Reference no: EM132935416

Assume you are a financial advisor for a client, James. James are 35 years old now and start saving for his retirement. He thinks that he will retire at the age 65 years old and expect to live until 100 years old. He wishes to move to Hawaii to retire.

This is his plan of retirement:

1. Cost of moving is $300,000 at the beginning of year 65
2. Cost of living per year will be $35,000 for 35 years (from the end of year 66 to the end of year 100)
3. All estimations will be valued with interest rate of 8% per year.

Problem a. Calculate the amount of money he need at the beginning of year 65 (his retirement date) so that he can achieve his plan of retirement. This should include cost of moving and total costs of living. You are required to draw a timeline of cash flows.

Problem b. Assume today James have $50,000 in his saving accounts that pays 8% interest rate per year. He plans to save this in the next 30 years, as well as save more at the end of each year so that he would have the amount of money at the beginning of year 65. Calculate the amount he needs to save each year in the next 30 years. You are required to draw a timeline of cash flows.

Problem c. If otherwise James is not having any savings at the moment and plan to start saving at the end of the next six years (i.e. saving in 25 years). In that case calculate the amount James needs to save each year so that he can achieve his plan of retirement. You are required to draw a timeline of cash flows.