for Fin Expert

Spring 2016

Retirement Planning Project Details

You are a financial planner with unsophisticated clients. They could be the couple in the syllabus or yourself, but either client you choose has not taken any economics or finance courses and does not know much mathematics beyond grade school. This is a report to your clients, not about them to someone else.

First review the information your clients have given you. That way you and they will both know that you are thinking about the same things. You are then going to set up some alternate plans for your clients with:

1st Different rates of return. Remind them that higher expected rates of return come with higher levels of risk. Nothing about your plan will be guaranteed. They will want to come back every few years to review their progress and perhaps change their plans.

2nd Different retirement dates. Show them the effects of retiring earlier or later. After all they do not need to fix a retirement date now.

Each plan explanation should be self-contained and labelled so they can flip from one to another when they are making their decision. Make comparisons between the plans to show what happens to their annual contributions during accumulation. Each plan should tell them what they will have to do and what they can expect to get out of it if all goes as forecast. You should make one plan your main recommendation, but give them an idea of the trade-offs they will have to make to retire earlier or contribute less.

There is no one set format for the report. Part of your grade will be based on the simplicity of your presentation. Charts and graphs may help or may not. Large tables full of numbers and any algebra or finance jargon will certainly not help.

In particular reporting the results of a plan in the N=, I=, PV=, PMT=, FV= format will get you a low grade.

The report should be four or five pages (not counting any graphs of charts. Power Point slides are helpful in making you reduce each bit of new information to understandable size, but a set of power point slides with no other text will not be sufficient.