MAF101: Calculate Tony’s After-Tax Income - Finance Assignment Help

Assignment Task :

The retirement fund works as follows: 
Every dollar invested in the fund earns 5% p.a. You cannot make withdrawals from your fund until you reach your retirement age of 65. After that you can withdraw the funds to meet your day to day living expenses. Your life expectancy is 90 and you will work until you turn 65. You want to live comfortably during retirement, so you estimate that you will need $100,000 per year, starting at the end of the first year of retirement, and ending on your 93rd birthday. 

You will contribute the same amount into your retirement fund at the end of every year during your working life to age 65. 
1. How much do you need to contribute each year to fund your retirement? 

Part Two 
Today is 31st July, 2020. Tony is currently 28 years old and he hopes to retire at the age of 65. He is an Economist who works in Melbourne and is seeking a new job. Recently, Tony received two competing job offers from different recruitment companies. Both of the jobs will commence from 1st January 2021. He is thinking which of these offers he should accept and is asking your opinion as a personal financial planner to work out the consequences associated with each option, over the next 5 years. 

Please see details as below. 
First offer: 
The first offer is an economics lecturer role at Deakin University, Geelong. The salary is $110 000 per year before tax, and is estimated to grow at 4% per year. The cost of living in Geelong works out to be $40 000 per year. 
Second offer: 
The second offer is as a senior economic analyst at the Reserve Bank of Australia (RBA), located in Sydney. The salary is $190 000 per year before tax, and it is not expected to grow. The cost of living in Sydney works out to be $85 000 per year. 
Source: Australian Taxation Offic 
1. Calculate Tony’s after-tax income each year, for both offers, assuming no deductions and other earnings. Please show your calculations for the 5th year (year 2025) only, for both offers. You should present Tony’s after-tax income for every year, using a table. 
2. As Tony’s financial planner, provide a year-to-year analysis on the financial outcomes of the above job offers, for the next 5 years. How much money would Tony accumulate in 5 years’ time? Based on the outcome of your analysis, what advice would you give Tony? Please apply the following assumptions: 
a. Tony saves all his income after deducting all his cost of living.
b. Tony works the same job for the next 5 years.
c. Tony earns an interest rate of 1.85% on a high interest savings account. Tony does not invest. 
d. The cost of living does not change.
e. Tony gets paid his salary as a lump sum at the start of each year (1st January). 
Show formulas, variables, calculations and a concluding statement in your response. 
3. Explain what Tony can consider doing with his money, to increase his wealth. You should  research at least two options, and reference appropriately. Reputable websites are acceptable. 

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