Financial Planning Analysis Bill and Judy Sample

Transcription

1 Financial Planning Analysis Bill and Judy Sample August 1, 2017 Sample Report Pages William Patterson Senior Wealth Advisor ABC Wealth Advisors

2 Table of Contents Statement of Net Worth... 2 Summary... 3 Cash Flow Analysis Chart... 4 Cash Flow Analysis... 5 Rate of Return... 6 Value of Investments Chart... 7 Value of Investments Chart (in current dollars)... 8 Value of Investments... 9 Net Worth Over Time Chart Net Worth Over Time Solutions Monte Carlo Assumptions Monte Carlo Analysis - Summary Chart Monte Carlo Analysis - Value of Investments Chart (in future and current dollars) Monte Carlo Analysis - Value of Investments Monte Carlo Analysis - Bar Chart What-If Description What-If Monte Carlo Chart Plan Assumptions

3 Statement Of Net Worth Bill Judy Joint Total Assets Investment Assets Judy's Individual Brokerage 525, ,000 Joint Brokerage Account 466, ,671 Total Investment Assets 525, , ,671 Retirement Assets Judy's Retirement Plan 426, ,000 Bill's IRA 75,000 75,000 Bill's Retirement Plan 450, ,000 Total Retirement Assets 525, , ,000 Education Assets 529 Plan - Jack 529 Plan - Jill Total Education Assets Other Assets Paintings / Collectibles 75,000 75, Reservoir Road 1,500,000 1,500,000 Life Insurance - Judy 10,000 10,000 Life Insurance - Bill Total Other Assets 10,000 1,575,000 1,585,000 Total Assets 535, ,000 2,041,671 3,527,671 Liabilities Mortgage on 125 Resevoir 500, ,000 Total Liabilities 500, ,000 Net Worth 35, ,000 2,041,671 3,027,671 2

4 Plan Summary - Baseline Analysis Expenses Funded 100 % Shortfall 0 % Projected Final Values Future Current Dollars Dollars Investment Assets 4,857,677 1,360,303 Real Estate & Other Assets 7,136,018 1,998,311 Total Assets 11,993,694 3,358,614 This analysis is based on information that you provided. The assumptions and projections in this plan are estimates and are meant to serve solely as guideline. If any of the assumptions used in this plan are not realized, then the projections will be inaccurate. This plan does not offer legal or tax advice and should be reviewed by your legal and tax advisors before any action is taken. Past investment performance is not indicative of future 3

5 Cash Flow Analysis This analysis is based on information that you provided. The assumptions and projections in this plan are estimates and are meant to serve solely as guideline. If any of the assumptions used in this plan are not realized, then the projections will be inaccurate. This plan does not offer legal or tax advice and should be reviewed by your legal and tax advisors before any action is taken. Past investment performance is not indicative of future 4

6 Cash Flow Analysis Income Salary 270, , , , ,268 0 Social Security 0 44,122 31,119 35,710 Account Withdrawals Investment 50,000 87, , ,505 56, , , ,697 Retirement 0 199, , , /Coverdell 0 18, ,427 Total Income 320, , , , , , , ,025 Account Contributions 17,000 17,595 18,211 18,848 26,587 0 Net Income 303, , , , , , , ,025 Taxes Federal Ordinary 75,712 80,510 85,752 94, ,239 49,301 58,059 63,283 Federal Capital Gain 5,606 9,433 12,487 10,587 8,159 26,950 23,909 24,927 State and Local 15,241 17,337 19, ,172 15,799 15,873 17,161 Total Taxes 96, , , , ,569 92,050 97, ,371 Total Income After Taxes 206, , , , , , , ,654 Expenses Living Expenses 150, , , , , , , ,654 Travel 0 67,014 College - Jack 0 69,015 73,846 79,015 College - Jill 0 85,216 Investment Account Contribution 6,000 6,210 6,427 6,652 9,384 0 Mortgage on 125 Resevoir 30,401 30,401 30,401 30,401 30,401 30,401 Total Expenses 186, , , , , , , ,654 Surplus / Shortfall 20, ,838 0 Value of Investments 2,138,395 2,252,343 2,361,444 2,916,195 5,408,126 6,324,558 5,670,846 4,857,677 Investment Withdrawal Rate 1.0% 3.3% 3.6% 4.9% 0.5% 6.3% 7.5% 9.3% 5

