9% for the past seven years (Index Mundi, 2009). An inflation rate of 2% per annum shall be assumed for our future cash flows model, the additional 0.1% reflecting a desire for conservativeness in our estimates.

Karl's pension pays him 80% of his current salary, which is not expected to increase in the final three years. The pension benefit is indexed to inflation. We will assume a 30% tax rate for both pre- and post-retirement income.

The couple is breaking even at present, with a surplus of €264 expected for 2010. This assumes minimal work for Beatrix, so anything she works above and beyond the €15,000 threshold will allow the couple to save more money for their retirement. With no raises and no additional work from Beatrix, the couple will run a small deficit for their last two working years.

In retirement, the couple will not make enough money to...
[ View Full Essay]