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

Analysis of the Youngs portfolio taking into consideration risk tolerance and asset allocation. Assume they are aggressive investors (goal of 10% return) and revise asset allocation to achieve this goal.