Comprehensive Financial Plan

COMPREHENSIVE FINANCIAL PLAN
1 | P a g e
Table of Contents
Introduction- 2
Engagement Letter- 3
Client Goals- 5
Executive Summary- 6
Net Worth- 8
Cash Flow- 10
Budget Analysis- 12
Investment Recommendations- 14
Retirement Recommendations- 16
Insurance Recommendations- 25
Education Planning- 34
Tax Planning- 39
Estate Planning- 42

2 | P a g e
Introduction
It has been a pleasure building a relationship with you and learning about the aspects of
life that are most important to you. Enclosed here is your personal comprehensive financial
plan prepared exclusively for you based on the information you have provided through our
conversations and data gathering sessions. As I have become familiar with your current
financial situation, risk tolerance, and future financial aspirations, I truly believe we have set
attainable financial goals together. It’s going to take dedication to turn these changes into
reality and make them habitual, but the benefits will be truly worth your while.
Implementation is the key to realizing the value of this plan. The plan is designed to
work best when all of its units are functioning together, as many of the finances are
interrelated. It will be imperative to use this synergy to your advantage by treating each change
as important as the next.
You have the choice to be in ultimate control of your assets and execute this plan if you
feel comfortable doing so. I will always be available to guide you and manage your assets if
necessary, and I hope to be in regular contact with you as time passes to track your progress
and analyze how your finances are aligning with the goals you set forth for yourself. By
regularly reviewing and updating the plan, the likelihood of achieving the desired results is
greatly enhanced. I see a successful financial future for you and am happy to be such an integral
part of the process.

3 | P a g e
Engagement Letter &Contract Terms
The purpose of this section is to formally reveal the details of our engagement and walk you
through the steps of the process. To be as specific as possible, the following will break down
our ensuing relationship step by step. These steps can be time consuming, but I will do
everything I can to help you avoid feeling overwhelmed by the process:
 Reviewing and prioritizing your goals and objectives
 Developing a summary of your current financial situation, including a net worth
statement, cash flow summary, budget and income tax analysis
 Reviewing current investment portfolio and developing an asset management strategy
 Developing a financial management strategy, including financial projections and analysis
 Assessing exposure to financial risk and developing a risk management plan
 Completing a retirement planning assessment, including financial projections of assets
required at estimated retirement date
 Assessing estate net worth and liquidity and the development of an estate plan to
ensure estate planning objectives are met
 Identifying tax planning strategies to optimize financial position
 Integrating and prioritizing all strategies outlined above into a comprehensive financial
plan
 Managing the implementation and monitoring the performance of the financial plan
 On-going review and assessment of assumptions incorporated into financial plan given
changes in economic, political and regulatory environment
The following will review further fees and disclaimers that I would like you to review before
signing into this contract:

4 | P a g e
 My engagement fee is $3,000 for a comprehensive financial plan.
 Payment terms include $1,500 payable upon acceptance of this engagement and with
the balance due upon presentation of the comprehensive financial plan.
 The results presented in this financial plan are not predictions of actual results. Actual
results may vary to a material degree due to external factors beyond the scope and
control of this financial plan. Historical data is used to produce future assumptions used
in the financial plan, such as rates of return. Past performance is not a guarantee or
predictor of future performance.
 Recommended portfolio construction and the subsequent market transactions are
based on your personal/investor profile, your goals, and market conditions at the date
of plan publication
 This plan is not to be construed as offering legal or tax advice. You are encouraged to
discuss this plan and its findings with your attorney, accountant and insurance broker.
 The evaluation and hiring of these practitioners is your responsibility, and I make no
representations or warranties of the quality or appropriateness of anyone’s work but
my own
 If you wish to terminate this engagement at any time, please notify me in writing and I
will take care of your request immediately.
I look forward to working with you and helping you reach your financial planning goals. By
signing below, you are agreeing to the terms and conditions of the contract and officially
beginning your journey to financial well-being:
____________________________________________
Signature
__________________________
Date

5 | P a g e
Clients Goals
Here is a list of some of the aspects that you expressed as being the most important in your life.
These goals, along with a plethora of other objectives are going to be addressed throughout
this plan
Short-Term goals:
 Establish cash saving habits to accumulate a larger amount in savings account, including
refinancing your mortgage
 Create an estate focusing on allocating assets to beneficiaries and tax savings
 Start an education fund that will have enough accumulated money to fund your son’s
education without the burden of taking out a loan
Long-Term goals:
 Retire at age 65 and maintain a level of income to support your financial needs and
lifestyle
 Optimize the performance and allocations of investments in your 401(k)
 Continue to have enough income to make contributions to charity yearly
 Increase your death benefit in order to leave a larger family legacy

6 | P a g e
Executive Summary
• Personal Profile: using our Personal Profile questionnaire, which was designed to determine
your risk tolerance and investing knowledge, your results show:
Risk tolerance: Moderately Aggressive
Knowledge of investing: Average
• Budget: Your current financial statement shows annual gross income of $117,000 and annual
expenses of $87,801. Right now, your current income exceeds your expenses. There have been
many adjustments made within your budget, with the goal of keeping your savings at a healthy
surplus. The most significant change made to your expenses was in refinancing your mortgage,
which is going to save you an impressive $1,182. You are currently saving 25% of your current
cash inflow, which we would like to increase to at least 30% if possible.
• Children’s education: You do not currently have any educations savings for your son, so it is
going to be vital to get this savings started since your son will be beginning community college
in 2 years. By my estimates, it is going to cost you a total of over $52,000 to send him to
community college for 2 years and a 2 year state school for 2 years. This can be achieved by
funding this account with a yearly sum of $5,756.
• Insurance: You have told us that you are worried about risk and risk management. We are
recommending that Dan increase his term life insurance coverage to $850,000, and Katrina
obtain term life insurance in the amount of $450,000. For tax reasons, we recommend both
policies be owned by irrevocable life insurance trusts with “crummy” clauses. We also
recommend changes to your auto, and homeowners policies to minimize premium costs while
maximizing coverage. In addition, we recommend that you obtain an umbrella policy in the
amount of $2,000,000 for better liability coverage. We are recommending that Dan obtain long-
term disability insurance which will pay $3,000 per month in the event he is disabled.

