Retirement Savings Case Study

Part 1

SOLUTION 1:

Monica is interested in handling investment herself. Being a woman and possessing limited knowledge about investments and market, she will invest more of the money in safe and simple securities. This may include investing in fixed deposits, recurring deposits, life insurance schemes of retirement, gold, investment in 401(K), IRA etc. These are considered as safe investment and do not require much of technical knowledge about market. These types of investments provide steady and continuous return or income after retirement. In short, these investments will ensure continuous pension to investor. So, Monicas idea of investment will be quite similar to the plan stated above.

SOLUTION 2:

Richards contention that savings outside

Most of the investors after realizing the shortfall make risky moves for example, investing a large amount of money in risky equity stocks and this may turn out to be disaster if the stock prices fall and take years to come back to their initial prices. The following four tips will help in covering up the retirement savings.

1. Boost your savings to maximum Retirement savings account like 401(k)s and IRAs allow workers to stock their hard earned money away on a tax-deferred basis. In a

401(K), employers will typically match up the contributed made by employee.

Investment to these accounts shall be maximized as these provide tax deductions as well.

2. Get assets into alignment: A well-diversified portfolio can increase the probability that assets will participate in market booms and help insulate the savings against the unavoidable downfalls. The asset allocation shall be checked and smart portfolio provides exposure to variety of asset classes like domestic stocks, international stocks, bonds etc.

3. Cut Costs on Investments: Reduction in expenses is one method in which savings for retirement can be increased. Investment shall not be made in high commission

4. Embrace automation: Once the retirement plan is ready, make it an automated plan where the money is automatically transferred to savings account. If it happens automatically, one is more likely to keep up with savings habit, rather than waiting to see if he/she has money at the end of the month.

SOLUTION 4:

It is recommended that Richard and Monica shall follow the above tips to meet up the shortfall in retirement savings. They shall focus more on investing the money in safe investments rather than going for equities, stock etc. Money shall be put in tax deductible investments so that they are able to get the tax advantage along with continuous income.

Part