1) Bob and Mary have asked you to review their current portfolio allocation. a. Create a pie chart showing Bob and Mary's portfolio allocation. b. What is the most amount of money that Bob and Mary can individually contribute to their current retirement account (Bob has a SEP IRA; therefore, you will have to read ahead to answer this question). c. Based on their risk tolerance, do Bob and Mary have a sufficiently diversified portfolio? Risk Tolerance Bob - Aggressive Mary -- Moderate Estate Tax and Income Tax Information Bob and Mary have a basic will, which was written after their first child was born. They have done no other estate planning. They would like their assets to be split equally between their children after the death of the surviving spouse. Both Bob and Mary Currently lives at Charlotte, NC. Education Planning Bob and Mary want their children to go to their alma mater, Clemson University. In-state tuition is Currently $ per year. They want to fund 80% of the cost of a 4-year education, ensuring that the cost is fully funded when the child starts school. James has $20,000 in a CD. He is the only child with any money currently saved for college. It is set up as a UTMA account. All children are currently enrolled in public school Bob and Mary Jones Statement of Financial Position as of December 31, 2019 Liabilities Credit Card Debt $45,000 Assets Cash/Cash Equivalents Checking UTWROS S ROO Savings (TWROS) $7,000 Money Markets TWROS) $1,800 Total $9,600 Total Current Liabilities $45,000 Invested Assets Brokerage CD ? $20,000 Long-term Liabilities Mortgage (Residence) Vehicle Loan 1 Vehicle Loan 2 Bob's Student Loan Total Long-term Liabilities Total Liabilities $175,446 $12.877 $18,857 $250.000 $457,180 $502,180 Retirement Plan Assets SEP 401K ? ? $ Use Assets Residence (UTWROS) Vehicle (JTWROS) Vehicle #2 (JTWROS) Total TOTAL ASSETS $260,000 NET WORTH $18,300 TOTAL LIABILITIES AND $21,800 NET WORTH $480,100 H Husband W = Wife TWROS - Joint Tenants with Right of Survivorship Bob and Mary Jones Monthly and Yearly Budget Mortgage payment or rent Real estate taxes Automobile loan Automobile loan 2 Charge accounts Totalcabilities Monthly Yearly $1,400 $16,800 $185 1 $2,220 $384 $4,608 $5,352 $408 154.900 $2.823 $33.880 $942 $11,304 Transportation Insurance: Life Insurance Disability income Auto insurance Homeowners Insurance Total Insurance $284 $3,408 $500 $6,000 $117 $1,404 $175 $2,100 $2.018 | $24.216 Charitable contributions Household Expenses Medical Children Clothing/Grooming Recreation Gifts Personal/Business Total $900 $5,621 $683 $2.558 $575 $1,558 $783 $500 $13,178 $10,800 $67,456 $8,196 $30,700 $6.900 $18,700 $9,400 $6,000 $158.152 Additional Information: . Bob and Mary bought their house six years ago. The original loan was $200,000 and their interest rate is 7.5%. Occasionally, the will pay a lump sum amount towards their principal. Vehicle 1: Loan information: $19,750,5-year note at 6.25%, taken out two years ago. Vehicle 2: Loan information: $22,400, 5-year note at 7.25%, taken out last year. The average credit card interest rate is 17.5%. Bob and Mary Jones Retirement Case Family Information Bob (DOB 02/15/1973) is a primary care physician with an annual income of $200,000. Mary (DOB 09/16/1979) earns an annual income of $15,000. They have three children, James (age 14), Adam (age 12), and Colin lage 9). Before having children, Mary was employed by Boeing for 14 years. Mary was making $42,000 a year when she quither job at Boeing. After taxes and other deductions leg. the 401( her contribution to the family income was $20,000. Even with that, the Jones' budget was running an average of $1,500 a month in the hole. Mary would like to get totally out of the Boeing retirement plan, as she does not anticipate returning to work there. Mary is thinking of taking a lump- um distribution of her 401k account and rolling over all of the assets except for the Boeing stock into a self-directed IRA. Bob owns works at a contracted Physician and receives several 1099 each year. Soals and Objectives In order of priority, the specific goals and objectives of Bob and Mary are as follows: 1. Save for retirement. Retire when Bob turns 60, with funding for a projected 30-year life expectancy 2. Provide for the family if something happens to lob. Their target amount is 90% of his take- home income this year. 3. Reduce their debt Provide education funding for all three children. 