Thank's

Abdul-Rahi Taysir

Gary and Barbra Zabecks CASE That's how Gary and Barbara Zabecks, 51 and 48, describe their life a year ago. On the plus side, both spouses received promotions and raises at their "day jobs," bringing their respective salaries to their highest amount ever: $49,000 and $54,000. Both also do freelance work on the side" which nets them another $18,000 after expenses. On the negative side, two unfortunate things happened. First, the Zabecks sustained $70,000 of uninsured repair and clean up costs due to weather-related flooding in their town. They withdrew $45,000 from a taxable account (stock index fund) earmarked for retirement and took out a $25,000 low-interest bank loan to cover this cost. The bank charges them 6.5% for a seven year loan, which costs the couple $371.25 per month. "We certainly hadn't counted on having to make these payments," explains Gary, noting that the couple reduced their 401(k) plan contributions accordingly. The second bad thing that happened is that Gary's employer switched from a traditional defined benefit pension plan to a cash balance plan. A cash balance pension often hurts workers Gary's age because it doesn't provide as generous a payout for long years of service as a defined benefit pension plan. Gary estimates that this change has set his pension accumulation back at least ten years from what it would have been otherwise. The Zabecks had planned to retire when Gary turned 60 but now they are not so sure. The Zabecks have no children living at home. Gary's grown son from a previous marriage lives with his mother out of state. Their two top priorities right now are getting their home looking attractive again for an eventual resale and saving for retirement. The couple plans to retire in a warm southern state and was counting on their home equity, and the difference between living costs in New Jersey and their new state of residence, to provide them with needed cash. The Zabeck's net worth is $420,700. Their assets total $571,000 and include $2,000 in checking; $10,000 in two CDs; $98,000 and $63,000, respectively, in 401(k)s; $32,000 and $36,000, respectively, in IRAs; $15,000 remaining in the stock index fund; their $275,000 house (its value before the flood and what they hope it will be worth again after repairs), and two cars and personal property worth $40,000. The couple's debts total $150,300. They include a $120,000 mortgage balance; $24,500 remaining on the flood-related loan; and $5,800 owed on three credit cards. They are anticipating a large tax refund, partly due to their flood losses, and plan to apply it toward their outstanding balance. The Zabecks have adequate auto insurance and a $1 million umbrella liability policy. They thought that they had adequate homeowners insurance before the flood but found out that flood damage was not covered without purchasing a separate flood insurance policy. Somebody told them that floods of the type they experienced happen only once each century so they're inclined not to buy a policy now. "If it truly was a 100 year flood," says Gary, "we won't be alive for the next one." Life insurance coverage consists of $150,000 individual term policies, plus additional term coverage through their employers. Gary also has disability insurance through his employer. What the couple lacks, however, are current wills. Barbara has never prepared one and Gary has an old one that still names his ex-wife as executor and beneficiary of his estate. Your financial case analysis should include the following items, as appropriate: A discussion of the strengths and weaknesses of the individual or family's financial situation Correction of any misinformation that the individual or family has about financial topics Comments about the individual or family's cash flow Comments about emotional issues related to the individual or family's financial situation Calculations of the savings required to reach financial goals 3 to 5 recommended action steps to improve the individual or family's financial situation Recommended financial products such as bank accounts, insurance policies, and mutual funds Available resources that can assist the individual or family to improve their finances . Gary and Barbra Zabecks CASE That's how Gary and Barbara Zabecks, 51 and 48, describe their life a year ago. On the plus side, both spouses received promotions and raises at their "day jobs," bringing their respective salaries to their highest amount ever: $49,000 and $54,000. Both also do freelance work on the side" which nets them another $18,000 after expenses. On the negative side, two unfortunate things happened. First, the Zabecks sustained $70,000 of uninsured repair and clean up costs due to weather-related flooding in their town. They withdrew $45,000 from a taxable account (stock index fund) earmarked for retirement and took out a $25,000 low-interest bank loan to cover this cost. The bank charges them 6.5% for a seven year loan, which costs the couple $371.25 per month. "We certainly hadn't counted on having to make these payments," explains Gary, noting that the couple reduced their 401(k) plan contributions accordingly. The second bad thing that happened is that Gary's employer switched from a traditional defined benefit pension plan to a cash balance plan. A cash balance pension often hurts workers Gary's age because it doesn't provide as generous a payout for long years of service as a defined benefit pension plan. Gary estimates that this change has set his pension accumulation back at least ten years from what it would have been otherwise. The Zabecks had planned to retire when Gary turned 60 but now they are not so sure. The Zabecks have no children living at home. Gary's grown son from a previous marriage lives with his mother out of state. Their two top priorities right now are getting their home looking attractive again for an eventual resale and saving for retirement. The couple plans to retire in a warm southern state and was counting on their home equity, and the difference between living costs in New Jersey and their new state of residence, to provide them with needed cash. The Zabeck's net worth is $420,700. Their assets total $571,000 and include $2,000 in checking; $10,000 in two CDs; $98,000 and $63,000, respectively, in 401(k)s; $32,000 and $36,000, respectively, in IRAs; $15,000 remaining in the stock index fund; their $275,000 house (its value before the flood and what they hope it will be worth again after repairs), and two cars and personal property worth $40,000. The couple's debts total $150,300. They include a $120,000 mortgage balance; $24,500 remaining on the flood-related loan; and $5,800 owed on three credit cards. They are anticipating a large tax refund, partly due to their flood losses, and plan to apply it toward their outstanding balance. The Zabecks have adequate auto insurance and a $1 million umbrella liability policy. They thought that they had adequate homeowners insurance before the flood but found out that flood damage was not covered without purchasing a separate flood insurance policy. Somebody told them that floods of the type they experienced happen only once each century so they're inclined not to buy a policy now. "If it truly was a 100 year flood," says Gary, "we won't be alive for the next one." Life insurance coverage consists of $150,000 individual term policies, plus additional term coverage through their employers. Gary also has disability insurance through his employer. What the couple lacks, however, are current wills. Barbara has never prepared one and Gary has an old one that still names his ex-wife as executor and beneficiary of his estate. Your financial case analysis should include the following items, as appropriate: A discussion of the strengths and weaknesses of the individual or family's financial situation Correction of any misinformation that the individual or family has about financial topics Comments about the individual or family's cash flow Comments about emotional issues related to the individual or family's financial situation Calculations of the savings required to reach financial goals 3 to 5 recommended action steps to improve the individual or family's financial situation Recommended financial products such as bank accounts, insurance policies, and mutual funds Available resources that can assist the individual or family to improve their finances