CFP Practice Test 2

Raymond Ortega (58, born 1968) founded Ortega Precision Machining, Inc. in 1996 and has run it as an S corporation since formation. His wife, Sylvie (56, born 1970), works part-time as the company bookkeeper. They file jointly and live in a common-law state. Their son, Victor (31), is the company's operations manager and has owned 10% of the stock since Raymond gave it to him in 2021. Their daughter, Willa (28), is a teacher and is not involved in the business.

Goals: (1) Raymond retires at 65 (in 2033) with $150,000 a year of spending in today's dollars for 30 years; (2) Victor takes over and eventually owns the company; (3) Willa receives an inheritance of similar value to Victor's; (4) contribute much more toward retirement in the next seven years; (5) pay no more tax than necessary. Both are in good health, and Raymond's parents lived into their mid-90s.

The company sponsors a SIMPLE IRA with a 3% dollar-for-dollar match; it has no other plan. Because the company has more than 25 employees and has not elected the SECURE 2.0 higher SIMPLE limits, the 2026 limits are $17,000 plus a $4,000 age-50 catch-up; Raymond defers both and would like to save $100,000 or more a year for the next seven years. Most employees defer little.

Wills (2010): each leaves everything outright to the surviving spouse, then equally to Victor and Willa. Durable powers of attorney and health care directives were signed in 2010. No trusts. A gift tax return was filed for the 2021 gift of 10% of the stock to Victor.