Broker portfolio: Chose a portfolio for Maria's spousal maintenance. Take into consideration her risk tolerance, short-term goals, and advisor fee. Compute the portfolio's future value at retirement. (Show calculations. Ignore taxes for this case)

Retirement portfolio: Define and discuss whether the 'balanced fund' is appropriate for Maria's retirement account by taking into consideration her risk tolerance and retirement goals.

Compute the retirement account's future value at retirement taking into consideration the return on your recommended fund, contributions, risk tolerance, and advisor fee. (Show calculations. Ignore taxes for this case)

Compute total retirement savings (both portfolios):

Compute an annuity payment in retirement. Use a portfolio return that reflects Maria's risk tolerance and state of retirement. (Show calculations. Ignore taxes for this case)

Prospect Name: Maria Isabel Limon Age: 45 years old Status: Divorced, 2 kids Retirement Objectives: - Retire at age 67 - Retire with annual income approximately $125,000 in today's dollars Employment - Radiologist technician - Current Income \$150,000 annually - In 10 years, she plans on switching careers and plans to be a part-time life coach Health - Excellent, and family history indicates longevity Family Circumstances - Two children, ages 10 and 7 - Recently divorced, which has been settled - Mother passed away - Father is 90 years old, and has enough to support himself at a retirement home - Has a sister (married) with an 8 year old daughter that has a disability requiring her sister to stay home full-time Values - Maria has read a lot about ESG lately and is interested in this type of investing, but not at the expense of return. She would like to eliminate alcohol and tobacco firms from her portfolio since she sees the damage every day in her patients and disagrees with tobacco company marketing tactics. Savings - Maria maintains 6 months of savings for emergencies or job loss. This equates to $30,000 and is currently in her savings account earning very little interest. She is wondering if there is another way to invest this and earn a return. - Maria has a defined contribution retirement plan (401k plan) at work. She started saving 15 years ago and currently has $300,000 saved in this plan. She chose a balanced fund even though she isn't totally certain what this means, She liked the idea of it sounding "balanced". She notices that it doesn't grow as much as some of her colleagues accounts in up markets, but also doesn't decline as much in down markets. - Maria is a cautious spender and has no problem saving. She will continue to save about $20,000 per year into her defined contribution plan until she switches careers (in 10 years). At that time she hopes she has enough savings to let it grow until she needs it for retirement. She does not plan on saving additional funds for retirement when she is a part-time life coach. - Her kids' college expenses are expected to be covered by their father who is a rocket engineer and social media CEO. He also covers their day-to-day expenses. - Maria received $1,000,000 spousal maintenance payout at divorce and is not expecting any further proceeds. Currently, it is sitting in a bank CD that is going to expire in a month. She is wondering how she should invest these proceeds, being mindful that she would like to use $50,000 towards a kitchen remodel in 3 years. The remainder after short-term goals will go towards retirement. - Maria worries about her niece that has a disability. She would like to set aside some funds for her niece's education since her sister is unable to work and save. If she sets aside $75,000 for her niece, she is wondering how much that will be worth in 10 years when her niece goes to college. She prefers investing this into something that will keep up with inflation, but will also be available to her sister if she needs the funds earlier to help with her niece's disability. You note that college tuition inflation is projected to be 4%. Financial objectives (according to priority) - Retirement objectives above - Maria has been wanting to update her kitchen for several years. She would like to use $50,000 in 3 years to update her kitchen - Niece's education Accounts - Work defined contribution plan (401k) - Checking and savings account - Taxable brokerage account to be opened to invest the spousal maintenance Investment Options 401k frvestment Options (see end of case) XYZ Model Portfolio Asset Allocation (see end of case) Maria has reviewed asset classes with the portfolio manager and is comfortable with the following asset classes through XYZ Firm's model portfolios and investment menu of stocks and bonds: - Money market securities - Corporate bonds - US stocks - International stocks Other Investment Opportunities Maria's cousin, Frederick, is a self-proclaimed entrepreneur. Frederick boasts several investments that have produced triple digit returns in less than 5 vears each. He is trying to convince Maria to use $250,000 of her divorce spousal maintenance towards a digital currency technology that will make it easier for consumers to acquire, store, and utilize digital coins. Maria recently read that the space is crowded and that large firms have a competitive advantage over small entrepreneurs like her cousin. Frederick responds to Maria's concerns with: "Those reports are nonsense. I may be a small entrepreneur but I have consistently produced triple digit returns on my investments. I have a 6m sense for solid investments. Trust me. My track record doesn't lie." Takes - See assumptions below Risk Tolerance - After educating Maria on returns and standard deviations and looking at historic market volatility with his existing investments, you present Maria with a risk tolerance questionnaire. She scores in the moderately aggressive category for long-term investments. Although she needs education on how to build wealth, she is comfortable with market volatility for long-term funds. Risk Capacity - TBD Additional case assumptions - For purposes of computing future retirement income, assume zero taxes in this case - Use 1% financial advisor fee subtracted from returns - Client's insurance, estate planning, health and disability insurance planning and tax planning have been handled separately - Assume kitchen remodel of $50,000 is inflation adjusted. No need to adjust for inflation. She needs exactly $50,000 in 3 years. - Assume 30 year retirement Economic Information - Inflation is expected to be well above the Federal Reserve 2% target, but declining from recent record highs of 8%. XYZ Firm is using a 2.25% long-term inflation metric. - The Federal Reserve has exercised tightening monetary policy the last year and is expected to reduce or pause interest rate hikes in the next year - The stock market has declined 25% from record highs and there are concerns of a recession as companies begin laying off employees - In the past year, both stocks and bonds declined as a result of tightening montetary policy - The US dollar is currently strong and has appreciated against other currencies, it is expected that the dollar will revert and will depreciate against other currencies in the coming year XYZ Model Portfolio Asset Allocation tone-term fisk and feturn Prolection Before taxes and fees; asset allocation for assessment purposes