Question
STARTING EARLY: RETIREMENT AND ESTATE PLANNING Jamie Lee and Ross, now in their 50s, have plenty of time on their hands now that the triplets
STARTING EARLY: RETIREMENT AND ESTATE PLANNING
Jamie Lee and Ross, now in their 50s, have plenty of time on their hands now that the triplets are away at college. They both realize that time has flown by; more than 24 years have passed since they married!
Looking back over the years, they realize that they have worked hard in their careers, Jamie Lee as the proprietor of a cupcake caf and Ross, self-employed as a web page designer. They enjoyed raising their family and strived to be financially sound as they looked forward to a retirement that is just around the corner. They saved regularly and invested wisely over the years. They rebounded nicely from the recent economic crisis over the past few years, as they watched their investments closely and adjusted their strategies when they felt it necessary. They purchase vehicles with cash and do not carry credit card balances, choosing to use them for convenience only. The triplets are pursuing their master's degrees and have tuition covered through work-study programs at the university.
Jamie Lee and Ross are just a few short years from realizing their goals of retiring at 65 and purchasing the home at the beach!
Current Financial Situation
Assets (Jamie Lee and Ross combined):
Checking account, $5,500
Savings account, $53,000
Emergency fund savings account, $45,000
House, $475,000
IRA balance, $92,000
Life insurance cash value, $125,000
Investments (stocks, bonds), $750,000
Cars, $12,500 (Jamie Lee) and $16,000 (Ross)
Liabilities (Jamie Lee and Ross combined):
Mortgage balance, $43,000
Credit card balance, $0
Car loans, $0
Income:
Jamie Lee, $45,000 gross income ($31,500 net income after taxes)
Ross, $135,000 gross income ($97,200 net income after taxes)
Monthly Expenses
Mortgage, $1,225
Property taxes, $500
Homeowner's insurance, $300
IRA contribution, $300
Utilities, $250
Food, $600
Gas/Maintenance, $275
Entertainment, $300
Life insurance, $375
Questions
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| 1. | Jamie Lee and Ross estimate that they will have $1 million in liquid assets to withdraw from at the start of their retirement. They plan to be in retirement for 30 years. How much do you think Jamie Lee and Ross can withdraw each month and still leave their next egg intact? How much can they withdraw each month that will reduce their nest egg to zero? |
| 2. | Jamie Lee and Ross have been hearing many stories recently about acquaintances who are passing away without leaving a will, which made Jamie Lee and Ross anxious to review their estate plan with an attorney. They do not want to think about eventually passing on, but they know it is an essential part to careful financial planning. It was suggested that they assemble all of their legal documents in a place where their heirs would be able to access them if necessary. What documents would you suggest that Jamie Lee and Ross make accessible? |
| 3. | Jamie Lee and Ross are now having the attorney draw up a will for each of them. What is the purpose of having a will? Do they need to have an attorney to draft a will? What type of will would you recommend they have, based on their marital/family status? |
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