7 Rates of Return Investment Assets Judy's Individual Brokerage 6.6% 6.6% 6.6% 6.6% 6.6% 6.6% 6.6% 6.6% Judy's Retirement Plan 7.1% 7.1% 7.1% 7.1% 7.1% 7.1% 7.1% 7.1% Bill's IRA 6.9% 6.9% 6.9% 6.9% 6.9% 6.0% 6.0% 6.0% Bill's Retirement Plan 5.5% 5.5% 5.5% 5.5% 5.5% 5.5% 5.5% 5.5% Joint Brokerage Account 6.5% 6.5% 6.5% 6.5% 6.5% 7.4% 7.4% 7.4% WS Trust FBO William Sample 6.2% 6.2% 6.2% 6.2% 6.2% 6.2% 6.2% 6.2% 529 Plan - Jack 6.7% 6.7% 6.7% 6.7% 6.7% 6.7% 6.7% 6.7% 529 Plan - Jill 6.7% 6.7% 6.7% 6.7% 6.7% 6.7% 6.7% 6.7% Overall Rate of Return - Investments 6.4% 6.4% 6.4% 6.4% 6.4% 6.4% 6.4% 6.4% Real Estate and Other Assets Paintings / Collectibles 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 125 Reservoir Road 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 6

8 Value of Investments This analysis is based on information that you provided. The assumptions and projections in this plan are estimates and are meant to serve solely as guideline. If any of the assumptions used in this plan are not realized, then the projections will be inaccurate. This plan does not offer legal or tax advice and should be reviewed by your legal and tax advisors before any action is taken. Past investment performance is not indicative of future 7

9 Value of Investments Shown in current dollars This analysis is based on information that you provided. The assumptions and projections in this plan are estimates and are meant to serve solely as guideline. If any of the assumptions used in this plan are not realized, then the projections will be inaccurate. This plan does not offer legal or tax advice and should be reviewed by your legal and tax advisors before any action is taken. Past investment performance is not indicative of future 8

10 Value Of Investments Taxable Assets Judy's Individual Brokerage 572, , , ,045 1,366,233 1,859, , ,739 Joint Brokerage Account 503, , , ,302 1,339,288 0 Retirement Assets Judy's Retirement Plan 456, , , ,160 1,117,580 2,141,731 2,641,472 2,682,317 Bill's IRA 80,166 85,687 91,589 97, , ,736 66,902 7,779 Bill's Retirement Plan 492, , , ,792 1,394,462 2,088,078 2,146,320 2,047,841 Education Assets 529 Plan - Jack 17, Plan - Jill 16,005 33,643 53,042 0 Total Investment Assets 2,138,395 2,252,343 2,361,444 2,916,195 5,408,126 6,324,558 5,670,846 4,857,677 9

11 Net Worth Over Time This analysis is based on information that you provided. The assumptions and projections in this plan are estimates and are meant to serve solely as guideline. If any of the assumptions used in this plan are not realized, then the projections will be inaccurate. This plan does not offer legal or tax advice and should be reviewed by your legal and tax advisors before any action is taken. Past investment performance is not indicative of future 10

