Business Finance Retirement Plan Process
CASE STUDY 1
Your clients, Jerry and Jenny, are 25 years old. They have come to you for assistance with
planning for the cost their child’s education and their retirement. They would like to know if they
are on track to reach these two goals. Below are the facts about the family. Jenny currently earns $150,000 and they expect to need $150,000 per year in today’s
dollars in retirement. Jerry is a stay-at-home dad. Jenny plans to retire at age 67, and they expect to live until age 100. They also expect that Social Security will provide $40,000 of benefits in today’s dollars
at age 67. Jenny has been saving $5,000 annually in her 401(k) plan. Their son, Jazz, was just born and is expected to go to college in 18 years. They want to save for Jazz’s college education, which they expect will cost $20,000 in
today’s dollars per year and they are willing to fund 5 years of college. They want all
funds needed for Jazz’s college education available the first year Jazz starts college. They were told that college costs are increasing at 7% per year, while general inflation is
3%. They currently have $100,000 saved in total and they are averaging a 10% rate of return
and expect to continue to earn the same return over time. 1. Calculate the current cost of Jazz’s college education.
2. Calculate the capital needs of the couple at retirement and the current value (today’s value) of
their retirement needs.
3. Provide the couple with a summary of their goals with the current total amount needed to
reach their goals, showing how you arrived at the total.
4. Given their current resources, does the couple have sufficient resources to achieve their goals?
Using calculations, show and explain your answer to the couple.
5. Using calculations and explanations provide the couple with three alternatives for meeting
6. In your own words, provide the couple with the advantages and disadvantages of two accounts
and/or investment instruments that are used specifically to save for college education expenses.
Which would you recommend and why?
Your completed Case Study must contain a minimum of 500 words and 2 citations in current
APA format. Acceptable sources are personal finance journals, magazines, or newspapers. CASE STUDY 2
Your client, Steven, age 43, has come to you for assistance with retirement planning. He provides
you with the following facts. He earns $80,000 annually. His wage replacement ratio has been determined to be 80%. He expects inflation will average 3% for his entire life expectancy. He expects to work until 68, and live until 90. He currently has $60,000 saved, and he is averaging a 9% rate of return and expects
to continue to earn the same return over time. He has been saving $3,000 annually in his 401(k) plan. Additionally, Social Security Administration has notified him that his annual
retirement benefit, in today’s dollars will be $26,000. 1. Using calculations, explain to Steven why it is realistic to use a wage replacement ratio of
2. Using the annuity method, calculate how much capital Steven will need to be able to retire
at age 68.
3. Given his current resources, does he have sufficient resources to achieve his retirement
goal? Using calculations, show and explain your answer to Steven.
4. Provide Steven with 3 alternatives for meeting his retirement goal. In doing so, use
calculations to show the impact of each alternative.
Before hiring you as his financial planner, Steven was going to another planner. He mentions
that the other planner calculated this retirement needs another way, so he asks you to
calculate his retirement needs using other methods.
5. Using the capital preservation method, calculate how much capital Steven needs in order
to retire at 68.
6. Using the purchasing power preservation method, calculate how much capital Steven
needs in order to retire at 68.
7. In your own words, provide Steven with the advantages and disadvantages of each method
and explain why the amounts calculated are different with the three methods.
8. In your own words, provide Steven with the advantages and disadvantages of 2 investment
instruments that are used specifically to save for retirement. Which would you recommend
Your completed Case Study must contain a minimum of 700 words and 2 citations in current
APA format. Acceptable sources are personal finance journals, magazines, or newspapers.
Business Finance Retirement Plan Process