Ali Firas is a Managing Director at Best Paint Company

Ali Firas is a Managing Director at Best Paint Company in Johor Bahru while Aisyah Sofea is a manager at one of the local bank in Malaysia. His monthly income is RM20,000.00 with 2 months of bonus while Aisyah Sofea’s income is RM7,000.00 with 3 months bonus. Ali Firas is 36 years old. His wife, Aisyah Sofea, is 35 years old while his son, Omar Fateh is 3 years old.

The family of Ali Firas stays in a house in Johor Bahru which they bought 5 years ago for RM950,000.00. They took a loan of RM750,000.00 for 20 years from a bank with an interest of 5.5% per annum. The housing installment per month is paid by Ali Firas. The current value of the house is estimated at RM1,090,000.00.

Ali Firas drives a one year old car with a current value of RM140,000.00. He still has 4 more years of loan outstanding and he has no intention to sell the car in the near future. The car was purchased new for RM180,000.00 with a loan of RM150,000.00. Interest paid for the loan was 5%. His wife, Aisyah Sofea used a car provided by her employer.

Ali Firas believes in life insurance and the details of his policies are as follows:

1. Whole life with bonus policy with the sum assured of RM150,000.00 and the annual premium is RM5,260.00. This policy was purchased many years ago and covers death, total permanent disability and major sickness. The projected cash values at age 36, his present age is RM19,800.00. He would like to surrender the policy when he retires and use the cash values to provide for his retirement needs.
2. An-Investment linked policy with the sum assured of RM200,000.00 which was purchased three years ago with an annual premium of RM4,650.00. This policy provides protection against death and total and permanent disability. Now, this policy has an investment value of RM16,200.00.

Ali Firas’s current assets are as follows:

Ali Firas would like to use the money in his Fixed Deposit and Joint Saving accounts for his child’s university education, while his unit trusts, shares and whole life with bonus policy and the Investment linked policy are for his own future retirement.

Ali Firas would like to retire at the age of 60. He believes that Aisyah Sofea would also retire at the same age as him. He would like to provide an annual sum that is equivalent to 80% of his last drawn salary and bonus when he retires.

Some assumptions agreed by Ali Firas are:

Required :

2. Calculate the total retirement gap if Ali Firas decided to utilize the unit trust, equity shares, employee retirement fund and cash value of his 2 life insurance policies to assist to fund his retirement. He wishes to remain to stay in the same house when he retires.