Personal Finance and Wealth Management Case # 1

Presented by Pratik karel Madhur Bharadwaj

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Introduction
Mary and Harry Reser
Net worth of $1,065,951. $32,000 in a 2% bank passbook account, Harry is thetelephone stock; and earns $64,543, plus an sole breadwinner $347,365 in two main concerns are longevity and taxes The Reser's additionalin Harry's 401(k); $224,901 $8,169 from investments $31,000 in an annuity; $202,685 in mutual funds; $23,000 in whole life insurance; their $190,000 home; and $15,000 of personal property.
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Cash Flow
Cash Receivables: (in $) Salary 64543 Cash Payables: (in $) Monthly Expenses 1500 (18000 yearly)

Income from Investments 8169 Contribution in 401(k) - 9681

Cash Surplus - $45031

Familys Financial Problems

As Harry was retiring next year, they wanted their money to last longer and also for the same reason, they wanted to reduce their tax liability as much as possible. The income from investments (from the coming year) should be such that they do not have to pay much tax. The adjusted gross income should be limited to $44000 so as to save tax on social security taxes. When should they take the money out of their tax-deferred plan 401(k)? Should they surrender their Life Insurance Policy for a cash amount of $ 23000? The Reser's car and home have $500,000 and $300,000 of liability coverage, respectively. Do they need Umbrella Liability? If they take out money from their investments, tax will be levied on that amount.
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Strengths
They had an impressive net worth of $1,065,951 and have no debts. They had no children and no heirs. The investment which they have at present is well diversified. No Immediate requirement of Finance Employer also contributes to their 401(k) 8% of the first pay.

Weakness
Harry is the sole bread winner and is about to retire next year which means they will be dependent upon the income from investment and the net worth. No accumulation of savings further as it is assumed that their medical/health expense is going to rise. They are not covered by any medical/health insurance which could control their medical expenses.
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Recommendations
They should not take money out of their Life Insurance Policy instead they should go for withdrawing from tax-deferred plan Investment in medical insurance/health coverage for both of them Reverse Mortgage Umbrella Policy Investment in Balanced Mutual fund should divest some money from the telephone stock and move the amount into some fixed income generation plan

Thank You