12 Net Worth Over Time Assets Judy's Individual Brokerage 572, , , ,045 1,366,233 1,859, , ,739 Judy's Retirement Plan 456, , , ,160 1,117,580 2,141,731 2,641,472 2,682,317 Bill's IRA 80,166 85,687 91,589 97, , ,736 66,902 7,779 Bill's Retirement Plan 492, , , ,792 1,394,462 2,088,078 2,146,320 2,047,841 Joint Brokerage Account 503, , , ,302 1,339,288 0 Paintings / Collectibles 76,875 78,797 80,767 82, , , , , Reservoir Road 1,552,500 1,606,838 1,663,077 1,721,285 2,428,042 3,424,993 4,831,291 5,544, Plan - Jack 17, Plan - Jill 16,005 33,643 53,042 0 Life Insurance - Judy 11,500 13,000 14,500 16,000 31,000 46,000 61,000 67,000 Total Assets 3,779,270 3,950,977 4,119,788 4,736,266 7,973,141 9,931,205 10,736,785 10,660,370 Liabilities Mortgage on 125 Resevoir 491, , , , , ,596 Total Liabilities 491, , , , , ,596 Net Worth 3,287,336 3,467,480 3,645,115 4,270,823 7,626,844 9,771,610 10,736,785 10,660,370 Other Assets WS Trust FBO William Sample 1,008,900 1,017,879 1,026,938 1,036,078 1,132,071 1,236,958 1,351,563 1,400,324 Total Other Assets 1,008,900 1,017,879 1,026,938 1,036,078 1,132,071 1,236,958 1,351,563 1,400,324 11

13 Solutions. The following values will allow you to meet your expense needs with final projected value of investment assets of $3,571,025. Each of the values is calculated independently of the other values. Rates of return are derived by solving for the appreciation return only, interest and dividends remain constant. Portfolio rebalancing for the 'Solved For' account(s) is disabled during the rate of return solution. Desired Final Value of Investments Increase this expense: Living Expenses Or, lower your target rate of return: Overall Rate of Return Future Dollars $3,571,000 Current $150, % Current Dollars $1,000,000 Target $160, % 12

14 Monte Carlo Assumptions. In this Monte Carlo analysis, the chance of meeting your goals is calculated by running the projections 1,000 times, each time using varying rates of return. If there were sufficient funds to cover all expenses, the trial is considered a success. If not, it is a failure. Once all of the trials have been completed, the chance of success is determined by dividing the number of successful trials by the total number of trials. For each run of the plan (trial), the following rates of return and standard deviations were used: Rate of Standard Asset Class Return Deviation Cash & Equivalents 0.0% 3.7% Fixed Income - Government 6.0% 11.4% Fixed Income - Corporate 6.0% 8.6% Fixed Income - Municipal 4.0% 13.8% Large Cap Equities 7.0% 16.4% Mid Cap Equities 7.5% 16.7% Small Cap Equities 8.0% 17.5% International Equities 8.5% 21.9% Emerging Market Equities 8.5% 30.0% Real Estate Investment Trusts 8.0% 18.4% Commodities 8.5% 14.0% Undefined 0.0% 0.0% Rates of return are based on expected data. Standard deviations are for the period Standard Deviation is a measure of the variability of a data set. A low standard deviation indicates that most all of the data points are close to the mean, while a high standard deviation indicates that the data is more 'spread out' over a larger range of values. For this analysis a normal distribution is used. Approximately 68% of the data will be plus or minus 1 standard deviation from the mean and approximately 95% of the data will be plus or minus 2 standard deviations from the mean. The results generated using Monte Carlo may vary with each use and may vary over time. Other asset classes not used in the analysis may have characteristics similar or superior to those being considered. 13

15 Monte Carlo Analysis - Summary Chance of meeting goals 74% IMPORTANT: The projections or other information generated by Cheshire Wealth Manager regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Probabilities based on running 1,000 Monte Carlo trials. While this diagram depicts a wide range of possible outcomes, there is no assurance that your actual investment plan will fall within this range. This analysis is based on information that you provided. The assumptions and projections in this plan are estimates and are meant to serve solely as guideline. If any of the assumptions used in this plan are not realized, then the projections will be inaccurate. This plan does not offer legal or tax advice and should be reviewed by your legal and tax advisors before any action is taken. Past investment performance is not indicative of future 14

