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Week 1 discussion

Getting a hold of Retirement Needs Analysis

DIRECTIONS:

Here is the Discussion #1 Retirement Needs Analysis Discussion Problem. Please refer to the following documents (located in Content, Week 1) to assist you in solving the following capital needs problem.

What makes Capital Needs Analysis so Important?

A financial planner capital needs analysis for a client exemplar

Calculator capital needs analysis example

Capital needs analysis MS Excel spreadsheet

Please submit your Capital Needs Analysis in MS Word format (with an accompanying MS Excel Spreadsheet, if you so desire) with the following file name: LastNameFirstInitial_CapitalNeedsAnalysis01.docx. For example, if you name is John Smith, the file name of your solution(s) should be SmithJ_CapitalNeedsAnalysis01.docx. Submit your Capital Needs Analysis solution to your Homework #1 Assignment Folder.

HERE IS THE CAPITAL NEEDS PROBLEM YOU ARE SOLVING:

The Smith’s had $110,000 in savings at age 51. They had a desired retirement age of 65. They want to fund through age 92. Assume a 4 percent inflation rate and a 5 percent after-tax rate for investment both pre and post- retirement. They have household income of $140,000, which is increasing at the rate of inflation. Their expenditures including taxes are $125,000 a year. They estimate that in retirement they will receive $28,000 a year together in Social Security and Mr. Smith will receive a $12,000 a year pension, both in today’s dollars. Their retirement expenditures would be $90,000 a year in today’s dollars.

Calculate

a) The lump sum needed at retirement

b) Current assets available at retirement

c) The difference between needs and resources

d) Yearly savings needed

Note: When using your calculator, remember that payments need to be received at the beginning of the year and not at the end of the year.

Here is the Discussion Question

How important is a capital needs analysis for retirement planning? Can the Smith's achieve their goal?

Week 2 discussion

DQ1 Uncovering the Different Types of IRAs

Discuss the advantages and disadvantages of using a traditional IRA, including when it may be advantageous to use a nondeductible IRA.

DQ2 Penalties and Taxes for Early Withdrawls

Discuss the reasons for making premature withdrawals from qualified retirement plans along with reasons why these withdrawals are taxed and often penalized.

DQ3 Becoming Aware of Nondiscrimination Requirements

Discuss the application and implications of nondiscrimination requirements for qualified plans.

Week 3 discussion

DQ1 Looking into a Defined Pension Plan

Discuss the advantages and disadvantages of installing a defined benefit pension plan.

DQ2 Observing Insurance and Retirement Plans

Discuss the implications of using life insurance to fund a qualified plan relative to the incidental death benefit test

DQ3 ERISA Exemptions

Discuss the types of pension and welfare plans that are exempt from ERISA regulations.

Week 4 discussion

DQ1 Benefits of Age-Weighted Retirement Plans

Discuss situation in which an employer might want to implement an age-weighted plan

DQ2 Taking Advantage of 401(k) Plans

Discuss the similarities and differences between Section 401(k) plans and other qualified profit sharing plans.

DQ3 Limiting Contributions From Higher Wage Employees

Discuss ways in which contributions from higher-income employees may be limited.

Week 5 discussion

DQ1 About Those Keogh Plans

Discuss ways in which Keogh plans are different from other qualified plans. Include any implications of a plan covering non-employee self-employed individuals.

DQ2 About those SEP plans

Discuss SEP contributions from both the employee and employer perspectives.

DQ3 Is a Nonqualified Deferred Compensation Plan a Good Employee Benefit?

Discuss when it would be appropriate to implement a non-qualified deferred compensation plan, and what benefits would be achieved by doing so

Week 6 discussion

DQ1 Fair Market Value?

Define "fair market value". Explain how fair market value impacts estate taxes.

DQ2 Becoming Aware of Family Limited Partnerships (FLPs)

What is a Family Limited Partnership (FLP) and how is it valued?

DQ3 Looking into Defined Value Clauses

Please explain a "defined value clause" and state how this can reduce (or increase) taxes.

Week 7 discussion

DQ1 What is the IRD Rule?

What is the Income in Respect of a Decedent (IRD) rule?

DQ2 Picking out Roth Income and IRD Income

Is a Roth IRA considered income in Respect of a Decedent (IRD)? Please explain.

DQ3 Determining IRD Assets

List the various types of IRD assets

Week 8 discussion

DQ1 Establishing Post Mortem Estate Planning

What is "Post-death estate planning"?

DQ2 Disclaiming an Inheritance

Why would someone disclaim an inheritance?

DQ3 Spotting "Disclaiming" Issues

If a spouse disclaims an income interest, who gets the income?