Today is January $1,2017.$ Peter and Patricia Morgan 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

Peter Morgan $($Age $62)$

Peter has been employed $25$ years as a vice president for an oil field services com$-$

pany. He participates in a defined benefit plan. Peter$$s first wife is deceased.

Patricia Morgan $($Age $29)$

Patricia owns two companies: Publications, Inc., and Patricia Advertising, Inc

eter$$s life expectancy is $25\mathrm{.}75$ years. Patricia$$s life expectancy is

$57\mathrm{.}75$ years, which is also their joint life expectancy.

Investment Information

$$ They believe a $$60,000$ emergency fund is adequate.

$$ They consider themselves moderate risk takers.

$$ Peter$$s individual retirement account $($IRA$)$ investment portfolio is $$600,000$ of

which $$300,000$ is invested in low$-$to$-$medium$-$risk equity mutual funds. Patricia

is the beneficiary of the IRA and Peter$$s children are named as contingent ben$-$

eficiaries.

$$ The other $$300,000$ of the IRA is invested in staggered maturity, short$-$term

Treasury notes.

$$ Peter expects to use the income and some of the principal from the $$300,000$ in

Treasury notes in his IRA to make up any shortfall between his retirement needs

and his defined benefit plan annuity, for the period of time until Social Security

benefits are received.

$$ Peter is currently earning an annual rate of return of $4\mathrm{.}5\%$ on the $$300,000$

invested in Treasury notes.

Income Tax Information

Peter and Patricia file a joint federal tax return but pay no state income tax. They

are in the $28\%$ marginal federal income bracket.

Retirement Information

Peter $($DOB December $31,1954)$

$$ Has an employer$-$provided defined benefit plan that will pay him a joint and sur$-$

vivor annuity equal to $80\%$ of a single life annuity at any retirement age of $60$ or

older. No reduction or increase for retirement after age $60.$

CasesApps$\_$Txtbk$\_10$E$.$indb $235/18/201712$:$31$:$33$ PM

$24$ Personal Financial Planning: Cases & Applications Textbook $10$th Edition $2017-2018$

$$ The defined benefit formula is $1\mathrm{.}25\%$ times the number of years of service times

the final salary with no offset for Social Security. $($Peter$$s salary for $2016$ was

$$200,000.)$

$$ Peter$$s projected Social Security benefit beginning at age $66$ is $$25,500$ per year or

approximately $75\%($rounded$)$ of that amount at age $62.$ Social Security benefits

are expected to increase proportionally with the general inflation rate.

$$ Peter is expected to retire immediately, January $1,2017.$ He has three options to

elect regarding his defined benefit plan assets.

$$

Take a lump sum distribution of $$1\mathrm{.}2$ million.

$$

Take a single life annuity with monthly payments taken as an annuity due

beginning January $1,2017.$

$$

Take a joint and survivor annuity with monthly payments taken as an annu$-$

ity due beginning January $1,2017.$

With what risks should Patricia be concerned regarding her investment portfolio?

Provide calculation And Can not use excel