3. Loyiso needs at least R15 000 per month at present for his expenses. He plans to retire in five years' time. 3.1 If the inflation rate is \( 6 \% \), calculate how much per month he will need in five years' time for his expenses. 3.2 He calculates that his monthly expenses after retirement will be \( 80 \% \) of his current monthly experses. How much will that be? 33 How much per year will he need when he retires? 34 He will have R2 000000,00 to invest and use the interest as a monthly income. Will the interest, at \( 8,5 \% \) per year, be enough for his needs?

To calculate how much Loyiso will need in five years regarding his current expenses of R15,000, we can adjust for inflation. Using the formula for future value with inflation: \[ \text{Future Value} = \text{Present Value} \times (1 + \text{inflation rate})^n \] In this case, \[ \text{Future Value} = R15,000 \times (1 + 0.06)^5 \approx R20,149.46 \] So, in five years, his monthly expenses will be approximately R20,149.46. If he plans to have his expenses at 80% of his current monthly expenses after retirement, we can simply multiply his future monthly expenses by 80%: \[ \text{Retirement Expenses} = R20,149.46 \times 0.80 \approx R16,119.57 \] This means he will need around R16,119.57 per month after retirement. To calculate how much Loyiso will need annually when he retires, we take his revised monthly retirement expenses and multiply them by 12: \[ \text{Annual Retirement Expenses} = R16,119.57 \times 12 \approx R193,434.84 \] So, he will need approximately R193,434.84 per year. Now, with an investment of R2,000,000, let's determine if the interest at 8.5% per year is sufficient to cover his needs. First, we calculate the annual income from the investment: \[ \text{Annual Interest Income} = R2,000,000 \times 0.085 \approx R170,000 \] Since Loyiso needs R193,434.84 per year and the investment only yields about R170,000, it’s clear that he will not have enough interest income to meet his expenses after retirement. He’ll need to consider additional savings or investments to cover the gap. To recap, Loyiso will need to strategize to fill the R23,434.84 annual shortfall to maintain his desired lifestyle in retirement! --- Considering inflation is a sneaky gremlin that can really mess with budgets! Historically, it has averaged around 3-4% over long periods, but sudden spikes can make what we think we "need" suddenly inadequate. Like that time you thought a loaf of bread was always R5, and then—BAM!—it's now R12. Keep up with inflation adjustments! In real life, understanding how inflation impacts retirement savings is crucial. Many folks stick their heads in the sand and underestimate how much they truly need. By factoring in long-term inflation into their savings strategy, they can avoid the shock of retirement underfunded. So, always keep your future expenses in mind and adjust your savings plan accordingly!