Retirement is the act where one withdraws from the active position or certain occupation or one's active life. This comprises the reduction of several hours one spent in active production, it is brought about by the age factor or body changes due to illness. Most people tend to retire when their private, as well as public benefits, are mature or eligible.in most of the ideology of retirement has been introduced recently, in the late nineteenth or early twentieth century, in the previous year’s life expectancy was high and most of the organization offered individual’s jobs till their demise. The idea was first introduced and practiced in the 1890's in Germany. Most recently developed countries have provided a platform that people at old age receive pensions and retirement benefits at old age which are in most scenarios funded by their employers or state.
Retirement planning
The section below will be useful in the evaluation of the effectiveness as well as the probability of success of the discussed retirement plan. There are also recommendations on the best and suitable plans to improve the plan.
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| Current Retirement Plan | ||
|
Client Name |
Jim | Sally smith |
|
Occupation |
Employed | Business owner |
Date of Birth |
1/1/1965 |
1/1/1967 |
|
Current Age |
54 |
52 |
Planned Retirement Age |
62 |
62 |
|
Life Expectancy |
93 |
95 |
|
Current Income ($) |
$102,000 |
$120,000 |
Full Retirement Age |
62 |
60 |
| Planned Social Security Benefits 1 |
$2000 |
$ |
Full Social Security Benefits |
$20000 |
$ |
Social Security Benefit Inflation |
6% |
6% |
Funding of Retirement Goals
Based on the available information on Jim and sally the retirement goals are summarized as shown below:
High priority needs (wants)
Health care both assumes $ 10000
Both sally and Jim adopts travel expenditure of $ 20000 each
Relatively high priority needs (wants)
Funding for nephew’s education program $10000
Purchase of a car or track both sally and Jim expenditure $35000
Provide for family expenditure $ 5000
Sally scholarship expenditure $100000
Low priority needs (wants)
Both spends on acquiring motorcycles $ 40000
Chances of succeeding on the current plan
Based on calculations in the money guide pro there is the likelihood of the plan being unsuccessful since it falls far much below the confidence zone which in most cases lies between the frequencies of 70%-90%.
Some of the qualities that lead to ascertainment of success include:
The risk portfolio adopted by both Jim and Sally are very risky.in which the returns from risky investments are high which enables one to realize their goals it is not in correlation with their risk capacity to tolerate.
Both Jim and sally are retiring too early. This reducing their time capacity to focus on saving to realize increased time on savings is seen by spending on your savings as well as reductions of social security benefits.
There is the minimization of social security benefits, which is factored by the adoption of early retirement schemes by Jim and sally. Retiring before reaching the maximum age reduces the level of benefits one is deemed to enjoy.
There are savings for goals. Both require to reduce the cost of travel to cover for the cost of benefits through saving.
Recommendations
This segment comprises a variety of strategies that Jim and sally are expected to choose among various strategies and adapt them to enable them to realize their benefit plan.
Social security strategy
This is an important and very vital factor of consideration in retirement planning, as it is prevalent as to be the guarantee to be most likely the source income most households are going to depend on income after retirement. Receiving of benefits at the current age would not be the best choice of plan and therefore Jim and sally are expected to follow the strategy below which shows at the age of 62 and 60 respectively the retirement benefits tend to be limited in comparison to the retirement at 67 which benefits are 21% higher and maximum on attainment of 70 years of age.
To achieve their objectives of best benefits realization Jim and Sally are posed with the obligation to choose among the modes given what they feel to be suitable and benefiting.
Development of other assets to help achieve goals
Apart from savings accounts, one has and the usage of home equity, Jim and Sally are entitled to achieve their goals by disposal of assets they do own. It's an option that is viable on occasion where there arises emergencies and no other options are present.to be more specific is to consider the savings in the form of a joint account as a boost at retirement in achieving the goals set.
Recommendation on the action plan
Modifications requirements for the achievement of goals presented are highlighted as follows;
On high priority goals
Both Sally and Jim are required to extend their retirement age to at least the age of 69
Ensure that on retirement they are free from debts and borrowing and ensure that they have fully financed their children's education.
On other recommendations
Despite the action plan on modification of goals, it is also commendable that Jim and Sally adopts the following action plan for the chances of improving and maximizing on their chances of success
Refinancing their borrowings for instance mortgages as in the description in the cash management segment.
Sale of the investments at old age when they feel not in a position to manage the entities for instance at 70 sallies is expected to dispose of the business entity she owns.
Adopt the funding objectives and plans as guided by the education planning department
Delayed filing of their social security benefits until they have reached the maximum age required that is 70
Possibility of success
With the adoption of the new recommended strategies on retirement benefit plan the chances of success rises. The possibility of the recommendations lies between 83% -88% which is a guarantee that all the goals will be met and accomplished.
Conclusion
Retirement benefits schemes are seen as a platform that enables clients to achieve their set goals and live along their life expectations even after their retirement. This enables them to maintain their status and reputation in the community even after retirement.
