Case Study 1 Tyler and Melinda Atkins have come to you with a simple question. How much do we need to retire? They have provided you with their personal financial statements, and the information below. They are both 55 years old. They would like to retire at age 67 if possible. They have twin daughters who are currently in college. Melindas latest Social Security statement indicated that she will get $1,280 per month (in todays dollars). Tylers latest Social Security statement indicated that he will get $1,035 per month (in todays dollars). Their loans have the following interest rates: credit card 15%, mortgage 6.5%, medical loan 3%, car loan 1 4%, car loan 2 6%. Tyler is a self-employed and may only use an IRA or Roth IRA for retirement savings. The limit on IRA contributions is currently $5,500 per year, per person. Melinda has a 401(k) that matches 75% up to 6% of her salary. Maximum IRA contributions for this year are Your task is to analyze the data they have provided and answer their simple question. You will need to consider a number of factors, including the following: Their post-retirement expenses and wage replacement ratio Contributions strategy (how much to save in which type of account) Calculate a sinking fund Taxation of withdrawals/contributions What age they can afford to retire Assumptions: including inflation rate, investment rates of return, length of retirement, age at retirement Personal Financial Statement of: Tyler and Melinda Atkins Assets Amount in Dollars Income Amount in Dollars Cash - checking accounts $ 1,400 Wages - Melinda $ 39,000 Cash - savings accounts $ 19,000 Wages - Tyler $ 27,000 Certificates of deposit $ - Total Income $ 66,000 Securities - stocks / bonds / mutual funds $ - Notes & contracts receivable $ - Life insurance (cash surrender value) $ - Personal property (autos, jewelry, etc.) $ 22,500 Melinda 401(k) $ 280,000 Tyler IRA $ 60,000 Expenses (Monthly) Amount in Dollars Real estate (market value) $ 250,000 Fuel $ 200 Other assets (specify) $ - Car Payments 1 $ 368 Total Assets $ 632,900 Car Payments 2 $ 328 Mortgage $ 1,400 Liabilities Amount in Dollars Property Tax $ 150 Credit Cards $ 23,500 Property Insurance $ 150 Medical Loan 18,300 Utilities and Maintenance $ 325 Taxes payable - 401(k) contributions - M $ 195 Real estate mortgages 60,000 IRA Contributions $ 135 Car Loan 1 12,000 Personal Care $ 100 Car Loan 2 16,000 Life Insurance $ 60 Total Liabilities $ 129,800 Credit Card Pmt $ 150 Medical Pmt $ 360 Net Worth $ 503,100 Auto Insurance $ 215 Medical Insurance $ 450 Food $ 225 Shopping $ 215 Entertainment $ 250 Total per Month $ 5,276 Total per Year $ 63,312