Was wondering if anyone would like to help me with this Military Retirement Payments problem I have:
Bob and Linda Smith are divorcing after 41 years of marriage. That date of divorce will be April 1, 2009.
Bob is retired military currently receiving $4,500 a month in traditional (or High-3) military retirement benefits. Bob was born April 1, 1949 and Linda was born April 1, 1951. They married on March 31, 1969, and Bob joined the army the next day. He retired 20 years later on March 31, 1989.
Bob, because he didn't want to pay for it, convinced Linda years ago to sign away her right to SPB, which is a type of military insurance that would assure that Linda continued to receive Bob's military retirement payments in the event that he died. If Linda chooses to participate in Bob's retirement benefits, and he dies, all benefits to her would cease. The only way to mitigate this is to purchase a life insurance policy on Bob that would pay her enough to ensure her financial future. Unfortunately, Bob is a smoker and Linda cannot afford the cost of such a policy.
Bob also doesn't really want Linda participating in his retirement (although there is some debate over whether he has a choice) so he is willing to "buy her out" of his policy.
Military benefits increase in January of each year by what is known as a COLA, or cost of living adjustment. This is a federally mandated increase that is tied to changes in the Consumer Price Index. The increase this year was a whopping 5.8%.
The question that needs to be answered: How much would he have to pay her today assuming all future COLA's will equal the average COLA of the last 10 years?
You should use March 30, 2009 as the date for your discount rate. Also assume that the effective tax rate will be 18%. Also assume that Bob and Linda are Caucasian.
Thanks in advance to anyone can help me with this at all. Above is ALL the information available to me to answer this question.
Bob and Linda Smith are divorcing after 41 years of marriage. That date of divorce will be April 1, 2009.
Bob is retired military currently receiving $4,500 a month in traditional (or High-3) military retirement benefits. Bob was born April 1, 1949 and Linda was born April 1, 1951. They married on March 31, 1969, and Bob joined the army the next day. He retired 20 years later on March 31, 1989.
Bob, because he didn't want to pay for it, convinced Linda years ago to sign away her right to SPB, which is a type of military insurance that would assure that Linda continued to receive Bob's military retirement payments in the event that he died. If Linda chooses to participate in Bob's retirement benefits, and he dies, all benefits to her would cease. The only way to mitigate this is to purchase a life insurance policy on Bob that would pay her enough to ensure her financial future. Unfortunately, Bob is a smoker and Linda cannot afford the cost of such a policy.
Bob also doesn't really want Linda participating in his retirement (although there is some debate over whether he has a choice) so he is willing to "buy her out" of his policy.
Military benefits increase in January of each year by what is known as a COLA, or cost of living adjustment. This is a federally mandated increase that is tied to changes in the Consumer Price Index. The increase this year was a whopping 5.8%.
The question that needs to be answered: How much would he have to pay her today assuming all future COLA's will equal the average COLA of the last 10 years?
You should use March 30, 2009 as the date for your discount rate. Also assume that the effective tax rate will be 18%. Also assume that Bob and Linda are Caucasian.
Thanks in advance to anyone can help me with this at all. Above is ALL the information available to me to answer this question.
