Welcome to Case 2. This case requires you to use Microsoft Excel to calculate retirement needs. I have provided an example that is recorded and can be found here: http://youtu.be/oyV6xaQsvcs?list=UUZYXr28tfYVaU6-CEHgs_Bw

Thomas and Jill Williams, both ages 42, are evaluating their financial situation. They have come to your company for financial advice for their largest goals and concerns which education planning and retirement planning. However, they are curious about life insurance. Thomas has owned an auto repair shop for 15 years. Jill is a school teacher at one of the local elementary schools. They have one child, Michelle, who is 8 years of age.

Case Assumptions

Regular Inflation – 3.8%

College Inflation – 6%

College Savings ROR – 8%

Pre-Retirement ROR 9.5%

After-Retirement ROR 6%

Wage Replacement Ratio – 70%

Social Security Benefits – $1,400 monthly a piece

Client Data

Ages: Thomas and Jill are 42 and Michelle is 8 years old

Estimated Retirement Date: When they both reach age 66.

Estimated Life Expectancy: Thomas and Jill will both live until ages 92.

Current Retirement Assets: $120,000 in Thomas’ 401(k). There is not match from Thomas’ employer. Jill has a pension plan and she expects to receive 55% of her current salary in retirement.

Current Income: Thomas makes $100,000 per year and Jill makes $45,000 per year.

These clients come to you with the following needs:

1.    Retirement

a.      What amount is needed the day the Williams enter retirement?

b.     How much money do the Williams need to save per month to achieve this goal?

2.    Life Insurance Planning

a.      Assume that both Thomas and Jill will live to the age of 92 and that the average funeral cost is $10,000 per person. Also assume their mortgage balance is $225,000 and credit card debt is $12,000.

b.     Thomas has a $500,000 20 year term policy that he took out 5 years ago. Jill has a $100,000 group term policy.

c.      How much life insurance does each individual need?

                                                        i.     Use http://www.lifehappens.org/insurance-overview/life-insurance/calculate-your-needs/

                                                       ii.      

d.     What type of life insurance do you recommend and why?

e.      Assuming the individuals meet “preferred” class of health and doesn’t use tobacco how much will the life insurance policy cost per year?

                                                        i.     Use any online rating system, but the one I used in class was

1.     http://www.ryan-insurance.net/life/term-proposal-request/