UC Berkeley Haas School of Business Fisher Investments

UGBA 137 Case Study # 3 – Hal Jordan's Retirement

Last fall, Hal Jordan took a trip to Berkeley for Homecoming and his 40th class reunion. At the reunion, he ran into and caught up with an old buddy and classmate he hadn't seen in years—Scott Summers. Hal shared his financial situation, which has increasingly been weighing on his mind as he approaches retirement.

After graduating, Hal got his real estate license and has run his own office ever since. Most of his money is tied up in real estate—namely, two apartment buildings he bought around 20 years ago, one of which is nearly paid off and both of which provide decent monthly cash flow. He also owns a couple limited partnerships some buddies from his fraternity days talked him into while they were in their 30s. Several years back, he opened and started contributing to an IRA—which now has a little over $100,000.

Hal and his wife (from whom he's separated) had five kids—two still at Cal, three with families of their own. They're all out of the house, though, and now that it's just him and the family chocolate lab, Oski, the house is feeling a little big.

Hal laments to Scott how much “advice” he's been getting recently—an old buddy from Bowles works for Goldman Sachs and is encouraging him to sign on with one of their wealth management guys. He's also got an old friend, Jack Clark, who runs his own small investment shop—has a couple million in assets under management—and offered to set him up with a portfolio recommendation and help him plan for retirement. And then one of his sons, who just finished his Haas MBA, is working for a hedge fund and really pushing Hal to invest with his company.

Hal expresses to Scott he feels he planned poorly for his retirement and won't ever be able to stop working. He's not too concerned about leaving much money behind—his kids, all going to or having gone to Cal, will be financially independent and successful without him—but he would like to hang up the business someday and enjoy retirement.

A couple weeks after the reunion, Hal runs into an old buddy at the Big Game, Charles Xavier, who (regrettably) got his MBA from Stanford. He now works for AIG, and he tries to convince Hal an annuity is definitely the way to go (guaranteed income stream!).

  1. Categorize all of Hal's assets mentioned as either liquid or illiquid. Is it true that if he stops working soon he'll have no source of income? List possible sources of income Hal could realize upon his retirement.
  2. Of the options Hal's friends and family have presented to him, briefly list the plusses and minuses of each.
  3. What might Hal have done earlier in his career to better prepare for retirement?