7 | P a g e
• Investments: You currently don’t have any outstanding investments in the securities market
and the money in your savings account is not adequate enough to start worrying about creating
an investment portfolio. I have made suggestions, however, to efficiently allocate the funds in
your 401(k) plan to increase the return on those funds for your future. My suggested allocations
to your 401(k) plan will increase your expected retirement income from $61,000 to $75,000. A
satisfactory level of retirement income based on your current income would be $81,900. The
difference can be made up by contributing an extra $2,982 annually to your 401(k).
• Taxes: You have suggested that your taxes are currently being handled by a tax professional
and that you are content with your current tax liability. Suggestions that I have made for you in
other section are going to reduce your taxable income, including making larger yearly
contributions to your 401(k) plan and making gift contributions to fund your son’s college
education. It might also be of value to consider moving your life insurance death benefit into a
beneficiaries name so it is not accounted for in your gross estate.
• Estate Planning: Establishment of your estate documentation is critical. I recommend
establishing a living trust so that you can pass your assets to your choice of beneficiaries
immediately following your death, while avoiding probate. In addition, establishing a will is vital
to protect the remaining assets that are left outside of the living trust. It is a huge benefit to
ensure your current and future assets are distributed in the manner that you desire. Lastly, I
recommend that you grant your son as the power of attorney and as the beneficiary of your
401(k) plan and lie insurance death benefit. This will save money in form of future asset
transferring costs and it will decrease your gross estate, which could save tax liabilities down
the road

8 | P a g e
Net Worth
A statementof networth providesan overview of an individual's current financial situation. In
this report, the Assets section represents what you currently own, stated at market values. The
Liabilitiessectionillustratesyour current debt balances. The net worth section shows the approximate
amount that would be left if you sold all your assets and paid off your debts, representing a good
estimate of yourcurrentwealth.One of the mainobjectivesof financial planning is to increase your net
worththrougha varietyof strategies. The followingisalistof the assetsand liabilities that are included
in determining your net worth:

9 | P a g e
Assets Liabilities
I. Liquid
Assets
I. Short-
Term
Cash & Checking
Accounts $15,000 CurrentBills $0
SavingsAccounts $5,000 CreditCards $1,000
MoneyMarket
Funds $0.00
Installment
Loans $0
TOTAL $20,000.00 TOTAL $1,000
II. Investment
Assets
II. Long-
Term
A. Short Term CD's $0 Mortgage $375,000
TreasuryBills $0 Loans $4,956.54
B. Long Term
401(k) Taxes
(28%) $81,989.32
Life Insurance DeathBenefit $425,000 TOTAL $379,957
Retirement
401(k) Contribution
Plan $292,819
Equity
Common/Preferred
Stock $0
Mutual Funds/Stock $0
TOTAL
LIABILITIES ($380,957)
IRA Stock $0
ProfitSharingStock $0
Debt Muni Bonds $0
IRA-Bonds $0
NET
WORTH
$1,046,862.4
6
ProfitSharingBonds $0
CD's Long-Term $0
TOTAL $717,819
III. Personal
Assets
Residence/Vacation
Home $500,000
Automobiles $175,000
Personal Property $10,000
Other $5,000
TOTAL $690,000
TOTAL ASSETS
$1,427,819.0
0

10 | P a g e
Cash Flows
A cash flowstatement,summarizesanindividual'sfinancial activityover a given period of time.
The cash flow statement in this report tracks your income (cash inflows) and uses of cash (cash
outflows) duringthe currentyear.The difference betweenthe income youreceive and the cash you use
isyour netcash flow.If there isa positive value foryournetyearlycashflow, it means that you are able
to accumulate savingseachyear,while alternatively if you are spending more than you’re earning, you
will notbe able to save andinvesttowardsbenefittingyourfuture asefficientlyandyouwill have less of
a safety net should crisis ever rear its nasty face. The following is a breakdown of your current cash
flows:

11 | P a g e
Inflow Outflow
IncomeSources Fixed Expenses
Salary $117,000
Self-employment $0 A. Family Needs
Dividend/Interest $0 Foods $8,400
Capital Gains $0 Clothing $500
Rents/annuities/Pensions $0 Transportation $5,760
Bonus $0 Other $0
AlimonyChildSupport $0 TOTAL $14,660
TOTAL $117,000 B. Home
Mortgage $33,600
Insurance $750
Utilities $4,500
INFLOW TOTAL $117,000 Other $3,780
OUTFLOW TOTAL $87,801 TOTAL $42,630
SAVINGS $29,199 C. Insurance
Life $720
Disability $0
Health $0
Auto $2,160
Liability $0
TOTAL $2,880
D. Other
Loans $1,576
TOTAL $1,576
Flexible Expenses
Taxes $7,414
Vacation $500
Entertainment $3,000
Gifts $9,385
Tuition $5,756
TOTAL $26,055

12 | P a g e
Budget
Your budget is based on realistic estimations of your earnings coupled with your past
spending and saving habits. Your budget is a dynamic document designed to be flexible.
Deviations may occur due to need changes, accidents, and other unexpected events. The goal is
to provide you with guidelines to incorporate into your financial behavior.

13 | P a g e
Current and Projected Budget
Expenses current per year projectedper year current per month projectedper month
mortgage $ 35,148.00 $ 20,964.00 $ 2,929.00 $ 1,747.00
taxes $ 4,991.00 $ 4,991.00 $ 415.92 $ 415.92
insurance $ 2,880.00 $ 5,370.00 $ 240.00 $ 447.50
entertainment $ 3,000.00 $ 2,500.00 $ 250.00 $ 208.33
contributions $ 8,487.00 $ 11,469.00 $ 707.25 $ 955.75
gifts $ 9,385.00 $ 14,000.00 $ 782.08 $ 1,166.67
education $ 5,756.00 $ - $ 479.67 $ -
loans $ 1,576.00 $ 1,576.00 $ 131.33 $ 131.33
Totals: $ 71,223.00 $ 60,870.00 $ 5,935.25 $ 5,072.50

