Mrs. Thuy needs advice for her retirement plan. She is 35 years old and plans to retire at 55. She has good
health, so her life expectancy is 80 years old. Her current annual basic living expenses are 100 mil VND. She
desires to buy a brand new car with a value of 5 bil VND 5 years after retirement. She also intends to
contribute 300 mil VND annually to a charity fund to help homeless children. Such a contribution is expected
from 55 to 65. Additionally, she wishes to travel to a particular European country each year from 60 to 65.
The current average cost of a tour to a European country is 70 mil VND.
Regarding Mrs. Thuy’s extent of risk tolerance and personal circumstance, a consultant advises that she
should equally invest in stocks and bonds with the expected rate of returns of 20% and 10%, respectively,
for the pre-retirement period. After her retirement, she is advised to only deposit money in the bank with the
expected rate of return of 5%. The inflation rate is 3%.
Assume that Mrs. Thuy’s current basic living standards remain even when she retires. She also wants to
maintain the tour quality when traveling to European countries. The investments’ expected return rates
mentioned previously have already been adjusted for the inflation rate.
Question. Calculate the required annual savings from 35 to 55 to cover the expected expenses after
retirement sufficiently
Question. If her average annual net income in the pre-retirement period is 90 mil VND, is it sufficient to
meet the required annual savings calculated in Question 6? If not, please propose three
alternative solutions to help Mrs. Thuy meet such required annual savings.
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