automatically
The major objectives of this paper however include;
 Assessing the implications of the intended decision to
draw down on pension payments assuming that the rate of return
on investments is 20%.

PERSONAL FINANCE 3
 Provide the alternative strategies that can be
undertaken
 Assess the assumptions on which such strategies will be
applicable
 Provision of mathematical evidence where possible
With an understanding of the objectives, the report will
provide brief definitions of some of the key terms covered within the
scope.
Superannuation for example can be defined as scheme in
which a company provides an opportunity to its employees to live in
a better state of life after they have reached retirement age
(Kenton, 2018).
It basically involves personal savings, government
contributions and a 9.5% employer contribution deducted from the
employee income earned during the active years of working.
Superannuation works on the principal that the employee opens up
a retirement account where all these funds are deposited. These
funds are then taken into invested by a trusted investment body
which then keeps on filing investment annual returns to the
employee’s account thereby gene rating additional income for the
employee. At the time of retirement these accumulated funds are
then given out the rightful owner.
2.0 Discussion
2.1 Explanation of the failure to meet intended objectives

PERSONAL FINANCE 4
Although the superannuation arrangements have proven to exist
over so many years that is for over 20 years now, there still exits concerns
of insufficient needed for an individual or couple to live a modest life of
the superannuation savings (wilkins and murawski, 2014). It is estimated
that the minimum income required for a couple to live a comfortable life
after retirement is around $57,665. Additionally it further calculated that
only 32% of couples have the capacity to live successfully (Harper, 2015).
Elderly people legible for retirement payments are basically
interested in achieving about three types of benefits from their retirement
savings. These benefits comprise of income inflow, ability to manage risk,
and being flexible at the end of it all. On a sad note all the above benefits
cannot be achieved or obtained due to a number of factors such inflation,
tax rate, unfavorable fiscal policies and many other unfavorable economic
conditions (Clark, 2012).such a statement means that the superannuation
program is not yet fully functioning as required or expected and this poses
a huge threat to the couple of Mr. Max and Mrs. Jenny. They too stand a
huge risk of living upon their savings for long.
Below is a mathematical representation showing the level risky of running
short of funds if the couple chooses to continue with a draw down option
on superannuation. Supposing the couple decides to combine their
superannuation funds, they would be in position to raise a total sum of: $
350,000 = ($250,000 +$ 100,000). And they hope to live on the total sum
for fifteen years; they get themselves in a serious financial crisis within a
period not more ten years. All their funds will have depleted and they will