14 | P a g e
Overall, the new projected budget should save you an annual amount of $10,353. The
majority of this savings is going to be the result of refinancing your mortgage, which it going to
save you $1,182 a month on its own. Some of your expenses are going to increase, such as
annual contributions to your 401(k) plan and insurance costs, but these increases in
expenditures are going to benefit other aspects of your finances, as you will learn upon
reviewing your plan.
The most important aspect of your new budget is that you are projected to be saving a
considerable amount more each year. This will allow you to save up and create an emergency
fund in case something of a dire nature should ever occur, and in addition you will be able to
accumulate enough money to start investing in stocks and bonds to build a larger future
income.
Below is a breakdown of exactly how refinancing your mortgage is going to save you a
great deal of money:
MONTHLY SAVINGS $1,182 /mo
NEW PAYMENT $1,747
BREAK EVEN 6 months
COSTS $6,000
LIFETIME SAVINGS $67,913

15 | P a g e
Investment Recommendations
Constructing an efficient portfolio by making sound investments in financial securities
can be one of the most rewarding aspects of a financial plan. Investment is simply the
commitment of a given sum of money today with expectations for receiving a larger sum in the
future. There are a wide variety of investment products in which this can be done, including
bonds, stocks, mutual funds, and REITS, each with varying levels of risk and return.
The questionnaire in the data gathering packet was used as a tool to gauge which
investments would be best suited for your level of risk tolerance based on your responses. The
survey suggests that you share the same investment philosophy as a moderately aggressive
investor. Investors with this type of approach typically hold 60-70% stocks in their long-run
portfolios, as reflected on the scale below:
Conservative > Moderately Conservative > Moderately Aggressive > Aggressive > Very
Aggressive
40-50% stocks 50-60% stocks 60-70% stocks 70-80% stocks 80-90%
stocks
You are currently reaping no benefits from such investing because you have yet to
create a portfolio. Although you currently have a savings balance that is too low to start
investing immediately, the new budget introduced earlier in the plan should allow you to
accumulate enough savings over time to create a portfolio before retirement. I would suggest
that you begin investing once you have at least $50,000 combined in your bank accounts.
Assuring that you have enough excess money to make a yearly gift as a contribution to your
son’s 529 account and to make larger contributions to your 401(k) plan should be a larger
priority for you in the short run.
You do not have an adequate amount of money in your savings account for you to begin
investing in stocks and bonds. The amount of money that you will be accumulating in your
savings account is going to be allocated towards Dillon’s 529 education savings plan and
towards other current expenditures. Assuring that you have enough money to make mortgage
payments stress free and take care of any other life expenditures also needs to be a 100%
guarantee before I advise you to start buying securities.

16 | P a g e
Down the road, once you have reached a financially comfortable situation in life, I
suggest taking the same investing approach that was recommended to you for the allocation of
the funds in your 401(k) employer contribution plan. As a recap, I suggested that the 401(k)
funds be invested as so:
Cash- 4%
Bonds- 27%
Stocks- 69% (large-cap stocks- 35%, mid-small cap stocks- 8%, international stocks- 26%)
Other- 0%
This follows your moderately aggressive investment philosophy as measured by
percentage of allocations and boasts an expected rate of return on the portfolio of 8.17%.
Although 69% in stocks seems like a steep percentage, the risk is slightly alleviated by the
portion of large-cap stocks, because these are more established corporations that operate with
less overall risk. This is also about as risky as you would want to make your portfolio given that
most portfolios begin as risky when individuals are younger and decrease their level of risk as
individuals near retirement. At this point in your life, you want to guarantee yourself a level of
return rather than invest this money where it might lose value.
When considering which stocks to invest in, there are various other details that must be
considered before making a decision. For example, you have the choice to buy several
individual large-cap stocks, or you can buy a mutual fund comprised of a bundle of several
large-cap stocks. The following displays some vague suggestions as to which investments I think
would be beneficial for you:
Municipal bonds
 Interest paid on municipal bonds is exempt from both federal and local
income taxes within the state of issue
 They tend to have a lower default rate than standard bonds
Mutual funds in stocks
 Helps to diversify the portfolio by spreading out risk
 The fund’s manager, supported by a staff of investment analysts,
manages the investment portfolio

17 | P a g e
Retirement Analysis
The purpose of retirement planning is to determine the level of funding needed to help
meet your retirement goals and identify the actions you will need to take to achieve that level
of funding. In this report, your retirement plan is analyzed before and after making adjustments
to see how reallocating resources and changing certain saving/funding habits could boost your
annual retirement income. Below is a table presenting several important details that go into the
calculations for determining your retirement needs:
Retirement Details
Current Age 55
Years to Retirement 10
Retirement Age 65
Years of Retirement 30
Ending Retirement Age 95
A good retirement plan will address the following questions and objectives:
 What would my spendable income during retirement be if I maintain my current
patterns of income, spending, and saving?
 How much would I have to save annually in order to achieve my annual retirement
spending objective?
 How will varying the assumed rates of return on my assets affect the results of the
analysis?
 What can I do to facilitate more rapid growth of wealth?
 Help you set attainable spending goals for retirement
 Illustrate the impact of changing your current spending and saving patterns
 Help you utilize planning concepts that not only increase your retirement income but
also do so by taking advantage of tax deferral and tax reduction.

18 | P a g e
Retirement Planning Process
The suggestions I present to you regarding your retirement planning are based on calculations
following these steps:
1. First, a more efficient portfolio was generated that would be better fitted for your
401(k) to be invested in
2. This produces a higher level of expected retirement income for you, however there is
still a gap between expected and desired retirement income
3. This gap must be made up either by saving a specified amount of money or contributing
more monthly funds to your retirement plan.
4. The type of retirement plan is the key indicator in deciding between methods of
accumulating future money
Your current 401(k) contribution plan has an accumulated of over $292,000 invested in
stocks, bonds, and the money market. The red flag that was the quickest to catch my attention
was the large percentage of the 401(k) that is invested in the money market, a portion that is
contributing very minimally toward your projected retirement income.
Here is a snapshot of your current allocation of contributed retirement funds, along with a
tailored suggestion that I have formulated to help meet your financial goals. You will be able to
get a visualization of how this new asset allocation will increase the yearly return on your
retirement portfolio:

