Case Approach To Financial Planning Quantitative/Analytical Mini-Case Problem

Case Approach To Financial Planning Quantitative/Analytical Mini-Case Problem

Your clients, Jamal and Chyna Gwynn, would like you to determine if they are on track to meet their retirement goal. Use the following assumptions to answer the Gwynns’ retirement planning questions:

•Jamal: Age forty eight

•Chyna: Age fifty

•Desired Retirement Age: When Jamal turns Age sixty two

•Age to Begin Receiving Social Security Benefits: Age sixty two

•Full Retirement Age: Age sixty seven

•Earned Income: Jamal $145,000

•Earned Income: Chyna $210,000

•Bonus: Jamal $25,000

•Retirement Income Replacement Ratio: 90 Percent

•Investment Rate of Return Before Retirement: 7.90 Percent

•Investment Rate of Return After Retirement: 5.50 Percent

•Inflation Rate Assumption (Presently and Going Forward): 3.00 Percent

•Growth Rate of Retirement Savings and Social Security Benefits: 3.00 Percent

•Marginal Federal and State Marginal Tax Rate Before Retirement: 29 Percent

•Marginal Federal and State Marginal Tax Rate After Retirement: 29 Percent

•Annual Social Security Benefit at Full Retirement: Jamal $42,000

•Annual Social Security Benefit at Full Retirement: Chyna $39,000

•Other Income in Retirement: $80,000

•Combined Retirement Assets Held in Tax-Deferred Assets: $1,500,000

•Combined Retirement Savings Using Tax-Deferred Accounts: $42,000

•Other Retirement Assets: $0

a.What is the retirement asset value needed on the first day of retirement, plus any additional annual savings needed per year, to fully meet a capital depletion retirement goal.

b.What is the value of assets needed to fund the capital preservation model of retirement? Can the Gwynns’ currently meet this need?

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