Return calcn - Indv investors .. S/T or S/T+L/T

[amg]

When calculating return requirements for individual investors, should we take only the return needed to meet their expenses or should we also incorporate their wishes of donating an X amt of money on their death?
if nothing is mentioned, what do we assume?

 

[sct123]

I think if they give you a required future value of the portfolio then you need to calculate a required return to achieve that taking into account expenses, taxes, liquidity needs…..

 

[JamesHouston]

^^ Agree with sct

 

[longcfa]

Your asset base become your bequest value.
You will need to generate sufficient return to cover yearly expenses until death + inflation to protect real value of principal.
Dont forget to adjust for tax

 

[jut111]

From what I’ve seen in the previous exams, if they give you a final ending value you need to meet some goal, just bust out your TVM function and adjust for inflation and/or tax.
If it’s just annual expenses you are covering, it’s expenses/investable base +inflation/taxes.

 

[amg]

but in one of the exams, they said that the clients ‘wished’ to gift $1 million to their children.. and i always thought that was optional… for example, if there was a sudden need for a large cash outflow, then they could forego this gift.
but apparently, this $1 million has been included in the return calculation