19 | P a g e
Current Portfolio Distribution Expected Rate of Return
Weighted Rate of
Return
Cash 30% 1.00% 0.30%
Bonds 0% 7.00% 0%
Large-CapStocks 54% 9.00% 4.86%
Mid/Small CapStocks 15% 11.00% 1.65%
International Stocks 0% 8.50% 0.00%
Individual Equities 1% 10.00% 0.10%
Portfolio Expected rate of
return
6.91%
$86,124.60
$155,024.28
$43,062.30
$2,870.82
Current
Cash Large-Cap Stocks Mid/Small Cap Stocks Individual Equities

20 | P a g e
The investments in the current portfolio are not well enough diversified and return
could be improved by reallocating funds among different asset classes. The plan I have
$11,483.28
$77,512.14
$100,478.70
$22,966.56
$74,641.32
Suggested
Cash Bonds Large-Cap Stocks Mid/Small Cap Stocks International Stocks
Suggested Portfolio
Distribution Expected Rate of Return
Weighted Rate of
Return
Cash 4% 1.00% 0.04%
Bonds 27% 7.00% 1.89%
Large-CapStocks 35% 9.00% 3.15%
Mid/Small CapStocks 8% 11.00% 0.88%
International Stocks 26% 8.50% 2.21%
Individual Equities 0% 10.00% 0.00%
Portfolio Expected rate of
return
8.17%

21 | P a g e
formulated will help to efficiently diversify your portfolio by spreading out your funds to a
wider variety of asset classes that earn an attractive return relative to their level of risk.
You currently have 30% of your portfolio dedicated to cash and have nothing allocated
to bonds. A smart consideration would be to allocate the cash you have in your portfolio more
efficiently towards investment grade bonds, as you would be earning a yearly return of around
7.00% rather than a lousy 1.00% from keeping these funds in the money market. This strategy
could be a key factor in helping to finance your future needs.
When combining large, medium, small, and international stocks, your portfolio consists
of 69% stocks overall. Large cap stocks are those of big, often well-known corporations. Small
caps lack the same kind of name recognition, but often offer greater potential for investment
gains. Given that you would like to be positioned as a moderately aggressive investor, this is a
satisfactory amount of equity for you to be holding, but it would be effective to allocate more
of your overall stock funds towards small cap stocks that earn a higher return.
The current return of 6.91% is a decent return, but the new suggested allocation would
earn a return of 8.17%, which will make a huge difference down the road. The allocation
suggestion is slightly riskier than average of those with 9 years left until retirement, however in
our first meeting you said you were comfortable with allocating a high percentage of
investment funds in stock.
It is recommended that you earn 70% of your current income once you reach
retirement, which is equal to $81,900. Given the mix of assets that your 401(k) plan is currently
invested in, calculations suggest that there will be a considerable gap between the annual
income you will be making in retirement and the amount you should be earning to retire
comfortably.
Currently, your annual retirement income from your 401(k) plan would be $61,400 if it
remains invested in the same securities. The portfolio that I have suggested for you will
increase your retirement income to $75,000, and thus the remaining gap will have to be
accounted for through other means.
As a general rule of thumb, it is recommended that you still accumulate about 80% of
your annual income once you are retired. Your annual retirement spending goal has been
established at $81,900 which is 80% of the $117,000 you are currently earning. This value will
allow you to live comfortably without changing your lifestyle or giving up hobbies, because by
nature your expenditures are likely to be reduced once you become a retiree.

22 | P a g e
The chart below takes into consideration your desired retirement income, your
expected social security income, your projected 401(k) income, years until retirement, and by
using specified inflation and growth factors evaluates how much annual income you are going
to need to accumulate for retirement through other sources. From this analysis, there shows to
be a $9,903 shortfall in retirement income that will need to be accounted for using a mix of
strategies.
Annual Retirement Income Surplus/Shortfall
Current Annual Income $117,000
% of Preretirement Income Needed for Retirement 70%
Ideal Retirement Income $81,900
Minus Social Security ($25,500)
Remaining Needed Income $56,400
Inflation Factor (assume 10 years until retirement) 1.48
Inflated Remaining Income $83,472.00
Minus Projected Income from 401(k) ($75,000)
Estimate of Retirement Income Needed $18,472.00
Savings Necessary to Produce Needed Income $277,080.00
Value of Current Assets $20,000
Growth Factor 1.97
Estimated Future Value of Current Assets $28,212.00
Total Amount Needed $248,868.00
Annual Shortfall $9,903.22

23 | P a g e
 Making the assumptionsthatyouwill liveanadditional 30yearsonce you have reached
retirementandaninflationrate of 3.5%,calculationsindicate the following: youare goingto
needanadditional total retirementlumpsumof $182,136 to meetthe satisfactorylevelof
retirementincome,giventhatyourcurrentannual shortfall is$9,903, as shownbelow:
Lump Sum Retirement Need
PMT $9,903
FV $0
I 3.5%
N 30 years
PV $182,136
 Nextwe take a lookat the current savingsinyourbank accountsto see how much itwill growby
the time youhave reachedyourspecifiedretirementage.Assumingthatthe $20,000 inyour
bankaccounts will growfor10 yearsat an interestrate of 3.5%, the future value of yourcurrent
savingsisprojectedtobe $28,212.

24 | P a g e
Value of Current Savings at Retirement
PV $20,000
PMT $0
i 3.5%
n 10 years
FV $28,212
 The nextstepshowsthat subtractingthe future value of yourcurrentsavingsfromthe total
lumpsumneeded,ascalculatedabove,youare leftwithyouroverall savingsshortfall.After
findingthe total savingsshortfall,itcanbe calculatedhow muchyou are goingto needto save
annuallytomake up foryour retirementincomeshortfall,whichcomesoutto$2,982. Thisis not
such a dauntingnumberwhenconsideringitthisway:youonlyneedtosave $248.50 a month
extrafor the next10 yearsto assure yourself awell-fundedretirement.
Annual Savings Suggested for Retirement
Annual income needed from personal savings $9,903
Lump sum requirement need (current $)
n=30 years, I=3.5, PV=?, PMT=$9,903, FV=0 $182,136
Current Personal Savings $20,000
Value of Current Savings at Retirement
n=10 years, I=3, PV=$20,000, PMT=0, FV=? $28,212
Savings Shortfall $153,924
Annual Savings required for retirement
$2,982.00n=30 years, I=3.5, PV=0, PMT=?, FV=$153,924

