NEED HELP ANSWERING:

Forming retirement objectives for the client, a detailed analysis of their situation from a retirement stand point, and recommendations to close the gap.

MIKE AND MARIA ROMAN Mike and Maria have come to you, a financial planner, for help in developing a plan to accomplish their financial goals. From your initial meeting together, you have gathered the following information. PERSONAL BACKGROUND AND INFORMATION COLLECTED THE FAMILY Mike and Maria Roman live in the country and operate a baseball academy on their property. They have a quaint home with a baseball field to the left of their house and two covered baseball batting and pitching cages. Mike played professional baseball for 15 years and now provides baseball instruction through RBI to children ages six to the early twenties. Mike currently coaches several college baseball players and is one of the most respected hitting and pitching coaches in the area. He also coaches a 9-year old team and a 14-year old team, both competing at the major division level. Maria has the tireless job of scheduling all of the lessons. Mike and Maria Roman Mike is 44 years old and loves his job. He is also an avid hunter and fisherman. Maria is also 44 years old and has done a wonderful job of raising their two kids, while helping with the family business. The Children Emily is 20 years old and is a Junior at Florida State University where she is double majoring in anthropology and communications. She has always been an excellent student and has a full academic scholarship. She also works part time to earn additional spending money. Her brother, Michael, is 17 years old and is a junior at Mission High School, where he plays shortstop on the baseball team and is hitting over 300 for the year. Roman's Baseball Institute (RBI) Mike started RBI seven years ago after he left professional baseball. He has built his reputation, as well as that of RBI over that time period. RBI is one of the premier baseball academies in the area. The primary source of income for RBI is fees from baseball lessons. Lessons are priced at $70 per hour. Mike has three other coaches who help him provide lessons (Mickey, Mr. Joe, and Joey). His dad, Mickey, who is now retired from the Post Office, taught him how to play baseball, coached him growing up, and works with him now that he is retired. Mr. Joe also coached Mike as a child and now coaches for Mike. Joey is 20 years old, played baseball for Mike growing up and played in college during his freshman year before getting injured. RBI generates $245,000 in gross annual revenue and has the following expenses: Coaching fees to his coaches $60,000 Utilities $2,500 Field Maintenance Equipment (balls, etc.) Other Expenses $7,000 $1,000 $3,000 BANK LENDING RATES 15-year mortgage rate is 5.0%. 30-year mortgage rate is 6.0%. Secured personal loan rate is 10.0%. EDUCATION INFORMATION Mike and Maria believe strongly in education. They want Michael to attend a college for learning, as well as baseball. As mentioned, they expect to fund $15,000 per year for five years in today's dollars for Michael's education. Tuition has been increasing at a 7 percent rate, which is expected to continue indefi- nitely. INTERNAL INFORMATION Term INSURANCE INFORMATION Life Insurance Policy A Policy B Insured Mike Maria Face Amount $150,000 $40,000 Type Term Cash Value $0 $0 Annual Premium $156 Who pays premium Mike Mike Beneficiary Maria Mike Policy Owner Mike Maria Settlement options clause selected None None Health Insurance Mike and Maria are covered under the Major League Baseball policy. The plan includes a family deductible of $12,600 at a cost of $500 per month. $50 Long-Term Disability Insurance Neither Mike nor Maria are covered by any disability insurance. Homeowners Insurance The Romans have a HO3 policy with endorsements for replacement value and open perils for personal property. The current dwelling coverage is 100% replacement value with an inflation rider. Automobile Insurance Both of their cars are covered. Type Bodily Injury Property Damage Medical Payments PAP $100,000/$300,000 $50,000 $5,000 per person Automobile Insurance Both of their cars are covered. Type PAP Bodily Injury $100,000/$300,000 Property Damage $50,000 Medical Payments $5,000 per person Physical Damage Actual Cash Value Uninsured Motorist Bodily Injury $100,000/$300,000 Uninsured Motorist Property Damage $50,000 Comprehensive Deductible $1,000 Collision Deductible $1,000 Premium (annual) $3,300 Personal Liability Insurance Neither Mike nor Maria have PLUP coverage. INCOME TAX INFORMATION The Romans filing status for their federal income tax return is married filing jointly. RETIREMENT INFORMATION Mike would like to retire at age 60 and quit working. Mike met the requirements for the MLB minimum pension of $34,000 per year, which is what he expects to receive. This pension begins at age 62 and the amount is fixed for life (both his and his