Tax 1 Scenario: Tax calculation for 2019 Tax 2 Scenario: Tax calculation for 2019 with 25% SEP Tax3 Scenario: Tax calculation for 2019 with Safe Harbor 401(k) Plan 1. Mike and his family currently have a high deductible plan with a $12,500 deductible and a monthly premium of $500 per month. What recommendations would you make for lowering the deductible and improving coverage? Assume there was a premium increase of $500 per month bringing the total premium to $1000 per month. The plan is a standard PPO 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 yeags 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, Michacl, 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 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). Mike's dad, Mickey, who is now retired from the Post Office, taught Mike how to play baseball, coached Mike growing up, and works with Mike 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. RB1 generates $245,000 in gross annual revenue and has the following expenses: Mike works 1,500 hours and the other coaches total 2,000 hours. His three coaches work the following number of hours and are paid $30 per hour: Mike's coaches have worked with him for at least five years. Mike's net income equals the fees less the expenses listed above. He reports his revenue and expenses on Schedale C of his personal income tax return. Personal and Financial Objectives for Mike and Maria Roman 1. Provide for retirement. They would like to retire when Mike is age 60. They want plan on $100,000 of retirement income in today's dollars. They expect to receive Social Security and Mike has a pension with Major League Baseball (MLB). They would like to plan on funding Retirement Mike's coaches have worked with him for at least five years. Mike's net income equals the fees less the Planning \& expenses listed above. He reports his revenue and expenses on Schedule C of his personal income tax Employee Benefits return. James F Dalton, Mich. Personal and Financial Objectives for Mike and Maria Roman 1. Provide for retirement. They would like to retire when Mike is age 60. They want to plan on $100,000 of retirement income in today's dollars. They expect to receive Social Security and Mike has a pension with Major League Baseball (MLB). They would like to plan on funding potential retirement expenditures until they turn age 95 and would like to maintain the same level of spending even if Mike or Maria died early. 2. Provide for the cost of Michael's college education. They expect Michael to receive a partial baseball scholarship, but they plan on paying $15,000 per year for each of his five years for college. 3. Establish a retirement plan for the income Mike earns at RBL. EXTERNAL INFORMATION Economic Information - Inflation is expected to be 3.0% annually. - There is no state income tax. - The yield curve is slightly upward sloping but relatively flat. - The historic and expected correlation between the equity markets in the modernized countries is relatively high. The correlation between these markets increase especially during economic crisis. - They have a required rate of return of 9 percent. - The economy is in a steady slow growth expansion phase with moderate unemployment. 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. Long-Term Disability Insurance - Neither Mike nor Maria are covered by any disability insurance. Homeowners Insurance - The Romans have an H03 policy with endorsements for replacement value and open perils for personal property. The current dwelling coverage is 100% replacement value with an inflation rider. - 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 indefinitely. INTERNAL INFORMATION Insurance Information Life Insurance Health Insurance Mike and Maria are covered under the Major League Baseball policy. The plan includes I family deductible of $12,600 at a cost of $500 per month. Benefits amount is fixed for life (both his and his spouse's life). It is not intlation adjustea rrom wasy or uurung retirement. Mike expects his Social Security benefits will equal $30,000 in today's dollars at full Dalton, Michis 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 Mickey is Mike's dad and is an "old school" baseball coach. He turned 72 on December 22, 2021. He has a pension payment from the USPS of $2,000 per month and he and his wife receive a monthly payment from Social Security of $2,200. He also has an IRA with the following balances: - $80,000 as of December 31,2020 - $85,000 as of December 31,2021 - $90,000 as of December 31,2022 - $99,000 as of December 31,2023 Benefits Mickey also has Exxon stock that was distributed from a qualified plan 30 years ago. The distribution was a lump-sum distribution in which the FMV of the stock from the plan was $100,000. Mickey deposited the stock in his brokerage account and included $20,000 in his taxable income in the year of the distribution, based on the Form 1099-R. Mickey still owns the stock, which is now worth $324,340 and is held in the same brokerage account. He is hoping to leave it to Mike when he dies. Automobile Insurance - Both of thair rars are covered. Retirement Planning \& Employee Benefits James F. Daiton. Mich Personal Liability Insurance - Neither Mike nor Maria have PLUP coverage. Set 14: Qualified Plans, 858 Income Tax Information ited IRAs and Other The Romans fliing status for their federal income tax retum is married fling jointly. Retirement Information Set 15: Taxation of 864 Mike would like to retire at age 60 and quit working. Mike met the requirements for the MLB minimum al Security Benefits 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 fron 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 or Social Security coverage. Gifts, Estates, Trusts, and Will Information 875 Neither Mike nor Maria have prepared a will or any other estate planning documents. Tax 