question archive Alan and Angel Young both 36 years old Mr Young recently accepted a job making $93K a year
Alan and Angel Young both 36 years old Mr Young recently accepted a job making $93K a year
Subject:FinancePrice: Bought3
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
Analysis of the Young's risk management using the following format:
Life Insurance: His
Metric 12-16 x Gross Pay
Actual: None
Recommended: Needs $1.5M 30-year term due to level of assets and income
Cost/Saving: Cost $1,080 $0.72 per $1000