16 Monte Carlo Analysis - Value of Investments Shown in Future Dollars Chance of meeting goals 74% Chance of meeting goals 74% Shown in Current Dollars IMPORTANT: The projections or other information generated by Cheshire Wealth Manager regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Probabilities based on running 1,000 Monte Carlo trials. While this diagram depicts a wide range of possible outcomes, there is no assurance that your actual investment plan will fall within this range. This analysis is based on information that you provided. The assumptions and projections in this plan are estimates and are meant to serve solely as guideline. If any of the assumptions used in this plan are not realized, then the projections will be inaccurate. This plan does not offer legal or tax advice and should be reviewed by your legal and tax advisors before any action is taken. Past investment performance is not indicative of future 15

17 Monte Carlo Analysis - Value of Investments % chance of success 1,913,741 1,942,501 1,938,000 2,434,870 3,742,494 2,805,621 80% chance of success 1,994,935 2,050,816 2,082,177 2,631,874 4,307,062 3,950, , % chance of success 2,053,651 2,162,882 2,194,750 2,786,734 4,753,200 4,910,513 2,966,874 1,173,746 60% chance of success 2,112,036 2,245,344 2,305,269 2,912,312 5,204,427 5,822,252 4,672,542 3,539,766 50% chance of success 2,165,321 2,315,053 2,403,884 3,018,519 5,688,256 6,807,963 6,448,111 5,717,232 40% chance of success 2,217,757 2,387,467 2,502,789 3,154,700 6,147,490 7,856,104 8,295,801 8,060,938 Baseline 2,138,395 2,252,343 2,361,444 2,916,195 5,408,126 6,324,558 5,670,846 4,857,677 IMPORTANT: The projections or other information generated by Cheshire Wealth Manager regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Probabilities based on running 1,000 Monte Carlo trials. While this data depicts a wide range of possible outcomes, there is no assurance that your actual investment plan will fall within this range. 16

18 Monte Carlo Probability Running Out of Money Before Final Value of Investments of At Least This chart indicates the probability of running out of investment assets by the year (and age) indicated below each of the four bars. As you can see, the longer the plan goes, the higher the chance of depleting investment assets. This chart indicates the chance of meeting all projected expenses and having investment assets worth at least as much as the dollar amount associated with each of the four bars. As you might expect, the higher the dollar amount, the lower the probability. IMPORTANT: The projections or other information generated by Cheshire Wealth Manager regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Probabilities based on running 1,000 Monte Carlo trials. While this diagram depicts a wide range of possible outcomes, there is no assurance that your actual investment plan will fall within this range. This analysis is based on information that you provided. The assumptions and projections in this plan are estimates and are meant to serve solely as guideline. If any of the assumptions used in this plan are not realized, then the projections will be inaccurate. This plan does not offer legal or tax advice and should be reviewed by your legal and tax advisors before any action is taken. Past investment performance is not indicative of future 17

19 Scenario Descriptions Higher Living Expenses: Living expenses increased by $10,000 from $150,000 to $160,000 per year from now to the end of the plan. Higher Inheritance: Inheritance in 2020 is $1,000,000, not $500,000. Higher Living Expenses & Higher Inheritance: Living expenses of $160,000 per year combined with a higher inheritance of $1,000,000 vs. $500,000. Bill's Salary is Lower: Bill's Salary drops from $135,000 per year to $125,000 per year. IMPORTANT: For MonteCarlo Analysis - The projections or other information generated by Cheshire Wealth Manager regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Probabilities based on running 1,000 Monte Carlo trials. While the following diagram depicts a wide range of possible outcomes, there is no assurance that your actual investment plan will fall within this range. 18

20 Scenario Comparison - Monte Carlo Analysis Baseline Higher Living Expenses Higher Inheritance Higher Living Expenses & Higher Inheritance Bill's Salary is Lower This analysis is based on information that you provided. The assumptions and projections in this plan are estimates and are meant to serve solely as guideline. If any of the assumptions used in this plan are not realized, then the projections will be inaccurate. This plan does not offer legal or tax advice and should be reviewed by your legal and tax advisors before any action is taken. Past investment performance is not indicative of future 19

