Details and questions to answer:
Case Study Details:
Details and questions for the case study can be found below. You should not only answer the question, but explain/support your answers. You are welcome to use outside sources to help inform your recommendations (ex. an online model to determine asset allocation), but you need to be able to support your answers beyond that - i.e. why the asset allocation would make sense for the client. Your write-up should answer and explain the following questions: 1) What would be your recommendations for: - Type of account to be utilized for retirement savings (Employer Sponsored vs. IRA; Roth vs. Traditional) - Type and mix of investments - Monthly retirement contributions - Total amount to have saved at retirement 2) Calculation for the intended amount to have saved at retirement 3) Specifics as to the assumptions used to inform your recommendations, including: -Inflation - Rate of return - Life Expectancy - Retirement Age - Wage Replacement Ratio 4) The three most important/likely risks that you would identify which could derail the plan or assumptions, and if that risk occurs. what adjustments would you make to get the client back on track. 5) If there is any information that is not included but would have affected your recommendations, feel free to make assumptions, but note that a change may impact recommendations. Susan is 27 years old, is single with no children, and has just received a promotion to loan officer at the bank she works for. With the promotion, her base salary will be $49,000 per year, with the opportunity for additional incentive pay. The person in the previous role averaged an additional $750 per month in incentive pay. The bank she works for offers a 401(k) with a company match of 100% of up to 5% of employee contributions. Employee contributions/match are calculated based only on employee's base income li.e. not including incentive pay). Susan knows she needs to save for retirement, and has been thus far saving 3% per year as that was the automatic enrollment percentage. Company management is conservative, and worried about employees losing principal in their retirement accounts. Thus the default investment for those enrolled in the program is a money market account. Susan has not made changes to this allocation. She has a basic understanding of investing, and as such realizes that she should likely expand her asset classes. She took an online risk profile questionnaire which indicated she would be comfortable with a moderate risk profile. While she hasn't done any formal financial planning, Susan believes she would like to retire in her early 60 's. She took part in some global studies opportunities in college, and would like to travel more in retirement, but she hopes to have opportunities to travel throughout her career as well. In addition to travel, she hopes to move out of her apartment soon into a townhome. Susan currently has the following debts: - No credit card debt. - $10,000 in remaining student loans at a 5.5% fixed rate, and a payment of $210 per month - $6,500 remaining on a car loan with 24 months remaining, at a 3.25% fixed rate and a payment of $300 per month Susan currently has the following assets: $5,000 in savings - 2015 Toyota Camry $5,400 in Retirement Savings - $17,000 just received as an inheritance from an aunt who passed away Fund options within the company retirement plan include: - Vanguard S\&P 500 Index Fund - Short Term, Medium Term, and Long Term Bond Funds - Socially Responsible Stock Fund - Target Date Funds (option for each 5 years) REIT Fund Money Market Fund Small Cap Stock Fund Mid Cap Stock Fund International Stock Fund
