Week 2 follow on to the previous scenario.

1. Rosemary and Everett have provided you with additional information.They earn 6% on their portfolio and they anticipate 2.5% inflation.They sat down and looked at their expenses and they realized that they really cannot save $100,000 a year.More realistically they can save $50,000 a year with each employer adding an additional $10,000 to the savings. Calculate their retirement needs and deficit, if one exists, using the revised numbers.Come up with 3 ways they can retiremaybe delaying retirement, lowering their WRR, earning a higher rate of return on invested assets (although you need to be able to tell them how to accomplish that), maybe a combination of several of these.Rosemary and Everett do NOT want you to include Social Security in this mix.Show them the 3 potential solutions and then explain which of the three you would recommend and why.
2. Eleven years have passed since your first meeting with Rosemary and Everett.They retired at age 60 even though you may have advised differently.They have come to meet with you because they have decided to divorce.They are selling their house and the equity in the home will be enough for them each to buy a condominium without a mortgage.All other assets will be split 50/50.They have $3.5 million in retirement and other assets ($3 million in their 401k plans and $500,000 in other savings and investments) which will be divided.Rosemary is moving across the country and just came to close the financial planning relationship and say good-bye.Everett is staying in town and wants to continue as your client.
3. Advise Everett about how much he can spend each year once their assets are divided.He still anticipates living to age 100 and he's earning 6% on his portfolio; inflation is averaging 2.5%.Advise Everett about Social Security and Medicareoptions for claiming; when to sign up; etc.He's 63 now, so should he claim now or should he waittell him why.Keep in mind that life will be very different financially for Everett, both now and in the future since he will be living on half of what they lived on before.So make sure your advice will help him adjust initially but also help him get by for the rest of his life.
4. Three more years have passed; Everett is now 66.He has married again.His wife, Kayla, is 35 and has a 10 year old son, Ethan, who lives with them.Everett has gone back to work, making $80,000 (he was hurt by the time he spent away from the labor market so is making less than prior to retirement considering inflation).Kayla receives $700 per month in child support (the child support stops when Ethan turns 18).She worked at a minimum wage job at the local mall prior to their marriage, but now she is at home full time.Everett still owns the condo he purchased following the divorce and it is large enough for his new family.
5. Everett has not yet started collecting Social Security (regardless of what you may have advised earlier).He plans to work until age 75.He has $1.75 million in his 401k and $150,000 in other savings and investments.He is saving 10% of his salary in his 401k which his employer matches 50 cents on the dollar.His employer's health insurance covers Everett, Kayla, and Ethan.
6. Everett has come to you because he wants to know your recommendation for collecting Social Security.He also wants to know how long he can continue to contribute to the 401k and will the required minimum distribution rules apply if he is still working.Everett says that he and Kayla live a fairly frugal lifestyle and they believe that they can afford to live on his salary and the child support plus $100,000 in savings (the other $50,000 will be saved for emergencies) until he retires.
7. Look at the information that Everett has provided.Based on what they plan to spend will they be able to support Everett until age 100; will there be anything left for Kayla once he has died?Are their plans realistic (remember, look at the numbersdon't try to impose your values on them).Advise Everett.

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