Question

Mr. and Mrs. Lee are both 40 years old and they approach you, a wealth manager, for advice on their retirement planning. These are the information about the couple :

Age                              : Both are 40; No children

Jobs                             : Civil Engineer for Mr. Lee; Administration Manager for Mrs. Lee

Target retirement age   : 60 years old (for both)

Life expectancy           : 90 years old (for both)

Annual income            : $540,000 (after tax) for Mr. Lee

                                       $450,000 (after tax) for Mrs. Lee

Monthly expenses        : $32,000 for Mr. Lee

                                    : $23,000 for Mrs. Lee

Investment                  : Total investment in mutual funds (mix of bonds and stocks)

                                       $1,000,000

                                       (average annual return : 7%)

Cash on hand               : Total $500,000

Apartment                   : No apartment since they may go back to Australia to join their

   family after retirement.

Monthly expenses        : Expected to be 70% of their current level

after retirement

Explain all other factors they should consider for this retirement plan.(500 words)

Answer 1

Financial Decision making and budgeting are important to ensure financial plan for retirement and potential long term case is important.Some of the important factors that should be taken into consideration for a suitable retirement plan are as-

1.Safe investment scheme for seniors:

Both the employees must look for safer investment horizon,as schemes for senior citizens are less risky .Safe Investments for Seniors are available which helps in earning better returns.For instance -Federal Deposit Insurance Schemes.

2.Certificate of Deposit Investments

Ivestment id CDs gives the return with interest which is generally higher than the interest on a savings account.It generally varies from six weeks to six years with varying maturity dates.

3.Money Market Instruments.

It consists of low risk pools of investments such as savings account,CDs, and Treasury Bonds.It also gives the option of withdrawing money and writing cheques against money market account,which is limited to a certain extent.Money market instruments are insured through different Insurance Corporations.

4.Long term investments must be kept in equity backed schemes.

5.Equity investment should not be done with short term horizon.

6.Life insurance scheme covereage should be purchased which should be 10 time the annual premium to cover family protection.

7.An endowment policy should be purchased for a long duration of time.

8.Monthly investment options like Recurring Deposit and Fixed Deposit Account and Senior Citizen Scheme should be avialed.

The above cited different options and factors should be considered for the retirement plan.