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Financial Life Advisor
Sample Financial Plan
I usually try to avoid blatant self promotion on this blog but I am very excited about a new addition to our website which I just finished. It is a detailed example of what the financial planning process is like at Financial Life Advisors. It walks through the complete process of a middle-aged couple who hires us for a retirement plan. It has the initial consultation questionnaire, retirement plan and insurance analysis included with the example. I think it is beneficial to understanding what I believe a true financial planning engagement should look like. You will see that our financial plans are not “off the shelf” by any means and are completely customized for each client.
Click here to see the financial planning example.
Here are some excerpts from the example:
John and Joan Smith are a normal, middle-aged couple. They were contemplating their retirement and realized that there are many moving parts to their personal finances. They had investments accounts all over the place, were unsure of when they should file for Social Security benefits, thought they had adequate insurance coverage, and were unsure whether they had enough financial resources to last the rest of their lives.
After signing the Financial Planning Agreement, John and Joan met with their FLA advisor to provide copies of their insurance policies, financial statements, income tax returns, Social Security statements, and their wills. During this second meeting with the financial planner, John and Joan then explained, in detail, what they wanted retirement to be like. With the help of their FLA advisor, they outlined each one of their retirement goals (Step 2 – Gather Information).
After talking, the following goals were outlined by level of importance ranked from 10 (highest) to 1 (lowest).
All costs are in today’s dollars:
Importance - Goal
10 - Would both like to retire when John is 65, but would be okay with John working until he is 67.
8 - Replace vehicles every 5 years until age 75, then move down to one car. (New cars value $40,000)
6 - Want to be able to take a luxury vacation in retirement every year until they are 80. ($10,000-$8,000)
5 - Purchase a coastal vacation home ($300,000) with annual expenses of $20,000.
John & Joan have the following assets:
- Cash (bank accounts/CDs/Money Market) $80,000
- Brokerage account (stocks/bonds) $350,000 current value, $450,000 basis)
- Retirement Annuity ($220,000 current value, $100,000 basis)
- Joan’s IRA ($300,000)
- John’s 401(k) account ($550,000), employer match is 3%
- John is eligible for a pension which will pay 40% of his salary for life without inflation adjustments or a survivor benefit at age 65.
- Home is worth $450,000 with a $100,000 mortgage at a 5.4% interest rate
- John’s BMW is 3 years old and worth $25,000. The loan balance is $10,000.
- Joan’s Lexus is 6 years old and worth $15,000.
Insurance:
- John’s life insurance coverage is through work ($300,000) at $100/month.
- Joan’s life insurance coverage is a whole life policy ($100,000 death benefit, $30,000 cash value, $25,000 basis) at $85/month.
- John has a disability policy through work which replaces 60% of his income if he becomes disabled; Joan has no disability insurance.
- John and Joan have no long term care insurance.
- John and Joan have homeowners and auto property coverage, but no umbrella liability.
Situation Details:
- John is maxing out his 401(k) annually. Joan does not have a retirement plan and is self-employed.
- John grosses approx $120,000 per year; Joan makes approx $60,000.
- John and Joan drafted wills when their kids were young. They have not been updated since.
- After taking a comprehensive risk tolerance questionnaire it was determined that John was an aggressive investor and Joan, a conservative investor.
- The Smith’s spend approximately $5,000 a month on utilities, entertainment, food, and other regular living expenses.
- Of all investable assets, the overall fixed income to equity ratio is 33% fixed income and 67% equities (33/67).
- John’s Social Security statement shows him receiving $1,600 month at age 66; Joan’s shows $900 at age 66.
Click here to see what recommendations were made and to review the rest of the financial planning example.
Posted by Ben Gurwitz on 17th March, 2010 | Comments | Trackbacks
Tags: Financial Planning, Retirement Planning, Mar 10
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