21 Assumptions Family Bill Judy Jill Jack Date of Birth June, 1967 December, 1969 January, 2002 January, 2000 Retirement Date June, 2032 December, 2034 Life Expectancy Tax Rates & Inflation Federal Capital Gain State Local Inflation Plan Begins MFJ 15% / 20% CT 0.00% 3.50% 2020 MFJ 15% / 20% FL 0.00% 3.50% 2029 MFJ 15% / 20% AZ 0.00% 3.50% Assets Owner Type Market Value Tax Basis Judy's Individual Brokerage Judy Investment 525, ,000 Judy's Retirement Plan Judy 401(k) 426,000 0 Bill's IRA Bill Traditional IRA 75,000 45,000 Bill's Retirement Plan Bill 401(k) 450,000 0 Joint Brokerage Account Joint Investment 466, ,800 WS Trust FBO William Sample Revocable Trust Trust 1,000, ,000 Paintings / Collectibles Joint Other 75, Reservoir Road Joint Real Estate 1,500, , Plan - Jack Joint 529 Plan Plan - Jill Joint 529 Plan 0 0 Life Insurance - Judy Bill Life Insurance 10,000 10,000 Rates of Return Judy's Individual Brokerage Judy's Retirement Plan Bill's IRA Year Plan Begins Plan Begins Plan Begins Return 6.6% 7.1% 6.9% 20

22 Assumptions Rates of Return - Continued Bill's Retirement Plan Joint Brokerage Account WS Trust FBO William Sample Paintings / Collectibles 125 Reservoir Road 529 Plan - Jack 529 Plan - Jill Bill's IRA Joint Brokerage Account Overall Rate of Return - Investments Year Plan Begins Plan Begins Plan Begins Plan Begins Plan Begins Plan Begins Plan Begins Bill Retires Bill Retires Plan Begins Return 5.5% 7.0% 6.2% 2.5% 3.5% 6.7% 6.7% 6.0% 7.4% 6.3% Contributions Amount Annual Increase Starting Ending 529 Plan - Jack 6,000 Same as inflation Plan Begins January, Plan - Jack 10,000 Same as inflation Plan Begins January, Plan - Jill 5,000 Same as inflation Plan Begins January, Plan - Jill 10,000 Same as inflation Plan Begins January, 2020 Bill's Retirement Plan 17,000 Same as inflation Plan Begins Bill Retires Joint Brokerage Account 500,000 Same as inflation January, 2020 December, 2020 Joint Brokerage Account 6,000 Same as inflation Plan Begins Bill Retires Life Insurance - Judy 1,50.0% January, 2000 Plan Ends Withdrawals WS Trust FBO William Sample Liabilities Mortgage on 125 Resevoir Amount Annual Increase Starting Ending 5.0% n.a. Plan Begins Plan Ends Type Term Rate Orig. Amount Orig. Date Fixed Term 30 Years 4.500% 500,000 Plan Begins 21

23 Assumptions Income Bill's Salary Judy's Salary Bill's Social Security Judy's Social Security Amount Starting Ending Annual Increase 135,000 Plan Begins Bill Retires Same as inflation 135,000 Plan Begins Judy Retires Same as inflation 10,000 June, 2032 Life Expectancy Same as inflation 10,000 December, 2034 Life Expectancy Same as inflation Expenses Amount Starting Ending Annual Increase Living Expenses 150,000 Plan Begins Plan Ends Same as inflation Travel 40,000 Bill Retires December % College - Jack 64,500 Jack is 18 4 years 7.0% College - Jill 69,562 Jill is 18 4 years 7.0% Investment Account Contribution 6,000 January May Same as inflation Insurance Type Insured Owner Beneficiary Face Value Life Insurance - Judy Life Judy Bill Bill 750,000 Life Insurance - Bill Life Bill Judy Other 500,000 Long-Term Care Policy - Bill Long-Term Care Bill Bill Bill 200 / day 22