Next, I am going to analyze my client household’s existing insurance and retirement program as well as giving recommendations. First, it is the life insurance. The school district pays the premium for $50,000 in group term life insurance for Alex who has no other life insurance. Alex said that the plan provides yearly term insurance coverage to participating employees. Term insurance provides low-cost protection to employees during their working years. This group life plan provides a basic amount of term life insurance to eligible employees like Alex, based on earnings, position, a flat amount for all, or some combination. The plan also makes available supplemental term insurance, which allows Alex to purchased additional life insurance up
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Term insurance premiums increase with age but since the school district pays the premiums for Alex, then Alex does not have to worry about the premiums payments. This plan is inappropriate if Alex wishes to save money for a specific need since term insurance policy does not accumulate cash values. Marty has a $25,000 whole life insurance policy that was purchased at birth. Last year the Smiths bought $30,000 whole life insurance policies on each of the children. Whole life insurance is a cash-value policy that provides lifetime protection. Alex told me that they paid the premiums throughout the lifetime of Marty and the children. Therefore, Marty and the children are having ordinary life insurance plans. This type of whole life insurance is perfect for policyholders who wish to meet their protection and savings needs. The Smiths plan to use these policies to also save for the children’s college. The plan builds cash values that can be obtained by surrendering the policy or by borrowing the cash value. In my opinion, the plans that the family is having right now pretty much cover their basic needs. However, I would recommend a few …show more content…
Alex participates in a defined benefit retirement plan through the Oklahoma Teachers Retirement System and is eligible for full retirement benefits at age 58. In Alex’s defined-benefit plan, the retirement benefit is known, but the contributions will vary depending on the amount needed to fund the desired benefit. The amount can be based on career-average earnings or on a final average pay, which generally is an average of the last 3-5 years earnings. The retirement benefits reflect more accurately the effects of inflation because they are usually based on a final-pay formula. The plan is usually non-contributory, which means that Alex does not have to contribute any to the plan, only Alex’s employer does. Also, the investment risk falls directly on Alex’s employer and not on Alex. In my opinion, this plan fits Alex and the Smith family very well. Marty sets aside about $250 per month in an index mutual fund. The mutual fund was worth $37,789 at the end of September. I would recommend Marty and Alex to have a Roth individual retirement account (IRA) that allows them to make annual contributions to a retirement plan and receive favorable income-tax treatment of such contribution. Since the couple’s modified adjusted gross income is $117,000, and Alex participate in the employer’s retirement plans, both Alex and Marty can establish a Roth IRA. The couple’s modified adjusted gross income of $117,000 is below the income threshold for
Term insurance premiums increase with age but since the school district pays the premiums for Alex, then Alex does not have to worry about the premiums payments. This plan is inappropriate if Alex wishes to save money for a specific need since term insurance policy does not accumulate cash values. Marty has a $25,000 whole life insurance policy that was purchased at birth. Last year the Smiths bought $30,000 whole life insurance policies on each of the children. Whole life insurance is a cash-value policy that provides lifetime protection. Alex told me that they paid the premiums throughout the lifetime of Marty and the children. Therefore, Marty and the children are having ordinary life insurance plans. This type of whole life insurance is perfect for policyholders who wish to meet their protection and savings needs. The Smiths plan to use these policies to also save for the children’s college. The plan builds cash values that can be obtained by surrendering the policy or by borrowing the cash value. In my opinion, the plans that the family is having right now pretty much cover their basic needs. However, I would recommend a few …show more content…
Alex participates in a defined benefit retirement plan through the Oklahoma Teachers Retirement System and is eligible for full retirement benefits at age 58. In Alex’s defined-benefit plan, the retirement benefit is known, but the contributions will vary depending on the amount needed to fund the desired benefit. The amount can be based on career-average earnings or on a final average pay, which generally is an average of the last 3-5 years earnings. The retirement benefits reflect more accurately the effects of inflation because they are usually based on a final-pay formula. The plan is usually non-contributory, which means that Alex does not have to contribute any to the plan, only Alex’s employer does. Also, the investment risk falls directly on Alex’s employer and not on Alex. In my opinion, this plan fits Alex and the Smith family very well. Marty sets aside about $250 per month in an index mutual fund. The mutual fund was worth $37,789 at the end of September. I would recommend Marty and Alex to have a Roth individual retirement account (IRA) that allows them to make annual contributions to a retirement plan and receive favorable income-tax treatment of such contribution. Since the couple’s modified adjusted gross income is $117,000, and Alex participate in the employer’s retirement plans, both Alex and Marty can establish a Roth IRA. The couple’s modified adjusted gross income of $117,000 is below the income threshold for