Accounting

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This is paper instructions per teacher: You have been given the personal financial information for a client and are expected to render advice using the information they have provided. All of the information you will need can be found on the client data sheet. This is a real-life scenario, and therefore you will be dealing with real-life issues that a financial advisor would face. The client is likely to provide information you will not need to answer the questions, so review the information closely. Also, the client is not very organized with their records, so you must organize the data. You will have 2 files to upload – a word document answering all of the questions below, and an excel spread sheet showing how you arrived at your answers (questions requiring an excel sheet are indicated with *). Each answer should be detailed and thorough, with calculations and references supporting your answer. I will count off for grammatical errors, and any answer that is not complete. As the project is a large component of your grade for this course, I recommend spending some time on this and using the book to justify your answer where necessary. I will give as much partial credit on missed answers as I can. However, if you show no work on how you arrived at your answer, it is not possible for me to give partial credit. Make sure to upload your word and excel documents in a format that is easily printable and put your name on each of them. There is to be no group work and I will not accept any late assignments.

Final Case Study Summer 2013

Sam and Linda Fleming are asking you for a comprehensive retirement plan. Since Sam just turned 50 years old he thinks it is time to start taking a more serious look at his finances. Sam has a free spirit and likes to make more radical shifts in his asset allocation. His wife Linda is also 50 years old. She grew up with a very conservative background and she is adamant that their funds be placed in all bonds and CDs. Because of their disagreement, they recently decided to sell all of their holdings and are sitting entirely in cash. Linda works part-time as a nurse assistant and brings home $20,000 annually. Sam works as a sole practitioner of his own consulting company, Sam Advice, LLC. Sam only made $45,000 last year, all of which he categorized as wages.

Katie and John are the two children, ages 14 and 12. Last year, Sam and Linda bought a brand new house valued at $280,000. They were able to put 20% down and financed the remainder for a 30 year note at 4.75%. Since they recently bought a home, their itemized deductions are somewhat higher at $21,000. Since Sam quit his job 2 years ago, he has not bought any new life insurance to replace that at his old job. Last year their portfolio did well and made $950 in interest, they realized capital gains of $27,000 and Sam will have to pay $1500 in self-employment tax.

Other things you should know:

· They are currently living on $52,000 per year. In retirement they expect to only spend $45,000.

· Credit Card balance due is $280 payable by the end of 2013

· Sam just bought a motorcycle – he financed the $18,000 bike at 8.9% for 3 years

· Sam has an IRA rollover valued at $198,000

· Linda has a Roth IRA valued at $18,000

· Sam has a Roth IRA valued at $46,000

· They have $20,000 in checking/savings accounts

· They want to plan to live to age 100 (just to be on the safe side)

· Inflation is expected to be 3%

· Nominal Rate of return based on your recommendations will be 8%

· Social Security for Sam will be $1900/month and Linda will draw based on his benefit

· They want to plan for funeral costs of $10,000 in the event that either was to pass away

· For ratio analysis only, use an after-tax income of $55,000

Final Case Study Summer 2013

You have been given the personal financial information for a client and are expected to render advice using the information they have provided. All of the information you will need can be found on the client data sheet. This is a real-life scenario, and therefore you will be dealing with real-life issues that a financial advisor would face. The client is likely to provide information you will not need to answer the questions, so review the information closely. Also, the client is not very organized with their records, so you must organize the data.
You will have 2 files to upload
– a word document answering all of the questions below, and an excel spread sheet showing how you arrived at your answers (questions requiring an excel sheet are indicated with *).
Each answer should be detailed and thorough, with calculations and references supporting your answer
. I will count off for grammatical errors, and any answer that is not complete. As the project is a large component of your grade for this course, I recommend spending some time on this and using the book to justify your answer where necessary. I will give as much partial credit on missed answers as I can. However, if you show no work on how you arrived at your answer, it is not possible for me to give partial credit.
Make sure to upload your word and excel documents in a format that is easily printable and put your name on each of them. There is to be no group work and I will not accept any late assignments.

Questions:

Savings/Budgeting/Time Value of Money

1. *Create a Balance Sheet for the Fleming family. Note – do NOT include current living expenses as a liability on this sheet as the book suggests.

2. *Calculate the financial well-being ratios for the Flemings. Using these calculations to support your answer, how would you advise them on their current financial situation?

3. What are 3 practical tips can you give the Flemings that will help their present financial situation when dealing with saving and budgeting?

Insurance

4. * Using the needs analysis method, how much insurance should Sam have if Linda needs income until age 100? Assume she spends $52,000 per year until her age 65, and then drops to retirement level spending and that Sam wants to be able to pay off all debt including the entire mortgage balance with the proceeds of the policy.

5. Now, using the multiple-of-earnings method, how much insurance should he have?

6. After calculating the above, how much insurance are you going to recommend to Sam and why?

7. Sam is considering signing up for disability insurance through work. Explain to him in your own words, not the book, exactly why this type of coverage is or is not appropriate for him.

Taxes

8. The Flemings are concerned about their tax liability this year. Assuming they file jointly, how much tax should they expect to pay in 2012? Show your work by filing a 1040 for them.

9. What are two strategies that you think would help the Flemings with reducing their tax liability? Show in detail exactly how these strategies will save them money.

Retirement

10. Sam is looking at different ways to save for retirement.

a. Explain to him the different types of retirement accounts he qualifies for

b. Explain the benefits and drawbacks of each type of account

c. Give him instructions as to which account you recommend for him and why

11. *If Sam wants to retire at age 65 and know that his money will comfortably last him until he is 100, how much money should he and Linda be saving each year?

12. What advice do you give him based on the result of #11?

Investments

13. Develop a comprehensive investment analysis for the Flemings. Make sure you tell them :

a. Exactly how each account should be invested (WHAT do they buy), listing the specific investments and weightings of each investment

b. Exactly how their required retirement savings from question 12 above should be allocated – to which account and how it should be invested? (Answer both Where and What)

c. Justify your answer and explain your strategy to the Flemings