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Retirement Planning Example Essay

4941 words - 20 pages


Investments in the capital markets offer a unique opportunity to protect and grow personal wealth. Any discussion of investment strategy must begin with the investors risk tolerance. Some of the major factors contributing to any individual’s investments strategies are age, total value of savings and other assets, income, family and health. After a thorough discussion and getting some answers to a series of questions, your tolerance for risk can be assessed. This data helps us formulate investment policy that best fits your needs and objectives. Market timing, security selection and asset allocation are the three tools that are used to help reach your ...view middle of the document...

The specific asset classes to be focused on initially should be large cap value and growth. International stocks and mid cap growth stocks will help to increase the current portfolio’s diversity and size. The targeted percentages of the holdings for both the IRA Retirement Assets and Non-Retirement Assets are depicted in the following charts.
This should be revisited especially upon retirement where a more conservative allocation would be recommended.


Effective estate planning is necessary to avoid extra financial burdens to loved ones, in the event of death. It is an essential piece of any complete retirement plan. Setting up assets to assist heirs in the settlement of an estate simplifies the process and maximizes their potential benefits. The following estate planning tasks are recommended:

1. Limiting estate taxes through trusts in the name of beneficiaries
2. Setting up annual gifting to reduce the taxable estate
3. Creating a will
4. Naming an executor of the estate
5. Setting up beneficiaries for life insurance, 401ks and IRAs
6. Arranging for funeral expenses
7. Setting up a durable power of attorney
8. Establishing a guardian for living dependents

Reducing the value of the taxable Estate is more important because of recent changes in federal law. Assuming the current negotiations around the fiscal cliff do not specifically change the current law, the tax exemption is dropping from over five million to one million. The effective tax rate for the estate value above the exemption is also changing from 35% to 55%. These changes will significantly increase the potential tax burden on many families.


The Andersons have an opportunity to implement or maximize each of the recommendation listed above. They do not currently have any trusts setup and have not been gifting any portion of their estate. They do not have a Will or an executor.
Their personal residence, investments and savings, rental property are held jointly. The Anderson’s individual assets, including retirement plans and insurance policies designate the surviving spouse as the beneficiary. In the event of death, one spouse’s assets will be distributed to the surviving spouse tax-free. This will increase the size and potential tax burden of the surviving spouse’s estate. Their largest asset, James’s Business, does not have a clear plan should one or both of the owners pass away.
Without a buy/sell agreement, the death of a partner could put the surviving partner in a tough situation. If the surviving partner was forced to make a change, timing may not be optimal. Market conditions will dictate the current value. In the event of James’s death, Lucy is not interested in running the business. .Business co-owners usually choose from two types of buy-sell agreements.
James and his co-owner could purchase an insurance policy on each other, in a cross-purchase agreement. ...

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