spouse's life). It is not inflation adjusted from today or during retirement. Mike expects his Social Security benefits will equal $30,000 in today's dollars at full retirement age, which is age 67. Maria does not have 40 quarters of Social Security coverage. GIFTS, ESTATES, TRUSTS, AND WILL INFORMATION Neither Mike nor Maria have prepared a will or any other estate planning documents. MICKEY ROMAN MLM Dec ...u MICKEY ROMAN Mickey is Mike's dad and is an old school baseball coach. He turned 70 on December 22nd last year. He has a pension payment from the USPS of $2,000 per month and he and his wife receives a monthly payment from Social Security of $2.200. He also has an IRA with a balance of $85.000 as of December 31st 2014. Since his wife will 1. Assets are stated at fair market value. 2. Liabilities are stated at principal only as of January 1, 2017 (prior to January payments). 3. The home and land were financed with a $350,000 loan, seven years ago at 5 percent over 360 months. Jeep - Maria Ram Truck - Mike Furniture & Personal Property Total Personal Use Assets Total Assets SZOUUUU $18,000 $35.000 $80,000 $533,500 $683,000 Total Liabilities & Net Worth $683.000 1. Assets are stated at fair market value 2. Liabilities are stated at principal only as of January 1, 2017 (prior to January payments). 3. The home and land were financed with a $350,000 loan, seven years ago at 5 percent over 360 months. 4. They typically spend about $1,000 per month on cach credit card, but the balances are higher after the holidays. They do not maintain these balances 5. The Ram truck was financed with a loan of $30,000, six months ago at 3 percent over 48 months. 6. Mike's brokerage account is highly correlated to the market. In fact the account has a correlation with the market of about 99 percent . However, because Mike has some leveraged mutual funds in the account the beta of the portfolio is approximately 20 percent greater than the market. Mike's brokerage account is a margin account, which has an initial margin of 50 percent and a maintenance margin of 35 percent 7. The Jeep was financed with a loan of $13,000, 12 months ago at 3.5 percent over 48 months. 8. The municipal bond portfolio has a modified duration of 5 and a current YTM of 7 percent. CASE ASSUMPTIONS Required return - use the required return as stated in the case. For retirement and other long-term goals, assume cash and cash equivalents are added to investment accounts for purposes of projections and asset allocation decisions. Assume Social Security benefits begin at age 67. . MIKE AND MARIA ROMAN Mike and Maria have come to you, a financial planner, for help in developing a plan to accomplish their financial goals. From your initial meeting together, you have gathered the following information. PERSONAL BACKGROUND AND INFORMATION COLLECTED THE FAMILY Mike and Maria Roman live in the country and operate a baseball academy on their property. They have a quaint home with a baseball field to the left of their house and two covered baseball batting and pitching cages. Mike played professional baseball for 15 years and now provides baseball instruction through RBI to children ages six to the early twenties. Mike currently coaches several college baseball players and is one of the most respected hitting and pitching coaches in the area. He also coaches a 9-year old team and a 14-year old team, both competing at the major division level. Maria has the tireless job of scheduling all of the lessons. Mike and Maria Roman Mike is 44 years old and loves his job. He is also an avid hunter and fisherman. Maria is also 44 years old and has done a wonderful job of raising their two kids, while helping with the family business. The Children Emily is 20 years old and is a Junior at Florida State University where she is double majoring in anthropology and communications. She has always been an excellent student and has a full academic scholarship. She also works part time to earn additional spending money. Her brother, Michael, is 17 years old and is a junior at Mission High School, where he plays shortstop on the baseball team and is hitting over 300 for the year. Roman's Baseball Institute (RBI) Mike started RBI seven years ago after he left professional baseball. He has built his reputation, as well as that of RBI over that time period. RBI is one of the premier baseball academies in the area. The primary source of income for RBI is fees from baseball lessons. Lessons are priced at $70 per hour. Mike has three other coaches who help him provide lessons (Mickey, Mr. Joe, and Joey). His dad, Mickey, who is now retired from the Post Office, taught him how to play baseball, coached him growing up, and works with him now that he is retired. Mr. Joe also coached Mike as a child and now coaches for Mike. Joey is 20 years old, played baseball for Mike growing up and played in college during his freshman year before getting injured. RBI generates $245,000 in gross annual revenue and has the following expenses: Coaching fees to his coaches $60,000 Utilities $2,500 Field Maintenance Equipment (balls, etc.) Other Expenses $7,000 $1,000 $3,000 BANK LENDING RATES 15-year mortgage rate is 5.0%. 