25 | P a g e
Thisextra$248.50 neededpermonthtosatisfyyourretirementincome needswouldbe most
efficientlyaccomplishedbyincreasedmonthlycontributionstoyour401(k). Thismethodof clearingthe
gap betweenexpectedretirementincome anddesiredretirement incomehassome majoradvantages
that shouldnotbe overlooked.
Firstly,youremployerhaseithermetorcome close to meetingthe annual contributionsthat
youhave made to thisaccount, whichportraysthe dual benefityouwouldreceive fromthe addition of
the combinedincreasedcontributions.
Secondly,a401(k) contributionisbefore taxes,soyoudon’thave topay income tax whenyou
contribute money,justwhenyouwithdraw it.
Let’ssay forexample,thathypothetically,youare able tocontribute an extra$248.50 a month,
equivalentto$62 a week,toyour 401(k).Your employermatchesthisincrease andyourmonthly
contributionssuddenlyincrease byabout$497 a month,whichis$5,964 a year.
The followingisachart representingthe differencesin the future valueof the 401(k) under
differentcircumstances.$2,956,192 isthe future value of your401(k)’s assetsgivennochangesand
$4,769,250 is afterthe recommendationsthatwere explainedtake effect.Thisisaverysignificant
increase andtranslatestoan increase inretirementincome from$61,400 to at least$81,900,
dependentonthe level thatyouremployerincreasescontributionstoyour401(k).The forecastinthe
chart belowassumesthatyouremployerwill matchyoudollarfordollarforeverydollarof increased
contribution:
Accumulated Future Value of 401(k) Comparisons
Current 401(k) Reallocated 401(k) Reallocated 401(k) & Increased Contributions
N 30 30 30
PV 292,000 292,000 292,000
FV 2,956,192 4,072,197 4,769,250
I/Y 6.91% 8.17% 8.17%
PMT 8,487 8,487 $8,487 + increased contributions of $5,964= $14,451

26 | P a g e
Insurance Recommendations
Improvement in your risk management plan is one of the primary methods were are going to use to
reach your goals and protect your family’s financial future. More specifically, we want to protect your
familyandassetsinthe eventof a personal lossorpotential liabilityclaim, while being as thorough and
cost-effective as possible. The main purpose of insurance is to prevent a disastrous financial loss and
due to the many uncertainties and random events in life, it is vital to make sure all aspects of your life
are covered.

27 | P a g e
Life Insurance Introduction
A life insurance policy shouldensure thatwhenadeathoccursin yourfamily,there issufficient
income andcapital to coverthe cash flow needsforthe survivingfamilymembers.Withoutthe
continuedbenefitof yourincome,yourfamilymaynotbe able to affordongoingexpensesforhousing,
transportation,food,clothing, retirementneeds,etc. Thistype of income replacement needstobe
sufficientenoughtoensure Melissaisprovided cashflow tomeetthese needs,whichwouldotherwise
have to be coveredbyredeemingyourexistingassets.
Your currentlife insurance policythroughthe companyRiverSource hasthe followingcharacteristics:
 20 Year Term Life Insurance
 MonthlyPremium:$60.04
 DeathBenefit:$425,000

The company boastsa verysolidcreditratingby3 of the toprating firms,indicatingyouhave chosena
financiallystable companyforinsurance.Becauseof this,Isuggestthatyoureceive all insurance policies
that I recommendtoyouthroughthe same company:
 A.M. BestCreditRating:A+ (superior) withastable outlook
 Moody’sInvestorService CreditRating:Aa3 (excellent) withastable outlook
 Standard& Poor’sCreditRating:AA- (verystrong) withastable outlook

28 | P a g e
Life Insurance NeedsAnalysis:
In orderto produce an accurate estimate of yourfamily’soverall lifeinsurance needsIuse an
advancedcalculationthatinputsyourcurrentfinancial situationandfuture familyincome needs. This
value iscomparedto the deathbenefitof yourcurrentpolicytosee if itwill paya large enoughbenefit
to supportyourfamilywithoutthe supportof yourincome
Family Expenses
Final Expenses 15% of estate $180,000
OutstandingDebts Otherthan mortgage $4,956
OutstandingMortgage $375,000
Childrentobe College Funded
Age 14, 2 yearsat a
state school 1
Needed Income if you died
today
Total Annual Income 60% of total income $60,000
Years of Income Provided Estimated 30
CurrentSavings Bank accounts $14,000
CurrentRetirementSavings Pension,401(k),etc. $282,276
Value of CurrentDeathBenefit Life Insurance $425,000
Extras
EstimatedInflationRate 4%
After-Tax InvestmentYield 6%
Total
Your Overall Life Insurance Need
If youwere to die
today, your family
wouldneedthisamount $946,656.66

29 | P a g e
Life Insurance recommendation:
Thoughthe term life insurance policyyouhave isagreat choice and well-suitedformanyof yourneeds,
it maynot suffice inprovidingalarge enoughdeathbenefittosatisfyfuture expenditures.Your current
deathbenefitisonly$425,000 while thisanalysisindicatesthatyourfamilywouldneednearly$947,000
to live comfortablyfor30 years.I wouldsuggestincreasingyourmonthlypremiumfrom$60 to $90 to
increase yourdeathbenefitto$1,000,000. Itis a viable optiontostickwithyourcurrentlife insurance
companyas well keepingthe 20 yearterminsurance,asthiscoverage offersseveral advantagesovera
whole life policy:
 Theyare easyto understandandyoupay a low,fixedmonthlypremium. Wholelifepolicies,on
the otherhand,have a cash value thatbuilds,butthe monthlypremiumsare considerably
higher
 You can investyourhard earnedmoneyyourself ratherthanhavingthe insurance company
investforyou veryconservatively
 Deathbenefitsare generallyexcludedfromincome tax tothe beneficiary
 You can increase yourdeathbenefitfrom$425,000 to $1,000,000 for an extra$30 on the
monthlypremium

30 | P a g e
Health Insurance:
As faras the healthinsurance itself,the mostpractical seemstobe the comprehensive health
insurance whichcombineshospital insurance,surgical insurance,medical expense insurance,andmajor
medical expense insurance all intoone package.Thiswould be the idealcoverage planforyourfamily
once you are no longercoveredbyyouremployer,whichprovidessatisfactorycoverageforthe time
being.
For yourcurrent coverage,Irecommendthatyoutake advantage of youremployer’sFlexible
SpendingAccount,whichisanaccount youput moneyintotopay forcertainout-of-pockethealthcare
costs.You don’thave to pay taxesonthismoneyimplyingthatyouwill save anamountequal tothe
taxesyouwouldhave paidonthe moneyyousetaside.Since youindicatedthatyoursonmay be due
for bracesinthe nearfuture,youwouldbe able tosave tax dollarsfromsettingaside moneyforthe
procedure intoanFSA.