1 Scenario: Tax calculation for 2019 Tax 2 Scenario: Tax calculation for 2019 with 25% SEP Tax3 Scenario: Tax calculation for 2019 with Safe Harbor 401(k) Plan 1. Mike and his family currently have a high deductible plan with a $12,500 deductible and a monthly premium of $500 per month. What recommendations would you make for lowering the deductible and improving coverage? Assume there was a premium increase of $500 per month bringing the total premium to $1000 per month. The plan is a standard PPO 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 yeags 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, Michacl, 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 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). Mike's dad, Mickey, who is now retired from the Post Office, taught Mike how to play baseball, coached Mike growing up, and works with Mike 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. RB1 generates $245,000 in gross annual revenue and has the following expenses: Mike works 1,500 hours and the other coaches total 2,000 hours. His three coaches work the following number of hours and are paid $30 per hour: Mike's coaches have worked with him for at least five years. Mike's net income equals the fees less the expenses listed above. He reports his revenue and expenses on Schedale C of his personal income tax return. Personal and Financial Objectives for Mike and Maria Roman 1. Provide for retirement. They would like to retire when Mike is age 60. They want plan on $100,000 of retirement income in today's dollars. They expect to receive Social Security and Mike has a pension with Major League Baseball (MLB). They would like to plan on funding Retirement Mike's coaches have worked with him for at least five years. Mike's net income equals the fees less the Planning \& expenses listed above. He reports his revenue and expenses on Schedule C of his personal income tax Employee Benefits return. James F Dalton, Mich. Personal and Financial Objectives for Mike and Maria Roman 1. Provide for retirement. They would like to retire when Mike is age 60. They want to plan on $100,000 of retirement income in today's dollars. They expect to receive Social Security and Mike has a pension with Major League Baseball (MLB). They would like to plan on funding potential retirement expenditures until they turn age 95 and would like to maintain the same level of spending even if Mike or Maria died early. 2. Provide for the cost of Michael's college education. They expect Michael to receive a partial baseball scholarship, but they plan on paying $15,000 per year for each of his five years for college. 3. Establish a retirement plan for the income Mike earns at RBL. EXTERNAL INFORMATION Economic Information - Inflation is expected to be 3.0% annually. - There is no state income tax. - The yield curve is slightly upward sloping but relatively flat. - The historic and expected correlation between the equity markets in the modernized countries is relatively high. The correlation between these markets increase especially during economic crisis. - They have a required rate of return of 9 percent. - The economy is in a steady slow growth expansion phase with moderate unemployment. 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. Long-Term Disability Insurance - Neither Mike nor Maria are covered by any disability insurance. Homeowners Insurance - The Romans have an H03 policy with endorsements for replacement value and open perils for personal property. The current dwelling coverage is 100% replacement value with an inflation rider. - 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 indefinitely. INTERNAL INFORMATION Insurance Information Life Insurance Health Insurance Mike and Maria are covered under the Major League Baseball policy. The plan includes I family deductible of $12,600 at a cost of $500 per month. Benefits amount is fixed for life (both his and his spouse's life). It is not intlation adjustea rrom wasy or uurung retirement. Mike expects his Social Security benefits will equal $30,000 in today's dollars at full Dalton, Michis 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 Mickey is Mike's dad and is an "old school" baseball coach. He turned 72 on December 22, 2021. He has a pension payment from the USPS of $2,000 per month and he and his wife receive a monthly payment from Social Security of $2,200. He also has an IRA with the following balances: - $80,000 as of December 31,2020 - $85,000 as of December 31,2021 - $90,000 as of December 31,2022 - $99,000 as of December 31,2023 Benefits Mickey also has Exxon stock that was distributed from a qualified plan 30 years ago. The distribution was a lump-sum distribution in which the FMV of the stock from the plan was $100,000. Mickey deposited the stock in his brokerage account and included $20,000 in his taxable income in the year of the distribution, based on the Form 1099-R. Mickey still owns the stock, which is now worth $324,340 and is held in the same brokerage account. He is hoping to leave it to Mike when he dies. Automobile Insurance - Both of thair rars are covered. Retirement Planning \& Employee Benefits James F. Daiton. Mich Personal Liability Insurance - Neither Mike nor Maria have PLUP coverage. Set 14: Qualified Plans, 858 Income Tax Information ited IRAs and Other The Romans fliing status for their federal income tax retum is married fling jointly. Retirement Information Set 15: Taxation of 864 Mike would like to retire at age 60 and quit working. Mike met the requirements for the MLB minimum al Security Benefits 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 fron 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 or Social Security coverage. Gifts, Estates, Trusts, and Will Information 875 Neither Mike nor Maria have prepared a will or any other estate planning documents