Assignment
With three dependent children, the Brocks are assessing their life insurance. Pam has $5,000 of coverage. Josh has life insurance coverage equal to approximately eight times his annual salary.
With approximately 20 years until retirement, Pam and Josh Brock want to establish a more aggressive investment program to accumulate funds for their long-term financial needs. Josh does have a retirement program at work. This money, about $110,000, is invested in various conservative mutual funds. Since Pam has been working sporadically over this time frame, she does not have a formal retirement fund.
The Brocks established their own investment program about four years ago, and today they have about $36,000 invested in conservative stocks and mutual funds. In addition to their investment program, the Brocks have accumulated $11,000 to help pay for the children's college educations. Also, they have $5,000 tucked away in a savings account that serves as the family's emergency fund. Finally, both will qualify for Social Security when they reach retirement age.
|
Life Situation
|
Financial Data
|
|
Pam, 43
Josh, 45
3 Children, ages 16, 14 and 11
|
Monthly income
$4,900
|
|
Living expenses
|
$4,450
|
|
Assets
|
$262,700
|
|
Liabilities
|
$84,600
|
|
Emergency Fund
|
$5,000
|
Task
I. What changes would you recommend for the Brock's life insurance coverage? Support your reasoning for these changes.
II. What would you view as the strengths and weaknesses of the Brocks' financial situation at this stage in their lives? What would you recommend for additions or changes to address the weaknesses?
III. Describe an investment portfolio (asset types, allocation, risk-return) that you would recommend for the Brocks. Assuming a portfolio of 100%, how would you break out the investments by their weight (as a percentage)?