For this problem, I do not know what the cash & cash equivalencies are. I also cannot determine what the monthly non-discretionary cash flows are. Therefore, I cannot solve the following ratios: -Emergency fund ratio

-Current ratio

-Housing 1

-Housing 2

Here is all the information I was provided:

Assume date of January 1st, 2014

The Family

Alan and Angel Young both 36 years old

My Young recently accepted a job making $93K a year

Mrs. Young currently unemployed

Two children (ages 4 & 2)

Dog and a 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 everyday 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 - 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; Not qualify for refi until Mr Young in new job 1 year

Insurance

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

Bank account $28K JT

Inherited portfolio $200K H

Brokerage account $67K W

401K $32K JT

Residence $550K JT

Auto 1 $40K W

Auto 2 $25K JT

HH Items $150K JT

Liabilities

Mortgage $260514 JT

Other Financial

Annual contributions to 401K $17500

SS Taxes $7115

Federal WH $10384

State WH $3715

Property tax $3000

Tuition to preschool $15K

Utilities $2400

Entertainment $7500

Cable $1200

Clothing $2000

Auto maint/gas $3000

Food $9600

Investments

Investment portfolio $200K

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

PASS Score = 26

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

3 - Calculate the following & comment on each (show calculations):