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Essentials of Personal Financial Planning by Tom Tillery, Susan Tillery

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CHAPTER 11 INVESTMENT PLANNING

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CASE STUDY

Alice and Robert Reed are in their late fifties and anticipate retirement and financial independence in five years. Robert, a real estate entrepreneur for more than 30 years, owns real estate comprising approximately 50 percent of their investable net worth. The Reeds have come to you for a second opinion on their current investment portfolio. They describe themselves as risk averse. The real estate development business is all the risk they want to take.

Alice and Robert’s income places them solidly in the top marginal tax bracket, which, along with their state income tax and local city tax, places them in a 40 percent effective tax rate. Upon reviewing current investment statements from their brokerage firm, you discover the following:

They have $2 million of total investable assets.

Their real estate assets consist of partnership interests in two strip malls.

The other half of their investable assets are at a brokerdealer and consist of

images  $500,000 in non-traded real estate investment trusts;

images  $300,000 in a limited partnership for a motion picture deal; and

  $200,000 in mutual funds.

They have no qualified retirement plans.

Your ...

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