5. Travel to Europe each year in retirement for as long as they can. Insurance Information Life Insurance Insured Owner Beneficiary Type Amount Annual Cash Value Premium Bob Bob Mary 20-year term -5 yrs. old $350,000 None $400 Bob Mary Variable life - 4 yrs old $250,000 $11,080 $3,145 Disability Insurance Insured Type Benefit Premium Premium Notes Pa or Bob LTD Bob $6,000 60% of income to age 65; maximum $5,000/mo. benefit Includes residual disability benefit, partial disability benefit, and return- to work benefit; 90-day wait. Plan uses split definition of disability **Bob's bought this policy while he was working a Resident Physician. want to information Retirement Plans BOP has a SEP FRA. Mary is 100N vested in the Boeing 401(k) plan. Bob's retir and Mary's is at Fidelity Bob is currently contributing $12,000 to his SEPRA. He is open to change and seeks your expertise Mary no longer saves for retirement, because she believes she does not have sufficient cash flow and that she is not eligible for retirement savings. Bob and Mary has a joint Brokerage account. Beneficiary Fair Market Allocation Owner value $94,800 VEVEX Bob- SEP Mary $47,400 Mary VNJTX Bob - SEP Bob -SEP VFSVX Mary $94.800 $39,000 James and Adam VSGAX Bob RA Mary - 401(k) Boeing Stock $32,400 Bob FEXPX $20,250 Mary - 401(k) Bob Mary - 401(k) Bob $20,250 FSTGX Mary - 401(k) FMSFX $8,100 Bob "Cost basis in the Boeing stock is $15,000 Investment Statistics Personal Investments Name W of Shares Price per share Current Value Cost Basis Bank of America 500 $4,875 Citi Bank 300 $4,912 Amazon $41,000 AEPGX $9,000 1) Bob and Mary have asked you to review their current portfolio allocation. a. Create a pie chart showing Bob and Mary's portfolio allocation. b. What is the most amount of money that Bob and Mary can individually contribute to their current retirement account (Bob has a SEP IRA; therefore, you will have to read ahead to answer this question). c. Based on their risk tolerance, do Bob and Mary have a sufficiently diversified portfolio? Risk Tolerance Bob - Aggressive Mary -- Moderate Estate Tax and Income Tax Information Bob and Mary have a basic will, which was written after their first child was born. They have done no other estate planning. They would like their assets to be split equally between their children after the death of the surviving spouse. Both Bob and Mary Currently lives at Charlotte, NC. Education Planning Bob and Mary want their children to go to their alma mater, Clemson University. In-state tuition is Currently $ per year. They want to fund 80% of the cost of a 4-year education, ensuring that the cost is fully funded when the child starts school. James has $20,000 in a CD. He is the only child with any money currently saved for college. It is set up as a UTMA account. All children are currently enrolled in public school Bob and Mary Jones Statement of Financial Position as of December 31, 2019 Liabilities Credit Card Debt $45,000 Assets Cash/Cash Equivalents Checking UTWROS S ROO Savings (TWROS) $7,000 Money Markets TWROS) $1,800 Total $9,600 Total Current Liabilities $45,000 Invested Assets Brokerage CD ? $20,000 Long-term Liabilities Mortgage (Residence) Vehicle Loan 1 Vehicle Loan 2 Bob's Student Loan Total Long-term Liabilities Total Liabilities $175,446 $12.877 $18,857 $250.000 $457,180 $502,180 Retirement Plan Assets SEP 401K ? ? $ Use Assets Residence (UTWROS) Vehicle (JTWROS) Vehicle #2 (JTWROS) Total TOTAL ASSETS $260,000 NET WORTH $18,300 TOTAL LIABILITIES AND $21,800 NET WORTH $480,100 H Husband W = Wife TWROS - Joint Tenants with Right of Survivorship