section 1 - The American College Online Learning Center

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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
e. Lisa has a checking account with $2,000.f. Lisa received $350,000 of her ex-husband’s 401(k) plan pursuant to a qualifieddomestic relations order.g. When Lisa is not working she spends time with her mother (Roberta) age 84 whois in poor health and is suffering from dementia.h. Her planner is a CFP® professional who had both Lisa and her husband as clientswhen they were married. (Both are comfortable with this arrangement.)i. The planner also works as Roberta’s financial adviser.j. (Video: Case study: Lisa: Tacchino, Lemoine, Kitces, Guyton)LO 7-5-3: Case study: Joe and Jane1. Case study: Joe and Janea. Joe (age 58) and Jane (age 55) have been happily married for 30 years and areboth currently employed. They expect to continue their jobs until Joe turns 70. Joeearns $220,000 as a software engineer for a large company. Jane stayed homewith their kids most of her married life and started a job as an assistant managerat a local gift shop 5 years ago. Jane makes $40,000 per year.b. Joe has $900,000 in a 401(k) plan.c. Jane has $50,000 in a SEP-IRA.d. Joe has 1,000 nonqualified stock options from his employer. The options havea 10-year duration and were issued 3 years ago at $40 per share. The stock iscurrently worth $47 per share.e. Joe will receive $30,000 a year in Social Security benefits at full retirement age(age 66).f. Jane is eligible for $7,000 a year in Social Security benefits on her own earningsrecord at full retirement age (age 66 and 6 months).g. Joe has a $1,000 per month life annuity pension from a prior employer.h. Their house is worth $600,000 and they have 5 years left on the mortgage with anoutstanding loan balance of $79,000.i. Their vacation home at the lake is worth $200,000 and they have 15 years left onthe mortgage and still owe $140,000.j. They have $25,000 in a savings account.k. They are interested in leaving a legacy to their two children (and hopefully theiryet to be born grandchildren) but not at the expense of sacrificing their standardof living in retirement.l. They are both in good health. But Jane’s mother developed dementia at an earlyage (70).m. They are currently spending approximately $14,000 to $15,000 a month.n. (Video: Case study: Joe and Jane: Tacchino, Lemoine, Kitces, Guyton)7.35
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Huebner School SeriesHS 353 STUDY O
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THEAMERICANCOLLEGE.EDUThrough The A
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c. But it is more comprehensive bec
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(3) Work part-time during retiremen
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SECTION 2: UNDERSTANDING RETIREMENT
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d. Solutions(1) The model considers
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. Other sources of retirement incom
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c. Another option for solving cash
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(b) Net worth statements that ident
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d. Be ready to reengage with the cl
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(b) In financial planning(c) In inv
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j. Planning Point: Planners can use
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e. We also need them to have a bett
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Assignment 2IDENTIFY RETIREMENT INC
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(2) Income4. Determining risk toler
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collaborative experience which focu
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6. Asset allocation and risk tolera
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c. How long will the income last?d.
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. Durationc. Reliabilityd. Other6.
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c. Supplemental Security Income (SS
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. An unused emergency fund can supp
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5. Inflation(2) The expense method
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Assignment 3CHOOSE APPROPRIATE STRA
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. Save as a percentage of income an
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(1) Note that 38% of second income
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(4) The AARP website has a national
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4. Contributions to IRAs and Roth I
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carve out the nondeductible contrib
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(2) Plus salary deferrals (for an i
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a. Example:(1) Save $10,000 in 25%
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(a) This requires knowing four fact
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. Solution(1) Li and Lin Lin are bo
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(1) The increase in dollar amounts
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9. In some circumstances, an indivi
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2. Reverse mortgage basicsa. Almost
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5. Planning considerations(b) Keep
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(2) Some funds that are promoted as
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(1) Berstresser, Chalmers, and Tufa
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RESOURCES FOR COMPETENCY 3: CHOOSE
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(2) From the previous employer(s) p
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8. IRA funded plans (IRAs, SEPs, SI
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. Does the distribution election fi
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6. Net unrealized appreciation rule
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a. Tax-exempt plans include Roth IR
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8. Calculating required distributio
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(2) Exception: If there are separat
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5. Impactc. Tax rates are low in ea
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(7) Based on ordering rules, identi
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7. A married couple who file jointl
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(1) Needed to provide the appropria
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13. Transfers at deatha. Wills(2) A
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(1) The Retirement Equity Act manda
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(2) Beneficiary designation of bene
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13. Overview14. Types(2) The donor
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(1) Charity needs only to payout in
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c. Access should be granted to an a
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nightmare of living probate might h
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(6) Powers to represent their princ
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c. If the policy is term coverage w
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e. Factoring personal and family he
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problem. On the other hand, we can
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d. Adding a cost of living adjustme
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g. Planning Point: Sometimes a high
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(2) Clients may not be able to “a
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c. Ensure that the client is receiv
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a. Example: Because of physical and
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options about where to get his/her
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(2) Facilities, monthly fees, and s
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8. Other strategies that help to co
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standard deviations of the returns
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a collapse in the real estate marke
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a. In a later competency we will di
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years of service with the employer)
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a. Planning Point: Planners should
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(2) If you have locked in food, ren
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(4) Loss-of-spouse risk—Deferred
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(1) Excess withdrawal risk—The us
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(5) Frailty risk—Managing assets
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7. Practice good career management:
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Assignment 6CHOOSE APPROPRIATE STRA
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c. Example: Chuck and Sarah divide
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e. The bucket approach can be thoug
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3. Understanding systematic withdra
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(1) The time horizon used in the ca
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Page 184 and 185: c. Each of the three portfolios wil
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Page 200 and 201: 4. Taxationtheir return generating
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Page 228: RESOURCES FOR COMPETENCY 7: INTEGRA
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