A RETIREMENT PLANNING MINI-CASE / TUTORIALOUTLET DOT COM A RETIREMENT PLANNING MINI-CASE / TUTORIALOUTLET D | Page 5

$35,000 for Peter and $8,000 for Ann.
In the event of death, the Mayfields will need approximately $12,000
to cover immediate needs.
They would like to leave a legacy for their grandchildren by fully
funding both children’s college
education costs should Peter or Ann die.
Assumed investment return on assets in the event that one spouse dies
is 6.00% annually.
The value of the surviving spouse’s net estate is expected to grow by
4.00% annually. Additional Planning Assumptions
The Mayfields would like to maintain their monetary assets as an
emergency fund if possible, and use
interest earned as a “slush fund” while in retirement. Goals and
Objectives
The Mayfields are very much looking forward to retirement. They
hope to spend more time with their
growing grandchildren. Given this goal, they plan to retire when Peter
turns age 62. They would like to
know if they are currently on track to meet this goal.
Their second goal involves establishing an education funding plan to
help their grandchildren pay for
college expenses. They would like to fund one year of college tuition
and room and board for each
grandchild. Tuition plus expenses for colleges they have looked at
average $18,000 per year. They believe
that college costs will continue to rise at a 6% rate, but to offset some
of this increase they are comfortable
assuming an 8% rate of return in a tax-advantaged education savings
account, which is roughly equivalent to
a 5.5% after-tax rate of return.
Use the information provided in this narrative to answer the following
case questions. Case Questions 1. How much money market fund
income did the Mayfields earn during the year?
a. $0
b. $6,000
c. $6,325
d. $7,200