Reference no: EM132476310

Point 1: Simon and Janine Mackintosh are married. They are both 65 and have just retired. They have $1,500,000 funds in a combination of superannuation and non-superannuation investments. They own their home which they intend to retain as their home during their retirement phase. They do not have any debt. They plan to spend $60,000 p.a. in retirement and do not have any further planned annual or lump sum expenses.

Point 2: They have two daughters to whom they would like to eventually leave their home and remaining investment assets upon their deaths.

Point 3: Simon and Janine are able to tolerate some investment fluctuations, although they would be very concerned if their investments fell by 40% in any year. Throughout most of their working life, they invested their funds in growth investment options comprising 15% defensive investments (cash and fixed interest) and 85% in growth investments (shares and property). However, they want to change their asset allocation now that they are both retired.

Point 4: Simon and Janine are both healthy and they are each expected to live approximately 20 more years.

Problem 1: Explain as though you are their financial adviser, how Emilio and Jasmine will be able to finance their cost of living requirements in the event that the value of their investment drops by 25% in a single year.