section 1 - The American College Online Learning Center

d. Evelyn is in great health and her mother (age 85) is still alive and independent.Bruce has high blood pressure and both parents have passed away.e. Evelyn earns $70,000. Bruce did as well. In the last year since Bruce has retiredthey have been able to live on about $90,000 (pretax) and have been takingwithdrawals from Bruce’s 403(b) plan to make up the difference.f. They will have an additional health care expense of $20,000 a year for the nexttwo years—until they become Medicare eligible.g. They have a $400,000 home with no mortgage.h. They have $30,000 in a savings account.i. Bruce has $300,000 in a 403(b) account and Evelyn has $100,000.j. They do not have any long term care insurance or any other plan for addressinglong-term care.k. Neither have an interest in part-time work.l. Bruce’s Social Security PIA at full retirement age is $1,600 a month.m. Evelyn’s Social Security PIA is $1,100 a month.n. Evelyn’s defined benefit options include a(1) Straight life annuity of $5,500 a month(2) Joint and 50% survivor annuity of $5,100(3) Joint and 100% survivor annuity of $4,700(4) Evelyn has also paid into this plan and she can choose to take hercontributions of $173,000 as a lump sum. That would reduce her monthlypayments (single life annuity) by about $1,100 a month.(5) The joint and survivor annuity options are unusual in that she can choosean alternative beneficiary if Bruce predeceases her.o. Bruce has not yet begun to receive his pension benefit.(1) Life annuity $2,400 a month at age 65(2) Early payment allowed with a 6% reduction each year(3) Further reductions for a joint and survivor benefit option(4) Lump sum also availablep. They start the process looking for advice about Evelyn’s benefit optionsq. They have a clear preference for guaranteed income in relation to potential forinvestment growth.r. They are not particularly interested in choosing or managing investments.s. They are motivated to helping their children—sooner than later.t. (Video: Case study: Evelyn and Bruce: Littell, Lemoine, Kitces, Guyton)LO 7-5-2: Case study: Lisa1. Case study: Lisaa. Lisa, age 58, was recently divorced after being married for 25 years and is stillrecovering from the divorce. She is beginning to look forward and is trying to figureout if she can afford to retire. Her plan was always to retire at age 62 but she isaware that this might be more difficult after the divorce.b. She works three to four days a week as a realtor earning about $30,000 a year.c. Lisa has $200,000 in a money market fund from the sale of the couple’s home.d. She rents an apartment and covers expenses with her income and $2,000 amonth from the money market fund.7.34