Tom Wright is an HR manager at a mid-sized manufacturing company and was shocked one morning to learn he was being laid-off; the company is going to a service center delivery for HR and his position is being eliminated. His employment / severance will be maintained for six months. Tom has been very diligent in saving for his retirement and, prior to this pending termination, felt he was in good shape to retire at any time of his choosing. Tom designed his own retirement plan analysis over the past ten years, and his plan shows he and his wife Janet are in good financial shape. Instead of relying totally on his own plan, Tom and Janet decided they should consult you, a professional retirement planner, to review his plan and counsel them on how they should live their golden years. They are looking to you to answer several important questions:

• • Is Tom's retirement plan accurate, or do you need to modify it? If the plan requires modification, will the modified plan affect the Wright's retirement goals? 

 • Tom is not ready to retire and would like to do volunteer work at a local charitable organization. Tom also is a die-hard Chicago Cubs fan, and was recently given the news that the Cubs organization is willing to let him work as a volunteer for them. This is a dream come true for Tom. 

 • He also has been offered a position with a small company working 24 hours/week as an HR specialist. This part-time position will pay $40,000 annually and offers medical benefits and participation in a 401(k) plan after one year of service. Does Tom have to accept this part-time position, or can he pursue his dream with the Cubs and also do volunteer work for the local charitable organization? 

 • Can Tom and Janet retire with the same lifestyle they are now enjoying, or will they have to make adjustments? If adjustments are necessary, what do you recommend?

Additional Information

Janet is age 60 and Tom became age 64 this past July. Janet has been out of the workforce for nearly 30 years as she was diagnosed with multiple sclerosis at age 30. Janet stopped working at age 35 due to her disability and has been receiving Social Security disability benefits since age 35. Tom and Janet have been married 37 and have no children, but they do have a demanding cat named Clyde. Tom worked as a human resources manager for a mid- sized engineering firm and was with the company for ten years. With ten years of service, he can now retire with retiree medical benefits receiving a 50% contribution subsidy. Medical coverage through the company ends for Tom when he is 65 and will end for Janet when she is age 65. Tom has a small defined benefit plan with this employer that is estimated to produce lifetime income of $224.00 per month for him and Janet. Other than Janet's Social Security disability benefits, there are no other major sources of income for Tom and Janet after August.

 

Key questions that Tom and Janet want you to answer are: 

Tom's preference is to pursue hobbies, volunteer with the Cubs and work at a local charitable organization, but he is also a realist. Is Tom able to retire now without making changes to his current budget? If not, how long should he work at the proposed part-time job (which pays $40,000 annually) to meet this retirement goal? 

What changes would you ask Tom and Janet make to improve their current retirement plan? 

Are you comfortable with the assumptions Tom has made in constructing his retirement plan? If not, what assumption changes would you make to more accurately represent Tom and Janet's retirement liabilities?