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Finance & Accounting
Pages 6 (1506 words)
Name Course Instructor October 22, 2012 Money Management Total number of words 1497 Table of Contents Part 1 Introduction Life insurance option Comparison of both options Part 2 Share analysis Appendix 1 Table 1 – Life insurance offer Table 2 – Personally managed funds Table 3 – Comparison of both options Appendix 2 Table 4 – Company analysis References Introduction Retirement years are filled with uncertainties especially if the retiree has a medical condition…
I have therefore decided to consider one of two options – a life insurance investment and a personally managed fund. Life insurance option If I invest the $500,000 with a life insurance company then I may be able to earn a stable income each year with adjustments for inflation. Based on discussions with my insurance company, Table 1 in Appendix 1 reflects the amount that I would receive if I invest in an insurance policy that makes adjustments for inflation and pays my estate the balance of my policy at death. The table shows an initial investment of $500,000 and indicates that over a 20 year period and assuming a 3.5% rate of interest and an inflation rate of 3%, I would be able to have an inflation adjusted income of $15,000 in year 1 continuing to $26,302 payment in year 20. This policy continues as long as I am alive. The balance on the account at year 20 suggests that there will be sufficient funds for me to earn an income many years after year 20 if I am still alive. The principal amount only starts declining in year 12 suggesting that I will be paid out of interest earned on the investment up year 11, after which payments will start affecting my principal. ...
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