Problem
Manuel and Evie, a married couple, are considering retirement; they are both aged 67 and supply the following information:
1. They jointly own their home worth $3,500,000 and have no debt.
2. They have a car ($90,000), home contents ($100,000) and savings ($50,000).
3. Manuel's superannuation is $560,000 (tax-free $150,000, balance from a taxed source).
4. Evie's superannuation is $480,000 (tax-free $48,000, balance from a taxed source).
5. As 'high growth' investors, expected return on investments is 4.0% p.a. above the inflation rate (currently 3.0% p.a.).
6. They would like to receive $70,000 per annum after tax to meet their living costs.
Task
A. Discuss adequacy of capital for retirement and show calculations.
B. Discuss Manuel and Evie's risk tolerance relative to the 'draw-down' phase.
C. Briefly explain how Australia's retirement income policy is associated with this scenario. In your answer include details of how theory, politics, and legislation influence outcomes.