Jim: - Jim is a retired doctor. He was married for 25 years until his wife died about two years ago. He now lives alone. Financially, Jim is comfortable in retirement largely as a result of following a financial plan as a married couple for many years. - Jim is active, in good health and helps out as a volunteer in several community activities. - Jim is interested in scuba diving and likes to visit famous reefs and shipwrecks. Many of these sites are overseas. Ideally, he would like to undertake an overseas holiday each year. - Jim is conservative by nature even more so since retiring and losing his wife.

a. Discuss the key factors that Jim should take into consideration when developing a financial plan for the remainder of his retirement. Your response should make specific reference to the financial and personal circumstances of Jim as set out in the case study.

b.

Jim is considering changing the asset allocation within his investment portfolio. Currently, the portfolio is allocated to blue chip stocks selected from the ASX top 100 companies. Jim is seeking higher returns and is considering changing the portfolio allocation to comprise 65% in blue chip stocks and 35% in emerging opportunities stocks.

Typically, emerging opportunities are small to medium sized technology firms with potential for high growth in the short term. Many of these businesses fail, but those that succeed can generate very high returns to shareholders.

c.

Jim has been offered the opportunity to join a volunteer marine research group. Each year the group undertakes a six week long expedition to investigate marine life on remote coral reefs.

It is a three year research project and the group requires a commitment from each volunteer for the full three years. The project budget will pay for accommodation and meals etc during the expedition but the volunteer must pay for all personal travel requirements.

Jim estimates the travel requirements will cost about AUD30,000 per trip. This is expensive but the locations are remote and his diving gear is charged as excess baggage. On this basis, Jim will need approximately AUD90,000 to support his three year commitment to the project.

Jim is not sure how best to fund this requirement. Discuss and compare two possible ways that Jim could fund the AUD90,000 and make a recommendation (make sure you provide your reasons).

Client Name Tom Kit and Jo Jim 35 45 and 42 71 Age Status Married, home owners Widower (single), home owner Single, renter of Studio apartment Nil Strategy Consultant AUD195,000 pa from salary Nil Retired Doctor Two children (age 8 and 9) Accountant and Biochemist AUD175,000 pa (Kit) and AUD130,000 pa (Jo) from salary AUD85,000 pa total from retirement fund and investment portfolio Dependents Occupation Net Income (after super and after tax) Expenses (living and financial) Major assets AUD85,000 pa AUD55,000 pa AUD175,000 pa including the home loan Cash at bank AUD115,000 Superannuation AUD220,000 Cash at bank AUD45,000 Superannuation AUD250,000 Home AUD1.8 million Car AUD25,000 Cash at bank AUD30,000 Superannuation AUD1.8 million Home AUD1.5 million Investment portfolio AUD250,000 Car AUD50,000 Nil Home loan AUD1.2 million Major liabilities (interest only loan) Capital Gains Tax liability from recent sale of investment property AUD35,000 (due for payment within one month) Purchase an apartment within two years (price approx AUD1.3 million) with 15% cash and 85% Continue self funded retirement and Major financial goals Operate a conservative budget until the children complete high school in about 9 years time undertake one overseas holiday each year (approx cost AUD15,000 per holiday additional to normal expenses) bank loan Client Name Tom Kit and Jo Jim 35 45 and 42 71 Age Status Married, home owners Widower (single), home owner Single, renter of Studio apartment Nil Strategy Consultant AUD195,000 pa from salary Nil Retired Doctor Two children (age 8 and 9) Accountant and Biochemist AUD175,000 pa (Kit) and AUD130,000 pa (Jo) from salary AUD85,000 pa total from retirement fund and investment portfolio Dependents Occupation Net Income (after super and after tax) Expenses (living and financial) Major assets AUD85,000 pa AUD55,000 pa AUD175,000 pa including the home loan Cash at bank AUD115,000 Superannuation AUD220,000 Cash at bank AUD45,000 Superannuation AUD250,000 Home AUD1.8 million Car AUD25,000 Cash at bank AUD30,000 Superannuation AUD1.8 million Home AUD1.5 million Investment portfolio AUD250,000 Car AUD50,000 Nil Home loan AUD1.2 million Major liabilities (interest only loan) Capital Gains Tax liability from recent sale of investment property AUD35,000 (due for payment within one month) Purchase an apartment within two years (price approx AUD1.3 million) with 15% cash and 85% Continue self funded retirement and Major financial goals Operate a conservative budget until the children complete high school in about 9 years time undertake one overseas holiday each year (approx cost AUD15,000 per holiday additional to normal expenses) bank loan