Question

Personal Financial Plan for “Jack and Jill”

• Jack and Jill are married and a middle-aged couple.
• In order to achieve their goals, they hope to retire and must, therefore, ensure they have enough savings to cater for their needs in their golden days.
• As a married couple, they have made several investments and are not sure whether their insurance coverage is adequate.
• They are not sure whether they have enough financial resources to last them for the rest of their lives.

Personal Financial Plan Assumptions

1. Retirement:

• Jill would like to retire at age 65; and
• Jack would prefer to retire when he is 67.

2. Asset evaluation

• Cash & Cash equivalents (bank accounts/CDs/Money Market) – RM100,000
• Brokerage account (stocks/bonds) – RM315,000 current value
• Retirement Annuity (RM250,000 current value)
• Jill’s EPF - RM400,000
• Jack’s EPF account (RM520,000)
• Home is worth RM388,000 with a RM120,000 mortgage at a 4.5% interest rate
• Jack’s car is 3 years old and worth RM27,000. The loan balance is RM9,500.

3. Insurance Coverage

• Jack’s life insurance coverage is through work (RM305,000) at RM100/month.
• Jill’s life insurance coverage is a whole life policy (RM95,000 death benefit, RM25,000 cash value) at RM85/month.
• Jack has taken a disability policy to compensate him if he becomes disabled through work which replaces 60% of his income and Jane has no disability insurance.

3. Other Situation Details

• Jill is currently self-employed.
• Jack grosses approx. RM140,000 per year; Jill makes approx. RM50,000.
• They spend approximately RM6,000 a month on basic living expenses like utilities, entertainment, basic needs like food, property tax, and other expenses.
• The overall fixed income to equity ratio is about 40% fixed income and 60% equities (40/60) of all investable assets.
• The couple has not drafted a will.

A) insurance analysis

B) investment analysis

C) estate plan review

Answer 1

A) An insurance analysis will quantify the capital need and then calculate the gap between personal resources and the potential need. Only in this way, can you be assured that you are purchasing the right amount of coverage. With so much at stake, you don't want to buy too little coverage, and, if you're like most people, you also don't want to buy more coverage than you need. The analysis will also help you pinpoint the right kind of insurance based on your budget and your preferences.

B) Investment analysis is defined as the process of evaluating an investment for profitability and risk. It ultimately has the purpose of measuring how the given investment is a good fit for a portfolio. Furthermore, it can range from a single bond in a personal portfolio, to the investment of a startup business, and even large scale corporate projects.Investment analysis means the process of judging an investment for income, risk, and resale value. It is important to anyone who is considering an investment, regardless of type. Investment analysis methods generally evaluate 3 factors: risk, cash flows, and resale value

C) If you want to choose who will inherit what among your possessions and valuables, you need do some estate planning.Reducing taxes on what you leave behind is a common estate-planning goal.Estate planning minimizes the chances of family strife and ugly legal battles.

Retirement savings needs to become a priority instead of an afterthought. The Internal Revenue Service has made saving for retirement even more attractive with special tax-advantaged accounts such as employer 401(k) plans, individual retirement accounts(IRAs), and special retirement accounts for the self-employed.7 These accounts allow for tax deductions, credits, and even tax-free earnings on some retirement savings.