Alan & Angel Young Mini Case

Today is January 1, 2020

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 60s 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. Youngs mother is a pharma distributor and lives in another state she is 60 and self-sufficient. Mrs. Youngs father lives in the same town as the Youngs and her brother is self-sufficient and healthy.

Mrs. Youngs Father (Trust 1)

Mrs. Youngs 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) $1,703.37;

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 $17,500

SS Taxes $7,115

Federal WH $10,384

State WH $3,715

Property tax $3,000

Tuition to preschool $15K

Utilities $2,400

Entertainment $1,200

Clothing $2,000

Auto maint/gas $3,000

Food $9,600

Investments

Investment portfolio $327K

Brokerage account includes gifts from Mrs. Youngs father invested in money market account at 0% earnings

401K from Mr. Youngs prior job invested in index fund

Estate Info No estate planning documents

Asset	Current $	Expected Returns	Portfolio Percentage
Cash	$95,000	2.5%	29%
T Bonds	$0	4%
Corp Bonds	$0	6%
International Bonds	$0	7%
Index Fund	$32,000	9%	10%
Large Cap Fund	$200,000	10%	61%
Mid/Small Funds	0	12%
International Stock Fund	0	13%
Real Estate Funds	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. Youngs father about funding a 529 plan. Current cost of education $35K in todays 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 $17,500/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: Client balance sheet and pie charts using the data given.