Northwestern Accelerated CFP Program

January 2010 Start

Retirement Planning, Module 501

Case Studies

1. Peter (age 55) is the sole-owner of Parker Incorporated. This year he expects to make
$150,000 in compensation of which he’d like to save $30,000 in some type of retirement
vehicle. Peter does have one employee, Mary Jane, who has worked with Peter for the
last eight years. Mary Jane works 250 hours each year and makes $3,000 annually. Peter
would prefer not to make any contributions for her if possible.

What type of retirement plan would you recommend to Peter? Why?

2. For the last 12 years, Clark (age 40) has maintained a full time job assembling planes at
Boing, Inc. He is eligible for and contributes $16,500 into the Boing 401(k) plan.
Boing’s matching contribution is $4,125 for the year. On the side, Clark has been
working as a freelance reporter and expects to make $25,000 for the year. His Boing
salary is more than enough to cover his spending needs so he’d like to set up a retirement
plan that will allow him to defer as much of his side income as possible.

What type of retirement plan would you recommend to Clark? Why?

3. Reed (age 55) and Sue (age 53) have spent the last seven years building up a very
successful protection agency (they are married). Their company, FF Inc., has been able
to pay them each $175,000 for the last six years and they expect this to continue for years
to come. They have several large sources of income (mostly royalties) and would have
no problem (and would prefer) sheltering a large portion of their income.

What type of retirement plan would you recommend to Reed and Sue? Why?

4. Helen is the owner of NKredible, Inc. She is looking to set up a retirement plan to allow
her and her four employees to save towards their own retirement. Because the firm has
been so successful, Helen is willing to provide some additional contributions (if
reasonable and predictable) for the employees. She has polled her employees and has
provided you the following information:

Amount
Annual
Employee Years Employed Expected to
Compensation
Defer
Helen (owner) 12 (full time) $85,000 $10,000
Bob 10 (full time) $35,000 $0
Violet 8 (full time) $30,000 $2,000
Dashiell 6 (full time) $25,000 $0
Jack J 3 (full time) $15,000 $0

What type of retirement plan would you recommend to Helen? Why?