To begin this paper, I had to determine at what age I would want to retire and how long I
expected to live. I used my current age along with the hopes of retiring by the age of sixty five.
Then based on the female lie expectancy of my family, I opted to hopefully live till eighty years
of age. That will leave fifteen years after retirement and death that I will have to survive.
According to the calculator provided to us for this project, I will need 2.0 million or $697,404 in
today’s dollars. That is a little less than $50,000 a year for fifteen years that I will need to reach
my retirement goals effectively. In the calculator provided, we had an option to add expected
social security received. I did not select any amount for this option giving the current status of
the economy. I did not want to factor in that I may receive $20,000 in social security if there may
be none available for me at sixty five.
Compose an asset allocation that is right for you to meet your retirement goals.
Using the calculator that was provided for us to do this portion of our assignment advised
me of four different allocations that would work for me based on the goals and criteria I have for
my future. My criteria are that I have twenty or more years to achieve my retirement goal. I am
of high risk tolerance and have some flexibility. I am liable however to sell off my stock in an
attempt to purchase more.
My allocation shows my pie chart as a lump sum of my assets will be large cap stock.
Fifty percent of what I will need to fund my retirement will come from this transaction. A large
cap stock is “a company that has a market capitalization valued at more than $10 billion (N.A.
Large Cap, 2012).”
My allocation shows my pie chart as a portion of my assets will come from a small cap
stock. Twenty percent of what I will need to fund my retirement will come from this transaction.
A small cap stock references smaller companies. “They generally have smaller market
capitalization that is between $300 million and $2 billion (N.A. Small Cap, 2012).”
My allocation shows my pie chart as a portion of my assets will come from foreign.
Twenty percent of what I will need to fund my retirement will come from this transaction as
well. This is a great opportunity for me to take advantage of stock in a growing economy other
than the United States
My allocation shows my pie chart as a portion of my assets will be from bonds. Only ten
percent of what I will need to fund my retirement will come from this transaction. A bond is still
considered a loan but if used correctly can net me a return.
Analyze the risk and return issues with your retirement plan.
With any investments the risk can as quickly as the return can. Breaking my plan down
into each of the four categories that the allocation calculator provided for me is the best way to
analyze each one’s own risk and return.
As I stated earlier, a large portion will come from Large Cap Stock. Some examples of
corporations that are classified as large cap stock would be “Monster Beverage Corporation,
Microsoft Corporation and Apple Incorporated (N.A. 2012. MSN Money).” According to MSN
Money, both “Monster Beverage Corporation, Microsoft Corporation currently have the highest
Stock Scouter rating which is a ten (N.A. 2012. MSN Money).” While Apple Incorporated is the
second using the Stock Scouter rating which is a nine (N.A. 2012. MSN Money).”
For the large cap stock, the risk associated can be variable. The large cap stocks have a
tendency to produce smaller returns. The return is that this stock is classified as a “good place to
start your retirement because of its reliability (N.A. 2012. Yahoo Finance.).”
As I stated earlier, a twenty percent portion will...