31 | P a g e
DisabilityIncome insurance
What if youwere tobe disabledforanextendedperiodandcouldnotworkat all? For most
people,thismeansthatmonthlyexpendituresare goingtooutweighmonthlyincome,thuscreating
financial hardship.Many overlookdisabilityinsurance because noone thinkstheywill everbecome
disabled,however, statistically,more peopleare disabledeachyearthandie.
Giventhatyou are the primaryincome producer,if youare struck witha disability,itwouldbe
financiallydisastrous. Althoughyouare providedWorkman’sCompensationInsurancebyyour
employercoveringshort-term(six months) disabilities,Irecommendthat long-termdisabilityinsurance
be purchasedwitha monthly benefitof$7,000 to compensate foryourincome tothe family.
Thiscoverage alsopresentsthe optiontoaddon certainriders fora predeterminedextra
premium,inwhichIwouldsuggestthe waiverof premiumrider.Thiswouldallow youtostopmaking
premiumpaymentsduringthe disabilityperiod,whichcanbe veryvaluable if the disabilitylastsfora
longperiodof time. Inaddition,thispolicyshouldinclude acost-of-livingadjustment(COLA) to
compensate forinflationoverthe termof the disability. Giventhatthere isa relativelylow-riskof you
becomingdisabledbetweennowandyourretirement,Iwouldsuggestaddingonlythe twomentioned
ridersto avoidpayingahigherpremiumthannecessary.
DisabilityInsuranceusuallyrangesfrom1-3% of yearlyincome,soto playitfair we are goingto
use the rule of averagesandassume thatthiscoverage will costyou2% of youryearlyincome.This
comesout to a yearlypremiumof $2,340, or $195 a month.

32 | P a g e
Long Term Care insurance
Whenconsideringthe potential costof long-termcare andthe uncontrollableriskfactors
associatedwithit,itisadvisable foreveryone over55to considerbuyingalong-termcare policyif the
personhasthe abilitytomake the premiumpayments. Atthistime Iwouldrecommendwaitingtobuy
longtermcare insurance coverage until youreachage 60. Giventhat youare still livingaperfectly
healthylife,waitingafewyearsto buysuch a policywill save youmoneynow.Youdon’twantto wait
much longerafterturning60 to purchase thisinsurance because waitingtoolongcouldmake the policy
cost prohibitive.Astime passesandwe meetinthe future toevaluate how yourfinancial planiscoming
along,we can reevaluate whetherornotitis time toinvestina Long-TermCare policy.

33 | P a g e
Automobile insurance Policy
There are twotypesof damagesthat can occur from an auto accident:propertydamage and
bodilydamage.The selectionof agoodauto policyinvolvesconsideringcosteffective meansof covering
againstbothof these damages.
Under yourcurrentauto insurance planyoupay $180 a month. I recommendincreasingthe
coverage to the minimumrequiredtopurchase anumbrellainsurance policy thatcoversupto
$2,000,000 and becominginsuredagainstuninsureddrivers.The umbrellacreatesanattractive financial
cushionbecause where the underlyingautomobile liabilitycoverage stops,the umbrellapolicykicksin.
The umbrellapolicywill notonlycoveryourliabilityneedsbeyondthe underlyingpolicylimits,butalso
your defensecostsassociatedwithalawsuit. Again,the policynotonlycovers autoliabilitiesaswell as
home liabilities. The first$1millionof coverage generallycosts$200 to $400 a year;the next$1 million
runs an additional $75 to $100.
It wouldalsobe a wise considerationtoincrease yourdeductible to$1000 to save a few
hundreddollarsannuallyonthe premium. The youngage of your son alone will affectyourpremium
once he beginsdriving,because teenagersare perceivedtohave the highestriskof beinginvolvedin
financiallydevastatingcaraccidents.The decreaseddeductibleswillalsooffsetthe price change of
switchingovertothe umbrellapolicy.

34 | P a g e
Homeowners Policy
A homeownerisexposedtomanytypesof risks. The mainelementsof ahomeowner’spolicy
are coverage onthe house,forpersonal property,againstthe homeowner’sliability,andmedical
paymentsforbodilyinjuryorpropertydamage causedtootherpeople orproperty.The standard
homeowner’spolicyis apackage deal containingall fourtypesof coverage.
You currentlyhave the broadform of standardizedhomeowner’sinsurance,whichexcludes
liabilityprotectionagainstearthquakesandflood. YourlocationinLa Center,Washington,however,
doesnothave a considerableenoughriskof floodingorbeingpartof an earthquake soyoucan slide by
withouttakingonthisaddedpremium.
The rule of thumbisthat homeowner’sinsurance shouldcover80% of the appraisedvalue of
the property,butinsuringyourhome forthe replacementvalue ratherthanafixeddollaramountforan
addedpremiumisworth the peace of mind.Thiswill be accomplishedthroughthe umbrellapolicythatI
have suggestedforyou,whichcoversautoand home damage or replacementcostsupto $2,000,000.
Your home to be paidin full shoulddisasterstrike andcoversthe costsof expensive lawsuitsshouldthe
occasionrise.The benefitsandease of mindthese changeswill allow youtoenjoywill be well worththe
addedpremium.

35 | P a g e
Education Planning
Most Americans consider a college education extremely important, and in today’s
society that comes at a very high cost. Expenses at four-year universities are nearly two and a
half higher than 15 years ago and the cost will keep rising. Many families don’t consider the
financial burden of college tuition until the time comes to pay for it, causing unnecessary stress.
Any family that has children with college in the horizon should take a college funding plan very
seriously.

