Mark and Callie Collins

Retirement and Investment Planning Case

PERSONAL INFORMATON AND BACKGROUND

Mark and Callie Collins have come to you for help regarding their current financial situation as well as guidance understanding what they need to do for their longer term goal of retirement. Mark (age 37) is currently a freelance art director having been recently laid off from the advertising and marketing firm he and Callie moved to California from North Carolina to work for. Callie (age 36), who works in the same industry, is a copywriter. She is the owner and sole employee of "Callie's Calling Cards Inc." (S Corp). They have two children of their own and a large extended family with many nieces and nephews that they are very close to.

PRIMARY GOALS AND OBJECTIVES

Mark initiated the contact with you around the primary question of whether he should continue with his work in a freelance capacity or consider aggressively seeking new employment with another advertising firm. Mark thinks he can generate an income of $175,000/yr own his own or for a firm, but recognizes that the health and retirement benefits he would likely receive from a company have value that he would have to replace himself. They would specifically like to know the financial pros and cons of each option along with an understanding of where they stand regarding their goal of retiring at 60. He and Callie have discussed working together as partners in "Callie's Calling Cards", but would like to know more about the financial implications of that decision.

Callie's business (CCC) is successful and thriving, however, despite working with an accountant since establishing her S Corp, she feels she may be under-utilizing the structure of her business for her and Mark's benefit. She currently pays herself a modest salary of $ 50,000/yr and $ 10,000 annual distribution out of the average revenues of the business of $100,000/year. Because of this, the business has accumulated a much larger sum of cash than is needed for the business, which is not capital intensive. The only real business expenses beyond her wages are travel and entertainment, and periodic laptop and printer replacement that averaged together, generally don't exceed 15% of revenues.

Mark and Callie own a home in North Carolina which they renovated several years ago and currently rent out for just slightly more than their mortgage payment. They rent an apartment in the Bay Area of California which they love but would like to have some guidance on whether they should sell the home in North Carolina and consider buying in California.

OTHER GOALS

Mark and Callie have two children, Kole (age 7) and Kelly (age 4). They would like to fund half of the cost of their kid's college education expenses as they believe it is important for their children to be "invested" in their own education. They would like to know how much they should save to provide for public college expenses and the best way to achieve that goal.

Unfortunately, Mark lost his father a year ago and his mother (age 63), currently living alone in Texas, is beginning to show signs of a diminishing capacity to care for herself. Though he doesn't expect that his mother will need assistance in the next 5 years, he'd like to develop a strategy for his sister and him to take care of her when she does need help.