Bob and Karen Plan for Their Goals

Bob, age 47, is an engineering supervisor for a construction company. His wife, Karen, is age 44 and a 7th-grade math teacher. Bob and Karen have two children: Joey (age 12) and Sophie (age 8). They have a combined annual income of $150,000, no consumer debt, and currently have $625,000 in investments.

Bob and Karen have three goals: 1) College for their two children, 2) Plan for retirement in 13 years by building up their Individual Retirement Accounts (IRAs) and 3) Start putting money away for an Emergency Fund.

After telling CitrinGroup about their goals, Bob and Karen opened five accounts: two College Fund accounts (one for each child), two IRAs (one for each of them) and an Emergency Fund account.

Goal: College Funds (2) – Bob and Karen have planned for each of their children to attend a four-year university that costs $15,000 per year today. To accomplish this, CitrinGroup helped them open two accounts and budget $500 a month for each child's college fund. To make these deposits easier, Bob and Karen authorized the custodian to automatically debit $1,000 from their bank checking account on the 1st of every month. In analyzing the college goals, CitrinGroup determined that Bob and Karen must earn an average annual rate of 6% on their college investments. Thus, their college accounts have been automatically invested in the optimal portfolio to achieve this required rate.

Goal: Retirement Funds (2) – Bob and Karen plan to retire in 13 years. Working toward this goal, they will deposit $1,000 a month in each of their IRAs and other accounts. As with their college funding, Bob and Karen authorized the custodian to automatically debit $1,000 directly from their bank checking account on the 1st of every month and deposit it into their IRAs and other accounts for retirement. In addition, CitrinGroup invested their current retirement assets of $550,000 into their optimized portfolio. They figure to spend about $100,000 per year during retirement. CitrinGroup calculated that they will need $1,800,000 in 13 years when their retirement begins and can achieve this with an average annual return on their retirement assets of 8.0%.

Emergency Fund – Bob and Karen have budgeted $500 per month for their Emergency Fund. Because this is for emergencies, the CitrinGroup determined that this should be a very stable account that would enable them to access funds quickly and easily, if necessary, while offering a higher return on investment rather than a traditional savings account. Bob and Karen authorized Charles Schwab (the Custodian) to automatically debit $500 from their bank checking account on the 15th of every month. Their Emergency Fund asset allocation is: 100% Cash (Money Market).

Note: The information contained above is an example only and not intended as actual investment advice.