Question: The Crusoes family currently has a saving of $1, 415,000 and is thinking about retiring in 4 years. The family right now has an after tax income of $135,000 and has an annual living expense of $100,000. Neither member of the family are eligible for defined benefit pension and thus rely on return from the investment fund to cover their living expenses after retirement. The family is also going to pay its last home mortgage payment of $25000 in a few weeks and needs to establish a $60,000 university tuition fund for their daughter next month. In order to maintain their current life style after retirement, they will need $2, 200,000 by the time of the retirement. The current tax rate is 30%. Using the above information, please answer the following question:
What is the risk tolerance level of the Crusoes family if they are going to retire in 4 years?
What before tax return objective does Crusoes family need to achieve in order to retire in 4 years?
Given the return objective and risk tolerance level of the Crusoes family, is retiring in 4 years a good idea?