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Research Paper
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john’s brother helped set up a portfolio for retirement, now run by a large national discount broker.

INSTRUCTIONS TO CANDIDATES
ANSWER ALL QUESTIONS

You are a financial advisor to the Jones family (John 82, Jenny 81). Create a write-up (no bullet points except the introduction of the family) for the following challenges and give specific and appropriate recommendations for their age and situation. The case study file article and an outline are attached. Approx 4-5 pages, 12 font size.

 

Joneses family: 

 

Parents: John, 82 Jenny, 81 (Lives in Midwest)

Children: Jenna, 49 (Widowed) James, 47 (Married)

Grandchildren: Jonathan, 18 Jack, 16 Josie, 12

 

Income:

 

Joneses are now retired, John (retired at 63) a former human resources director, Jenny (retired at 62) was a former accountant.

Both have pensions

Both have social security benefits

Annual income from social security is $65,000

 

Assets:

 

House: Two-story, four-bedroom single-family home.

Worth: $475,000 (paid off)

Peak: $575,000

 

Vacation Home: 

Worth: $300,000 (paid off)

Peak: $400,000

 

Cash: 

Worth: $250,000

Peak: $500,000

 

Debt: Property taxes

Worth: -$7000/year

 

Investments: 

 

John’s brother helped set up a portfolio for retirement, now run by a large national discount broker.

 

Savings: Invested in a portfolio of mutual funds

 

Mutual funds: $250,000 (from cash)

30% domestic equities (Large & Mid-cap)

10% international equities

40% bonds (Treasuries & Corporate)

20% money market account

 

 

 

 

 

Current Status: 

 

Until the Joneses reached their 80’s they had an active retirement.

Take two major trips per year

Spent summers in vacation home

Volunteers in the community

Plan to pay $10,000 in grandson’s college costs

 

Challenges: 

Jenny has Emphysema, and has trouble climbing the stairs of home.

John has Alzheimer's, though it is still in the early stages.

 

1. Jenna is concerned if her father is still able to take care of his mutual fund portfolio.

2. Jenna wants to put her parents in an assisted-living community, however:

a. Jenna doesn’t know how assisted-living communities work

b. She doesn’t know how much they cost or if they can afford to pay

c. She wants to sell the home to pay for the assisted living community. 

 

 

Possible Recommendations for the Family:

 

Real Estate

Priority: Move John and Jenny to an assisted-living facility

Prepare house for sale with minor fixes

Expected net profit after sale: $445,000

Income

Current income: $65,000 from pensions, savings, and Social Security

Potential income from the rental of vacation home

drawing down investment principal for future expenses

Portfolio 

Current allocation: 40% stocks, 60% bonds

Recommended shift to 20% equity, 80% fixed income

Expected yield: 3% after management fees

Assisted Living

Estimated cost: $5,000 to $6,000 per month

Anticipated stay: 5 to 7 years or longer

Expenses to increase as caretaking needs grow

 

Estate Planning

Review wills and estate documents

Update wills if needed

Discuss inheritance wishes for children and grandchildren

Legal Documents

Power of attorney for financial matters

Health care power of attorney and living wills

Standard wills and revocable living trusts for clarity and empowerment

Vacation Home

maintenance costs versus wider living options with sale proceeds

John and Jenny's desire for the home to remain in the family 

Consider renting the vacation home to cover upkeep and taxes

Possibility of using the vacation home as a source of funds for caretaking expenses, if needed

Jonathan's Education

Consider the financial implications of supporting grandson Jonathan's college education

Evaluate if pre-gifting to a Section 529 plan is still feasible

Daily Bill Paying

online bill-paying service for convenience and organization

electronic bill storage and viewing for easier management

 

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