Question
My assignment is to create a roadmap to and for retirement for the people in the following case study. I am looking for some ideas
My assignment is to create a roadmap to and for retirement for the people in the following case study. I am looking for some ideas of how to tackle this one, not expecting you to write it for me. Thank you so much!
Case Study:
The average age of widows in the United States is 56. Widowed this year at age 48,
Peggy Brie is "suddenly single" and on her own financially at a much earlier age than
many widows. She has many important financial decisions to make and her lifestyle has
changed dramatically.
Brie and her late husband, together, earned $135,352. Of this amount, Peggy earns
$47,000, so she has lost two-thirds of her household income. Her two major concerns are
to maintain her household on a greatly reduced income and to wisely manage her late
husband's $250,000 life insurance policy and $110,000 IRA account. She is also
expecting a $45,000 inheritance within the next six months, so she'll soon be making
decisions to invest over $400,000.
Brie's net worth is $425,680. On the asset side, she has $800 in checking and $239,600
(mostly the insurance settlement) in a bank account paying 1.65% interest. In addition,
she has the $110,000 IRA balance, $18,000 in five stocks that she knows nothing about
and wants to unload, a $11,000 car, a $215,000 home, and $20,000 of personal property
and home furnishings. Brie also has $188,720 of debts. They include $4,720 remaining
on her late husband's car lease ($337 per month x 14 months), an $80,000 first mortgage,
an $83,000 second mortgage, and $21,000 of credit card debt, $13,000 of which includes
medical and funeral expenses that had to be charged before the insurance settlement
arrived.
Brie estimates that her monthly expenses total $4,000, but she really isn't sure. Her
biggest expense is $2,300 per month on the home mortgages. This is more than half of
the $3,916 that Brie grosses each month and 72% of her $3,200 net pay. Brie is
considering paying off both mortgages with the insurance proceeds as soon as possible so
that she doesn't have mortgage payments looming over her. It is very important to her to
keep the house for at least another 10 to 15 years until she is ready to retire. Her three
children are in their late teens and early twenties and two still live at home.
Brie estimates that she will retire at age 62. She will be eligible for an employer pension
and Social Security but has no individual retirement assets of her own. Her employer
offers a tax-deferred 401(k) retirement plan, but she has never participated. "My husband
was the saver and I liked to spend what I earned," she explains. Brie plans to rollover her
husband's IRA into her name and not touch this money until she retires.
Brie has adequate employer-paid health insurance that covers her and two of her three
children who are still considered dependents. It has low deductibles and co-payments and
$ 1 million of major medical coverage. She has $150,000 of life insurance and no
individual or employer-provided disability insurance. The liability coverage limits of her
auto and homeowners policies are $300,000.
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