30-year mortgage rate is 6.0%. Secured personal loan rate is 10.0%. EDUCATION INFORMATION Mike and Maria believe strongly in education. They want Michael to attend a college for learning, as well as baseball. As mentioned, they expect to fund $15,000 per year for five years in today's dollars for Michael's education. Tuition has been increasing at a 7 percent rate, which is expected to continue indefi- nitely. INTERNAL INFORMATION Term INSURANCE INFORMATION Life Insurance Policy A Policy B Insured Mike Maria Face Amount $150,000 $40,000 Type Term Cash Value $0 $0 Annual Premium $156 Who pays premium Mike Mike Beneficiary Maria Mike Policy Owner Mike Maria Settlement options clause selected None None Health Insurance Mike and Maria are covered under the Major League Baseball policy. The plan includes a family deductible of $12,600 at a cost of $500 per month. $50 Long-Term Disability Insurance Neither Mike nor Maria are covered by any disability insurance. Homeowners Insurance The Romans have a HO3 policy with endorsements for replacement value and open perils for personal property. The current dwelling coverage is 100% replacement value with an inflation rider. Automobile Insurance Both of their cars are covered. Type Bodily Injury Property Damage Medical Payments PAP $100,000/$300,000 $50,000 $5,000 per person Automobile Insurance Both of their cars are covered. Type PAP Bodily Injury $100,000/$300,000 Property Damage $50,000 Medical Payments $5,000 per person Physical Damage Actual Cash Value Uninsured Motorist Bodily Injury $100,000/$300,000 Uninsured Motorist Property Damage $50,000 Comprehensive Deductible $1,000 Collision Deductible $1,000 Premium (annual) $3,300 Personal Liability Insurance Neither Mike nor Maria have PLUP coverage. INCOME TAX INFORMATION The Romans filing status for their federal income tax return is married filing jointly. RETIREMENT INFORMATION Mike would like to retire at age 60 and quit working. Mike met the requirements for the MLB minimum pension of $34,000 per year, which is what he expects to receive. This pension begins at age 62 and the amount is fixed for life (both his and his spouse's life). It is not inflation adjusted from today or during retirement. Mike expects his Social Security benefits will equal $30,000 in today's dollars at full retirement age, which is age 67. Maria does not have 40 quarters of Social Security coverage. GIFTS, ESTATES, TRUSTS, AND WILL INFORMATION Neither Mike nor Maria have prepared a will or any other estate planning documents. MICKEY ROMAN MLM Dec ...u MICKEY ROMAN Mickey is Mike's dad and is an old school baseball coach. He turned 70 on December 22nd last year. He has a pension payment from the USPS of $2,000 per month and he and his wife receives a monthly payment from Social Security of $2.200. He also has an IRA with a balance of $85.000 as of December 31st 2014. Since his wife will 1. Assets are stated at fair market value. 2. Liabilities are stated at principal only as of January 1, 2017 (prior to January payments). 3. The home and land were financed with a $350,000 loan, seven years ago at 5 percent over 360 months. Jeep - Maria Ram Truck - Mike Furniture & Personal Property Total Personal Use Assets Total Assets SZOUUUU $18,000 $35.000 $80,000 $533,500 $683,000 Total Liabilities & Net Worth $683.000 1. Assets are stated at fair market value 2. Liabilities are stated at principal only as of January 1, 2017 (prior to January payments). 3. The home and land were financed with a $350,000 loan, seven years ago at 5 percent over 360 months. 4. They typically spend about $1,000 per month on cach credit card, but the balances are higher after the holidays. They do not maintain these balances 5. The Ram truck was financed with a loan of $30,000, six months ago at 3 percent over 48 months. 6. Mike's brokerage account is highly correlated to the market. In fact the account has a correlation with the market of about 99 percent . However, because Mike has some leveraged mutual funds in the account the beta of the portfolio is approximately 20 percent greater than the market. Mike's brokerage account is a margin account, which has an initial margin of 50 percent and a maintenance margin of 35 percent 7. The Jeep was financed with a loan of $13,000, 12 months ago at 3.5 percent over 48 months. 8. The municipal bond portfolio has a modified duration of 5 and a current YTM of 7 percent. CASE ASSUMPTIONS Required return - use the required return as stated in the case. For retirement and other long-term goals, assume cash and cash equivalents are added to investment accounts for purposes of projections and asset allocation decisions. Assume Social Security benefits begin at age 67