Alan and Angel Young both 36 years old Mr Young recently accepted a job making $93K a year

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Alan and Angel Young both 36 years old Mr Young recently accepted a job making $93K a year. Mrs. Young is currently unemployed. Two children (ages 4 & 2) Dog and an English Setter and Maine Coon Cat. Both are licensed lawyers and have been married for eight years.

The Extended Family

Mr. Young has a mother in her 60's who is living far away and is modestly self-sufficient.  Mr. Young has two siblings both married and self-sufficient. Mr Young inherited $400K from his late Uncle Fred who was 100 years old when he died and had worked every day of his life. He has spent the inheritance down to $200K.  Mrs Young has one brother who is married, wealthy and has two children. Mrs Young's mother is a pharma distributor and lives in another state - she is 60 and self-sufficient. Mrs Young's father lives in the same town as the Young's and her brother is self-sufficient and healthy. 

 

Mrs Young's Father (Trust 1)

Mrs Young's father set up a trust for the benefit of Mrs Young. Her brother is trustee, but it is really controlled by the father. The trust distributes $30K/year to Mrs Young. The balance is $700K and it has an average earnings rate of about 8.5% per year for the last 10 years. There is no plan to increase distributions. 

 

Economic Info

Inflation averages 3% for last 20 years and expected to continue at 3% 

Bank lending rates: 15 year 3.25%; 30 year 3.75%; Any closing costs associated with refinance are 3% and included in refinanced mortgage. 

Expected rate of return 8.5%

Residence Current value $550K; Balance on 30-year mortgage at 5.5% $260,514; Land value $150K;

Monthly payment (P&I) $1703.37;

Owned home for 8 years; Will not qualify for refinance until Mr. Young has been with his current employer for one year.

 

 

Life - No life insurance; Mr Young expects $50K group term from new employer 

Health - Covered under Mr Young employer plan; Cost $1K/month for family 

Disability - No disability; Mr Young will be covered for LTD provided by employer at 65% of gross pay. Homeowner - HO3 with open perils and replacement value; $250 deductible; Dwelling covered$300K with 80/20 coinsurance clause; Premium $2400/year. Auto - $250 deductible; 100/300/50; Premium $1800/year 

 

Assets

JT Bank account $28K

JT Inherited portfolio $200K

H Brokerage account $127K

W401K $32K - with brokerage account

JT Residence $550K

JT Auto 1 $40K

W Auto 2 $25K

JTHH Items $150K

JT Liabilities Mortgage $260514

 

Other Financial Annual Expenses

Annual contributions to 401K $17500

SS Taxes $7115

Federal WH $10384

State WH $3715

Property tax $3000

Tuition to preschool $15K

Utilities $2400

Entertainment $1200

Clothing $2000

Auto maint/gas $3000

Food $9600

 

Investments

Investment portfolio $327K

Brokerage account includes gifts from Mrs Young's father - invested in money market account at 0% earnings

401K from Mr Young's prior job invested in index fund

Estate Info No estate planning documents

 

Asset Current Expected Return Portfolio %

Cash 95,000 2.5% 29%

T Bonds 0 4    

 Corp Bonds 0 6

 Intl Bonds 0 7

 Index funds 32,000 9 10

Large Cap funds 200,000 10 61

Mid/Small fund 0 12

Intl stock fund 0 13

Real estate fund 0 8

Total $327,000 7.72%

 

Economic Info

Inflation averages 3% for last 20 years and expected to continue at 3%

 

Bank lending rates: 15 year 3.25%; 30 year 3.75%; Any closing costs associated with refinance are 3% and included in refinanced mortgage

 

Expected rate of return 8.5%

 

 

Residence

Current value $550K; Balance on 30-year mortgage at 5.5% $260,514; Land value $150K; Monthly payment (P&I) $1703.37; Owned home for 8 years; Not qualify for refi until Mr Young in new job 1 year

  

Estate Info

No estate planning documents

 

Goals and Concerns

Want proper insurance, investment and estate portfolio

 

Want to know cost of college education for the 2 children so they can approach Mrs Young's father about funding a 529 plan. Current cost of education $35K in today's dollars with expected 5% inflation. Expect children in school six years each and expect rate of return 8.5%

 

Want to plan for early retirement (100% WRR, excluding trust income) at age 62. Mr Young to save $17500/yr in 401K with an employer match of $6K. Expect to live to age 90. Do not include SS benefits in planning.

    Want to be debt free at retirement

Analysis

Show a personal financial income statement and pie charts using the data given.