Recommend A Retirement Plan

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recommend a personal retirement plan for a client that you identify. Support your recommendation to the client by explaining how the plan meets the client’s needs and mitigates risk. In addition to the required page total, include the required appendices. Required appendices may be tables, pie charts, and/or other appropriate figures.

Scenario
This week, you continue in the role of retirement planner you took on for the Week 7 assignment. You will identify a client, create a retirement plan that meets that client’s needs, and recommend the plan to the client.

Instructions
In a 5-6 page paper, complete the following:

Identify a person, couple, or family for whom you are creating the plan. Describe the person, couple, or family (no name is required, but it can be you, someone else, or someone you imagine). Each of the following items is important because your recommendations must align with them:
Include the factors that are important to know when developing a retirement plan (age, marital status, number of dependents, health, life expectancy, and other sources of income such as social security and pensions).
Identify a desired age of retirement and retirement income (assume these were provided by the client).
Describe the client’s personal risk tolerance (assume this information was provided by the client).
Develop a personal retirement plan that identifies required savings before retirement and planned savings and withdrawals before and after retirement. Support your explanation of this plan with the following appendices:
Annual and monthly savings before retirement (in addition to the required page total).
Annual and monthly withdrawals after retirement (in addition to the required page total).
Recommend asset allocations that mitigate risk based on the client’s profile, such as age, marital status, and personal risk tolerance, and based on the riskiness of the assets. Provide the following appendix to support the original and changing allocation of asset classes:
Asset allocation over the life of the plan (in addition to the required page total).

Sample Solution

Client Profile

I am recommending a personal retirement plan for a 30-year-old single male with no dependents. He is in good health and has a life expectancy of 85 years. He currently earns an annual salary of $100,000 and expects to retire at age 65. He has a moderate risk tolerance.

Desired Retirement Age and Income

The client’s desired retirement age is 65. He would like to have a retirement income of $80,000 per year.

Personal Risk Tolerance

The client has a moderate risk tolerance. He is willing to take some risk in order to achieve his retirement goals, but he does not want to put his savings at too much risk.

Personal Retirement Plan

The client’s personal retirement plan will focus on saving in a variety of accounts, including a 401(k), IRA, and Roth IRA. He will also invest in a mix of stocks and bonds to achieve his desired risk tolerance.

Required Savings Before Retirement

The client will need to save approximately $1.2 million before retirement in order to achieve his desired retirement income. This number is based on the following assumptions:

  • The client will retire at age 65.
  • The client will have a life expectancy of 85 years.
  • The client will withdraw $80,000 per year in retirement.
  • The client’s investments will earn an average annual return of 7%.

Planned Savings and Withdrawals Before and After Retirement

The client plans to save 15% of his annual salary in his 401(k) plan. He will also contribute $6,000 per year to his Roth IRA. This will result in total annual savings of $21,000.

After retirement, the client plans to withdraw $80,000 per year from his retirement savings. He will first withdraw from his taxable accounts, such as his 401(k) plan. Once his taxable accounts are depleted, he will begin withdrawing from his tax-advantaged accounts, such as his Roth IRA.

Appendix A: Retirement Savings Projections

The following table shows the client’s projected retirement savings based on his current savings rate and investment assumptions:

Age 401(k) Balance Roth IRA Balance Total Retirement Savings
30 $0 $0 $0
40 $300,000 $72,000 $372,000
50 $750,000 $216,000 $966,000
60 $1,350,000 $432,000 $1,782,000
65 $1,950,000 $648,000 $2,598,000

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Appendix B: Retirement Income Projections

The following table shows the client’s projected retirement income based on his current savings rate, investment assumptions, and retirement withdrawal plan:

Age Retirement Income
65 $80,000
70 $80,000
75 $80,000
80 $80,000
85 $80,000

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Conclusion

The client’s personal retirement plan is designed to help him achieve his desired retirement age and income. The plan is based on his current savings rate, investment assumptions, and retirement withdrawal plan. The client should monitor his progress regularly and make adjustments to his plan as needed.

Risk Mitigation

The client’s retirement plan is designed to mitigate risk in a number of ways. First, the client is saving in a variety of accounts, including a 401(k), IRA, and Roth IRA. This diversification of accounts helps to protect the client’s savings in the event that one account underperforms. Second, the client is investing in a mix of stocks and bonds. This diversification of investments also helps to reduce risk. Third, the client has a moderate risk tolerance. This means that he is willing to take some risk

 

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