James and Marsha are in their middle years, suggesting that they are in both the asset accumulation and conservation (risk management) phases. James has had a successful career as an executive in a large local company. Marsha has developed a recently successful small business in the local community. They were late to have children and have one child (Riley). Having a young child clearly establishes the need for life and disability insurance for income replacement (both parents). Marsha's Schedule C income creates the opportunity to establish a self-employed retirement plan. James maximizes his 401k contributions annually and his company provides a match. In the past they have spent most of their cash surplus on trips, boat, car, and a vacation home. While they have saved for retirement in James's 401k they have no cash reserve assets and limited college savings for Riley. They are now ready to make a plan and get serious about saving for the future.

Client Info James is age 50 and Marsha is age 45. James salary is $250,000 and all benefits including health, disability and life insurance are provided through his company. James and Marsha have 5-year-old son, Riley. Marsha is self-employed as a consultant and has Schedule C net income of $100,000 per year before self-employment tax or any deduction for any qualified or tax advantaged retirement plan. They pay their credit cards off every month Their annual cost of living increase at Inflation of 3% per year. Personal Use Assets Purchased their personal residence for $850,000 three years ago. They recently refinanced the house and took money out to consolidate all their debt (lake house, boat, and mortgage) into a $900,000 loan at 3.75% for 15 year. Credit card debt is paid off monthly. The Lake House was inherited and has no debt Savings and Retirement Information James has a safe harbor 401(k) plan through his company. James also has an integrated profit sharing plan through his company. James's total savings, including the employer match, is $48,500 per year. $24,000 is David's contribution and remainder is profit sharing and match from his company. Social Security retirement benefit at James age 67 (full normal age) will be $2,700 per month. Marsha is currently not saving towards retirement. She will start receiving her social security at her age 62 for $1,300 per month. Assumptions Inflation 3% Investment Rate of Return 7.5% Life Expectancy Age 95 Expected Rates of Return Treasury Bonds / Bond Fund 4.00% Large Cap Funds / Stocks 9.00% Mid / Small Funds / Stocks 12.00% Education Assumptions Present Value of Education in Today's Dollars $35,000 Expected Education Inflation Rate 5% Expected Years of College Education 4 years Beginning Year of College Education (age 18) 13 years from now

Question #4: How much will the Cross's need to save monthly in their 529 education fund until Riley's age 18 to pay for college costs assuming they will need to make the first of 4 annual payment at the beginning of Riley's first year?