Case Study 1
Tyler and Melinda Atkins have come to you with a simple question. “How much do we need to retire?” They have provided you with their personal financial statements, and the information below.
• They are both 55 years old. They would like to retire at age 67 if possible.
• They have twin daughters who are currently in college.
• Melinda’s latest Social Security statement indicated that she will get $1,280 per month
(in today’s dollars).
• Tyler’s latest Social Security statement indicated that he will get $1,035 per month (in
today’s dollars).
• Their loans have the following interest rates: credit card – 15%, mortgage – 6.5%,
medical loan – 3%, car loan 1 – 4%, car loan 2 – 6%.
• Tyler is a self-employed and may only use an IRA or Roth IRA for retirement savings.
The limit on IRA contributions is currently $5,500 per year, per person.
• Melinda has a 401(k) that matches 75% up to 6% of her salary.
Your task is to analyze the data they have provided and answer their “simple” question. You do not need to create a full financial plan. Just make budget recommendations based on your capital needs analysis. In order to do this, you will need to consider a number of factors, including the following:
• Their post-retirement expenses and wage replacement ratio
• Contributions strategy (how much to save in which type of account)
• Calculate a sinking fund
• Taxation of withdrawals/contributions
• What age they can afford to retire
