Financial Planning for a Retired Baseball Player: Investment Policy for Frank

1. The nominal pre-tax return objectives of Frank can be calculated as follows:\

• Pre-retirement income: $450,000\
• Post-retirement coaching income (indexed for inflation): $500,000\

To calculate the nominal pre-tax return, we need to account for the expected inflation rate of 4% per year.\

For pre-retirement income:
Nominal pre-tax return = Pre-retirement income / (1 - Marginal tax rate)
= $450,000 / (1 - 0.30)
= $450,000 / 0.70
= $642,857.14\

For post-retirement coaching income:
Nominal pre-tax return = Post-retirement income / (1 - Marginal tax rate)
= $500,000 / (1 - 0.30)
= $500,000 / 0.70
= $714,285.71\

Therefore, Frank's nominal pre-tax return objectives are $642,857.14 for pre-retirement income and $714,285.71 for post-retirement coaching income.\

2. The risk objective of Frank is that he is open to risky asset classes and is not overly concerned about volatility. This suggests that Frank is willing to accept a higher level of risk in order to potentially achieve higher returns. His experience in choosing a professional sports career, which also involves risk and volatility, indicates that he understands and is comfortable with the trade-off between risk and reward. Therefore, his risk objective can be described as a willingness to take on higher risk investments with the expectation of higher returns.