Bob and Mary Jones Monthly and Yearly Budget Mortgage payment or rent Real estate taxes Automobile loan Automobile loan 2 Charge accounts Totalcabilities Monthly Yearly $1,400 $16,800 $185 1 $2,220 $384 $4,608 $5,352 $408 154.900 $2.823 $33.880 $942 $11,304 Transportation Insurance: Life Insurance Disability income Auto insurance Homeowners Insurance Total Insurance $284 $3,408 $500 $6,000 $117 $1,404 $175 $2,100 $2.018 | $24.216 Charitable contributions Household Expenses Medical Children Clothing/Grooming Recreation Gifts Personal/Business Total $900 $5,621 $683 $2.558 $575 $1,558 $783 $500 $13,178 $10,800 $67,456 $8,196 $30,700 $6.900 $18,700 $9,400 $6,000 $158.152 Additional Information: . Bob and Mary bought their house six years ago. The original loan was $200,000 and their interest rate is 7.5%. Occasionally, the will pay a lump sum amount towards their principal. Vehicle 1: Loan information: $19,750,5-year note at 6.25%, taken out two years ago. Vehicle 2: Loan information: $22,400, 5-year note at 7.25%, taken out last year. The average credit card interest rate is 17.5%. Bob and Mary Jones Retirement Case Family Information Bob (DOB 02/15/1973) is a primary care physician with an annual income of $200,000. Mary (DOB 09/16/1979) earns an annual income of $15,000. They have three children, James (age 14), Adam (age 12), and Colin lage 9). Before having children, Mary was employed by Boeing for 14 years. Mary was making $42,000 a year when she quither job at Boeing. After taxes and other deductions leg. the 401( her contribution to the family income was $20,000. Even with that, the Jones' budget was running an average of $1,500 a month in the hole. Mary would like to get totally out of the Boeing retirement plan, as she does not anticipate returning to work there. Mary is thinking of taking a lump- um distribution of her 401k account and rolling over all of the assets except for the Boeing stock into a self-directed IRA. Bob owns works at a contracted Physician and receives several 1099 each year. Soals and Objectives In order of priority, the specific goals and objectives of Bob and Mary are as follows: 1. Save for retirement. Retire when Bob turns 60, with funding for a projected 30-year life expectancy 2. Provide for the family if something happens to lob. Their target amount is 90% of his take- home income this year. 3. Reduce their debt Provide education funding for all three children. 5. Travel to Europe each year in retirement for as long as they can. Insurance Information Life Insurance Insured Owner Beneficiary Type Amount Annual Cash Value Premium Bob Bob Mary 20-year term -5 yrs. old $350,000 None $400 Bob Mary Variable life - 4 yrs old $250,000 $11,080 $3,145 Disability Insurance Insured Type Benefit Premium Premium Notes Pa or Bob LTD Bob $6,000 60% of income to age 65; maximum $5,000/mo. benefit Includes residual disability benefit, partial disability benefit, and return- to work benefit; 90-day wait. Plan uses split definition of disability **Bob's bought this policy while he was working a Resident Physician. want to information Retirement Plans BOP has a SEP FRA. Mary is 100N vested in the Boeing 401(k) plan. Bob's retir and Mary's is at Fidelity Bob is currently contributing $12,000 to his SEPRA. He is open to change and seeks your expertise Mary no longer saves for retirement, because she believes she does not have sufficient cash flow and that she is not eligible for retirement savings. Bob and Mary has a joint Brokerage account. Beneficiary Fair Market Allocation Owner value $94,800 VEVEX Bob- SEP Mary $47,400 Mary VNJTX Bob - SEP Bob -SEP VFSVX Mary $94.800 $39,000 James and Adam VSGAX Bob RA Mary - 401(k) Boeing Stock $32,400 Bob FEXPX $20,250 Mary - 401(k) Bob Mary - 401(k) Bob $20,250 FSTGX Mary - 401(k) FMSFX $8,100 Bob "Cost basis in the Boeing stock is $15,000 Investment Statistics Personal Investments Name W of Shares Price per share Current Value Cost Basis Bank of America 500 $4,875 Citi Bank 300 $4,912 Amazon $41,000 AEPGX $9,000