36 | P a g e
I have incorporated an education planning section to help you get the ball rolling on
saving for your son’s education. Saving now for future college tuition is key, and it is crucial that
we implement this as soon as possible because time is still on your side. In educational
planning, as in every other segment of financial planning, it is time in, and not timing that
makes all the difference because of the magic of compounding. Luckily for you, there is only
one child to consider saving for, making this a much less daunting task than it could be.
The following pages include graphs, analysis, and explanations to give you a play-by-play
run down of how I calculated the future costs of college and how I suggest you save for the
expenses. The projections that went into formulating your funding plan are parallel with the
information that you passed on to me regarding your family’s wishes:
 Your family collectively agrees that it would be best to save on college education
by having your son take general education classes at an inexpensive school for
his first two years. Thus, I have indicated that he will be attending a community
college for the first two years
 He will then finish his education at a state college for his final two years,
preferably in-state to save on out-of-state tuition costs
 He will be starting high school this year, giving you a savings time horizon of 4
years before tuition payments begin
 You would like to save enough money to send him to school without taking a
loan out, also allowing him not to use any employment income to support his
school expenses

37 | P a g e
The charts below contain the primary framework for determining the amount of savings
required to pay for the full projected costs of college education. For this calculation, I broke the
costs of college into two component: community college tuition needs and state school tuition
needs. The assumption that was made for both components is that the tuition inflation rate is
5.0%
Community College Tuition Calculation
Average yearly tuition $3,748
Tuition inflation rate 5.0%
PMT $0
Years until enrollment 4 years
1st Year Tuition Future Value $4,556
2nd year Tuition Future Value $4,784
The current average yearly tuition at a community college today is $3,748. Given that your
son will be starting college in 4 years I have presented the future costs for his first and second
year at community college. The first year is projected to cost about $4,556 while the second is
going to cost about $4,784. The third and final chart presents the total future costs of your
son’s education, along with a yearly savings plan to help you achieve your goals.

38 | P a g e
State College Tuition Calculation
Average yearly tuition $15,566
Tuition inflation rate 5.0%
PMT $0
Years until enrollment 6 Years
1st Year Tuition Future Value $20,869
2nd year Tuition Future Value $21,903
The current average yearly tuition at an in-state state college is $15,566. Given that your
son will be transferring to such a school in a projected 6 years, I have presented the future costs
for his first and second year at a state school. The first year is projected to cost about $20,869
while the second is going to cost about $21,903.
Annual Education Contribution
PMT $5,756
FV $52,103
I/Y 3.5%
N 8 Years
PV $0
Given these projected future costs of college for all four years, the total cost of education
comes to $52,103. This may seemlike an intimidating amount considering you don’t currently
have much in your savings account. The good news is that if you are able to save $5,756
annually, which is about $480 a month, towards this purpose, college will already virtually be
paid for.

39 | P a g e
Education Funding Recommendation
It is my opinion that a 529 education savings account is the best investment vehicle for
college funding. This plan offers significant benefits that make it a very attractive choice:
 A Section 529 college savings plan allows a person to contribute to a pool of money that
is managed by the state treasurer or investment advisor. People of all income levels are
eligible to contribute to a 529 plan.
 The money that accumulates in this account grows with compounded interest. The
roughly 2% interest rate that this account will accrue is a better rate than could be
earned in the money market at this point in time
 Although your contributions are not deductible on your federal tax return, your
investment grows tax-deferred, and distributions to pay for the beneficiary's college
costs come out federally tax-free as long as they are used for educational purposes.
 Contributions to a 529 are considered a completed gift for estate and gift tax purposes.
The contributor may elect to treat the gift as occurring ratably over a five-year period,
so that the $14,000 exclusion can be leveraged to as much as $65,000 in one year.
 Control of the account stays with the owner even though contributions generally aren’t
considered part of your estate for federal tax purposes. The contributor of a 529 plan is
allowed to replace the current designated beneficiary who is a member of the family.

40 | P a g e
Tax Planning
Tax planning is defined as a process which helps individuals to evaluate their
financial status and their tax liabilities, and allows the financial planner to help
recommend solutions that will accomplish this with efficiency. This involves
conceiving of and implementing various strategies in order to minimize the amount
of taxes paid for a given period. Many clients claim that they are already covered in
this area because they are utilizing tax professionals, however, I am usually able to
generate a tip or two about taxes when going through a person’s financial
information. Below is a breakdown of current taxable income percentages based on
your total taxable income:

41 | P a g e
Current Income Tax Liability
Income
wages& salaries $ 117,000.00
yearlycontributionto retirementplan $ (8,487.00)
taxable dividends $ -
taxable refunds $ -
businessincome (loss) $ -
capital gain(loss) $ -
taxable notes,annuities $ -
rental real estate,partnerships,etc. $ -
social security benefits $ -
otherincome $ -
Total Income: $ 108,513.00
Adjustments
self-emplymenttax adjustment $ -
pre-tax contributions $ 9,385.00
otheradjustments $ -
Adjusted Gross Income: $ 99,128.00
Reductions
standarddeduction $ 41,961.00
personal exemptions $ 11,850.00
total deductions $ 53,811.00
Taxable Income: $ (44,426.00)
Income Tax
Federal income tax $ 5,741.14
Alternate minimumtax $ -
Total Tax Before Credits: $ 5,741.00
Credits
childtax credit $ 750.00
othercredits $ -
Total Income Tax Liability: $ 4,991..40

42 | P a g e
Although it isn’t a major issue in your mind to reduce your current income tax liability,
increasing your pre-tax contributions to the maximum allowable level of $14,000 a year will
reduce your income tax liability. As stated earlier in the plan, you will be accomplishing this by
setting aside an extra $5,756 a year towards your son’s 529 education account, thus creating a
tax advantage while simultaneously fulfilling a more important financial need. The table below
presents how much this contribution will decrease your tax liability from last year, making the
assumption that everything else remains constant. The new tax liability would be $4,432.80 as
compared to $4,991.40 last year, a $558.60 improvement:
Adjustments
self-emplymenttax adjustment $ -
pre-tax contributions $ 14,000.00
otheradjustments $ -
Adjusted Gross Income: $ 94,513.00
Reductions
standarddeduction $ 41,961.00
personal exemptions $ 11,850.00
total deductions $ 53,811.00
Taxable Income: $ (40,702.00)
Income Tax
Federal income tax $ 5,741.14
Alternate minimumtax $ -
Total Tax Before Credits: $ 5,741.00
Credits
childtax credit $ 750.00
othercredits $ -
Total Income Tax Liability: $ 4,432.80

