22 using the more conservative 3 rule this is a 1557

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(using the 4% rule) OR $11,674.22 (using the more conservative 3% rule). This is a 15.57% replacement ratio. Now, her combined replacement ratio is 70.57% (15.57% from investments + 25% + 30%). She has another issue related to her desire to relocate. If she could sell her home and move to something less costly to maintain then she could use some of the home equity (which is not used to repurchase a new home) to boost her retirement savings pool. The challenge for her is that housing costs in rural Pennsylvania will be much lower than in urban Raleigh, NC. This desire may not be feasible for this client. She may need to consider moving to another rural area closer to Raleigh which has a standard of living (and cost of real estate) much more in comparison to her current rural PA lifestyle. Q: A promising young engineer in their early 30s has decided to change jobs. At their former employer they had a defined benefit plan with an accrued and vested balance of $4,000 and the plan document specifies that any vested balance may be taken as a lump summ distribution at termination. They also have a 401(k) with a $22,000 balance. This rising star has come to you for advice on what do with the benefits from their former employer. They disclose that they will not be eligible for their new employer’s plan for 1 year. What should this young engineer do? A: The good news is that this engineer is young and is already planning for retirement. They will have a greater likelihood of a comfortable retirement because they started planning early. They should rollover both their vested DB balance and their vested 401(k) balance into a traditional IRA. During the year in which the engineer is not covered by their new employer’s plan, they are not an active participant. This means that they should contribute the annual max to their Traditional IRA to stay on track with their retirement planning goals. Planning for Wealthy Clients When people think of a “wealthy” client, they are typically thinking about the upper fringes of the upper class. Technically, the upper class begins at about $100,000 with the “upper middle” moniker bestowed
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upon those that fall between the textbook definitions of middle and upper class. In non-specific terms, a wealthy client is someone who has enough money that worries over sufficient retirement income is not even a passing thought. This group of people is generally more concerned about estate planning than savings strategies and spending plans. Estate planning is a very diverse area. For that reason, Penn State offers an entire course on this topic for those who are interested in working with wealthy clients. The two primary goals of estate planning with a trust is to either minimize taxation or to posthumously control how assets are distributed more thoroughly than a will alone can accomplish. The person who places money in a trust is called a grantor. The grantor can stipulate who gets paid by a trust and under which circumstances. A common stipulation is that an heir will receive partial payments at different age levels (often beginning around 25) once certain levels of schooling have been achieved. The money deposited into a trust also helps avoid taxes in sometimes creative ways. (Links to an external site.)Links to an external site.
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  • Spring '14
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