Today Derek and Cheri Zimmerman have come to me to help develop a plan to accomplish their financial goals. Their main objectives are to be able to purchase a house, put aside money for their children's education, and to be able to maintain their lifestyle in retirement. I conducted a risk-profile test and determined they have an average risk for their age, as part of the project.

- Can you help me with an IPS for the Zimmermans? I want Objectives: Return and Risk. Constraints Liquidity; Time horizon; Taxes; Legal and regulatory and unique circumstances.

You may make assumptions about them if the information is not presented. I also want a financial mission statement for them.

Personal Data:

Derek (age 35) works as an assistant manager in an engineering company.

His annual compensation is $55,000 per year.

Cheri (age 36) works as a nurse at a local hospital. Her annual compensation is $50,000 per year

The couple has two children of their own (9 and 7) and Derek has a daughter (13) from a previous marriage. His daughter splits time with him and his ex-wife.The couple has been married for 10 years. Derek is responsible for child support payments to his ex-wife in the amount of $500 per month. The divorce agreement requires him to create an irrevocable life insurance trust to benefit his daughter. Premiums are $200/month. They currently rent a house at $2,000 per month. They would like to be able to save to buy a $35,000 house. The bank will require 20% down. Their credit is deemed to be good. The couple does not have a will

Economic Data:

Inflation is expected to be at 6% this year, 4% next year, and then stabilize at 2% for the foreseeable future

Salaries will rise at an annual rate of 3%They live in Florida so there is no state income tax

GDP estimates are for growth of 2% for the next 5 years annual stock returns are expected to be 7% for the next 5 years.15- year mortgage rates are 5.5% and 30-year mortgage rates are 6.0%Student loan rates are 5%Auto loan rates are 4.8%

Insurance Data:

The family has health insurance provided through their jobs (Cheri and the kids under her work, Derek and his daughter under his).

It is an indemnity plan with a $200 deductible per person per year and an 80/20 medical coinsurance clause with a stop-loss limit of $10,000Automobile Insurance - both vehicles are covered with state minimum coverages

Investments:

The couple has an S&P 500 mutual fund index valued at $15,000

Currently, neither spouse puts any money into a 401(K) plan