Part 1: Superannuation Select a superannuation fund site to investigate and select an investment option into which Katarina’s money will be invested. Select a rate of return that you will use for your...

Introduction
The client in this case is a young individual who is looking to save money for retirement, to save enough money for her to live in the years after retirement. The following information about the client has been gathered
Client Information
Name: Katrina
Age: 23
Earning per annum: $55,000
Retirement age: 65 years
Expected life: 85 years
From the above information, the following calculation has been made. Also, the investment option has been selected for the client based on a lot of consideration which is the number of years which she will be earning, this plays a very important role in deciding the investment option because if the investment horizon is long enough the investment option can be more on the growth side and less on the investment protection side. This helps in growing the income at a faster rate than anything. Also initially when the investment horizon is long enough the risk can be taken to invest the money in a high-growth investment option as this will help in reaping the benefits later on which we will see in the later part of this report.
Part 1
Investment Option Selected = High Growth
http://www.supersa.sa.gov.au/investments/our-performance/income-stream/high-growth
Rate of Return = 10.00%
Frequency of Payments = Monthly
The Investment Option selected is ‘High Growth’ from Super SA because after going through the investment document, I found that the company has a great investment objective which fulfils the purpose of my client’s investment objective which is to retire at the age of 65 years and live till the age of 85 years, i.e., get an income each year which can give my client sufficient money to live for the 20 years, either yearly or lump sum.
Also, the other reason for selecting the ‘High Growth’ investment option is that the investment horizon of the client is very long which is approximately 42 years and during that period it is better to invest in a mix of risky and not so risky investment, this is said because the risky investment will help grow the investment at a pace which is higher than the inflation and the growth in the expenditure, whereas the not so risky investment will help in providing the capital protection which is needed.
The rate of return selected is 10.00% because the target return of the investment option is CPI + 4.5%, and assuming that the CPI is 2% the rate of return which is assumed the fund will return is 6.5% but because the investment horizon is more than 10 years we can assuming that the investment option will breach the 10-year average returns which it has given in the last 10 years, i.e., 10.05%. Therefore, based on this methodology and assumptions the rate of return selected is 10.00% (approximately)
The frequency of payment is selected as ‘Monthly’ because the client will receive her monthly salary every month, which will help her pay the investment each month at the start. This frequency will also ensure that no instalment is missed because the investment will get deducted at the start of the month, ensuring that the client has the rest of the money for spending.
Part 2
Compulsory Employer contributions = 9.5%
Annual Earnings = $55,000
Therefore, Compulsory employer contributions (in $ per month) = Compulsory Employer contributions * Annual Earnings/12
= 9.5% * $55,000/12
= $435
Because it is mentioned that only employer contribution will be invested the total money invested per month in the investment option chosen, i.e., High Growth will be $5,225 yearly which is approximately $435 monthly.
Inputs,
Monthly Investment = $435
Rate of Return = 12
Number of years (till retirement) = 42
Total Amount of money that Katrina will have at the age of 65 = Monthly Investment * [((1+(Rate of Return/12))^(12*Number of years)) – 1]/(Rate of return/12)
= $435 * [((1+(10.00%/12))^(12*42)) – 1]/(10%/12)
= $3,368,769
Therefore, the total money that Katrina has at the age of 65 will be $3,368,769, which means that all the money invested by the employer in the scheme will accumulate to $3,368,769 at the end of her 65th birthday which will be 42 years from now.
Part 3
The yearly rate of return = 8%
Account Balance = $3,368,769
Number of years (she will live after retirement) = 20
Therefore, this is how we will calculate what is the annual income she can get from the amount saved, i.e., $3,368,769.
Account Balance = Annual income received * (1-(1+(Yearly rate of return/12))^(-Number of years * 12))/(Yearly rate of return/12)
$3,368,769 = Annual Income Received * (1-(1+(8%/12))^(-20*12))/(8%/12)
= $28,177
Therefore, from the above calculation, it is clear that she will have around $28,177 per month to live for the whole retirement period which is more than what she is earning now. But this will become lesser than the actual value that is being seen in this because of the inflation which will be reducing the purchasing power of the same amount of money which she receives.
Part 4
Annual Income (earnings) = $55,000
From the above table, taking into consideration the tax slab we can calculate the after-tax income for the client and also the tax liability that she will be having annually which is:
Tax Liability = (($45,000 - $18,200) * 19%) + (($55,000 - $45,000) * 32.5%)
= $8,342
The total annual tax liability for Katrina will be $8,342...