43 | P a g e
Estate Planning
Estate planningisthe processof developingandimplementing documents and strategies to ensure the
distribution of your property during your life and after your death according to your goals and
objectives.Withoutsuchaplan,youmay lose control of the distribution of your assets and leave those
decisions to chance and outside forces. Estate taxes and probate are two other factors that are
preferablyavoidedatall cost,so financial planslooktoease thatburden as well. The following analysis
and suggestions that I have formulated for you will help you choose what will happen to your assets
upon your death, allow you to choose who they will be distributed to, and includes strategies to title
your assets in order to lower your taxable estate and avoid probate:. We will begin by analyzing your
current taxable estate, total settlement costs, and beneficiaries of your assets:

44 | P a g e
Current Estate Structure Brendan Melissa
Will No No
Bequests to non-skip persons (not including the surviving client)
Dollar amount $0 $0
Percent 0% 0%
Bequests to skip persons (subject to Generation-skipping Transfer
Tax)
Dollar amount $0 $0
Credit shelter trust No No
Estate Planning Assumptions
Death age (for estate plan) 85 85
Funeral and final expenses (in today's dollars) $15,000 $15,000
Percent of the probate estate 10% 10%
Administration expenses (as a percent of gross estate) 5% 5%
Historical Gifting Information
Cumulative total gifts in excess of annual exclusion $0 $0
Cumulative gift tax previously paid above total $0 $0
Cumulative gift tax credit previously used $0 $0
Generation-skipping transfer tax exemption previously used $0 $0

45 | P a g e
Total Current Estate Values
Brendan Melissa Joint Assets(Split50%) CommunityAssets
Cash assets $7,500 $7,500 $15,000 $0
Investmentassets $0 $0 $0 $0
Retirementassets $290,000 $0 N/A N/A
Stock options $0 $0 N/A $0
Annuities $0 $0 $0 $0
Deferredcompensation $0 $0 N/A N/A
Notesreceivable $0 $0 $0 $0
Businessassets $0 $0 $0 $0
Personal assets $190,000 $50,000 $0 $0
DeathBenefit $425,000 $0 $0 $0
PrimaryResidence $250,000 $250,000 $500,000 $0
AssetsreceivedatBrendan'sdeath N/A $1,162,500 N/A N/A
Current GrossEstate Total Assets $1,162,500 $1,470,000 $515,000 $0

46 | P a g e
Current Estate Tax & Settlement Costs
Brendan Melissa
Current Gross Estate $1,162,500 $1,470,000
Settlement costs:
Funeral and final expenses $ 15,000.00 $ 15,000.00
Probate expenses (2% of estate) $ 23,350.00 $ 29,400.00
Administration expenses (5% of estate) $ 58,125.00 $ 73,500.00
Liabilities payable at death $ 379,957.00 $ -
Adjusted gross estate $ 686,068.00 $ 1,352,100.00
Allowable tax-free transfers:
Transfers to surviving spouse (marital deduction) $ 686,068.00 $ -
Transfers to charities (charitable dedcution) $0 $0
State estate tax deduction (over $2.012 million in
Washington) $0 $0
Taxable estate $ - $ 1,352,100.00
Total settlement costs: $476,432.00 $117,900.00

47 | P a g e
Estate Tax & Settlement Costs With Death Benefit In Beneficiaries Name
Brendan Melissa
Current Gross Estate $737,500 $1,045,000
Settlement costs:
Funeral and final expenses $ 15,000.00 $ 15,000.00
Probate expenses (2% of estate) $ 23,350.00 $ 20,900.00
Administration expenses (5% of estate) $ 36,875.00 $ 52,250.00
Liabilities payable at death $ 379,957.00 $ -
Adjusted gross estate $ 282,318.00 $ 956,850.00
Allowable tax-free transfers:
Transfers to surviving spouse (marital deduction) $ 282,318.00 $ -
Transfers to charities (charitable deduction) $0 $0
State estate tax deduction (over $2.012 million in
Washington) $0 $0
Taxable estate $ - $ 956,850.00
Total settlement costs: $455,182.00 $88,150.00

48 | P a g e
The graph below shows a comparison of your total gross estate, settlement costs of your
assets upon your death, estate taxes, and how much of your estate is going to be passed on to
your wife’s gross estate upon your death with and without your current death benefit included
in your estate. You can decrease future settlement costs by over $20,000 and pass over
$400,000 of your estate into your wife’s estate when you die, so I would recommend that you
assign your life insurance death benefit to your son as a beneficiary and release it from your
current gross estate:
$476,432.00
$686,068.00
$-
$1,162,500.00
$455,182.00
$282,318.00
$-
$737,500.00
$-
$200,000.00
$400,000.00
$600,000.00
$800,000.00
$1,000,000.00
$1,200,000.00
$1,400,000.00
Settlement Costs Survivor Estate Taxes Current gross estate
Your Estate Calculations With/Without Death Benefit in
Your Name At Death
With Death Benefit Without Death Benefit

49 | P a g e
Additional Estate Recommendations
 Title your life insurance death benefit in your son’s name so that it is not included on
your total gross estate
 Establish a credit shelter trust also known as an AB Trust. This will allow you to avoid
estate taxes when passing assets on to heirs. The trust is structured so that upon your
death, the assets specified in the trust agreement, up to a specified maximum dollar
value, are transferred to the beneficiaries named in the trust, which you specified would
be your son. A key benefit to this type of trust is that the spouse maintains rights to the
trust assets and the income they generate during the remainder of his or her lifetime
 Establish a will to protect the remaining assets that are left outside the living trust.
 Establish in writing that your wife’s brother will be the guardian for your son if the
situation should arise
 Grant your wife as power of attorney so he can act on your behalf in making medical
care and finances

50 | P a g e

Comprehensive Financial Plan

Recomendados

Recomendados

Más contenido relacionado

La actualidad más candente

La actualidad más candente (20)

Destacado

Destacado (15)

Similar a Comprehensive Financial Plan

Similar a Comprehensive Financial Plan (20)

Comprehensive Financial Plan