An inheritance hits home: Mary Warner and her family must handle a delicate sharing of family assets. (Family Finances).LIKE MANY 40-YEAR-OLD COUPLES, MARY WARNER AND her husband. Carlton, are feeling "the squeeze." They are engaged in financial battles primarily on three fronts: saving for their own retirement; saving to put their two children, Carla, 19, and Caryn, 10. through college; and saving for possible expenses that may come from caring for aging parents. The Warners have challenged themselves to learn more about the financial markets because they realize the importance of the tasks ahead. "My ultimate goal is to learn some things about finance so I can teach my 19- and 10-year-olds how to save and invest so that they can get some of the things they really want," says Mary Warner, 48, who works part-time, processing contracts for print orders at ABC ABC in full American Broadcasting Co. Major U.S. television network. It began when the expanding national radio network NBC split into the separate Red and Blue networks in 1928. Advisors in Washington, D.C. "Hopefully we can leave a legacy for them, some money and property so that they can have a leg up from where I was when I started out." Relatively speaking, the Warners have done a good job stretching their finances. Mary brings in $12,500 from her part-time job, and Carlton, 42, earns $40,000 as a postal worker A postal worker is one who works for a post office, such as a mail carrier. In the U.S., postal workers are represented by the National Postal Mail Handlers Union - NPMHU and the American Postal Workers Union, part of the AFL-CIO. . Mary inherited their current home when her father died. They moved in in 1975, but she is co-owner of the property with her 45-year-old brother, Benjamin Foster Jr., who lives with their 68-year-old mother. Since inheriting the home. Mary has taken out a $50,000 home improvement loan, which the couple is paying back in $509 monthly installments. The Warner's joint assets include a $1,500 savings account Savings Account A deposit account intended for funds that are expected to stay in for the short term. A savings account offers lower returns than the market rates. Notes: , $2,000 credit union account, a $400 checking account, and a $10,000 mutual fund account. Mary owns a $7,900 Roth IRA Roth IRA An individual retirement plan that bears many similarities to the Traditional IRA. Contributions are never deductible, and qualified distributions are tax-free. A qualified distribution is one that is taken at least five years after the taxpayer established his/her first and has contributed $4,000 into her 401(k) plan. Carlton has a $12,000 thrift savings account with the postal service postal service, arrangements made by a government for the transmission of letters, packages, and periodicals, and for related services. Early courier systems for government use were organized in the Persian Empire under Cyrus, in the Roman Empire, and in medieval , and $40,000 in his 403(b) retirement account. They currently pay a $400 car note on a 1998 Isuzu Rodeo rodeo (rō`dēō, rōdā`ō), public exhibition of the skill of cowboys in various activities. Events include riding broncos, riding steers, "bulldogging" steers, roping and tying steers and calves, the use of the lasso, and ; they owe $13,000. Their other liabilities other liabilities Small and relatively insignificant liabilities. For financial reporting purposes, firms often combine small liabilities into this single category rather than listing each liability separately. include $4,300 in credit card expenses; a $1,400 credit account with Marlow Furniture Stores; $400 with Victoria's Secret For the Sonata Arctica single, see Victoria's Secret (song) Victoria's Secret is an American retailer of high quality lingerie and beauty products.[2] ; and $5,000 for Carla's tuition for the spring semester se·mes·ter n. One of two divisions of 15 to 18 weeks each of an academic year. [German, from Latin (cursus) s . Mary says she entered the Financial Fitness contest because, "When it is time to retire, we want to have some money so that we can live comfortably and travel if we want. And, if we need something, or we need to buy something for our parents, we want to have the money to be able to get it." In addition to managing the couples' daily expenses and the debt they've accumulated, Mary will also need to find a resolution concerning ownership of the house her father left her. Since she and her brother both own the house, which has been in the family since 1940, she is concerned about being able to pass it on to her children. But. Mary realizes that the house could be a source of revenue for her brother's retirement in the future. THE ADVICE Mary and Carlton have done a good job with the income they've generated, but they will have to work harder in order to retire the way they want. To guide the Warners on avoiding a financial squeeze, BLACK ENTERPRISE arranged a meeting with Walt Clark, president and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Clark Capital Investments in Columbia, Maryland Columbia is a census-designated place and planned community in Howard County, Maryland, United States. It is a suburb of Baltimore, and, to a lesser degree, Washington, DC. It began with the idea that a city could enhance its residents' quality of life. . * REDUCE DEBT PAYMENTS In addition to a $50,000 line of credit at 7%, the couple has a $4,300 credit card at 11.9%, a $13,000 car loan at 9%, and a $1,400 furniture loan at 26%. Since the interest is tax deductible That which may be taken away or subtracted. In taxation, an item that may be subtracted from gross income or adjusted gross income in determining taxable income (e.g., interest expenses, charitable contributions, certain taxes). on the credit line, Clark says the Warners should pay off the car loan from the line of credit. This will increase their original line of credit payment from $509 to $626, but eliminate the $400 car payment, saving them $288 per month, plus $40 monthly in additional tax write-off savings. "They should also take the $2,000 in the credit union, which was set aside for the Car payment, along with the monthly savings from the car, and payoff the remaining debt--highest interest rates first," says Clark * FINANCE TUITION COSTS Until now, the Warners have been using their $10,000 mutual fund account to fund their daughters education. Since the annual tuition is $10,000, that account would be exhausted by year's end. Clark says they should exercise their options by having Carla seek financial assistance through grants or loans, which she can pay back over time with her parents' help. Clark says they should then diversify the account, moving 50% of it from their current large-cap growth mutual fund to a mid-cap growth fund to reduce market risk. To finance the 10-year-old's education, the Warner's should discontinue dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: investing $75 a month in a saving account at 3% and, instead. invest it in a growth mutual fund as part of a 529 College Savings Plan. * MAXIMIZE EMPLOYEE SAVINGS PLANS Noun 1. employee savings plan - a plan that allows employees to contribute to an investment pool managed the employer plan, program, programme - a series of steps to be carried out or goals to be accomplished; "they drew up a six-step plan"; "they discussed plans Mary's 401(k) will start matching 3% of her contribution by the end of the year, so she should contribute the maximum to her retirement and diversify into an assortment of growth- and fixed-income funds. Since Carlton currently contributes the maximum to his Thrift Savings plan The Federal Thrift Savings Plan, or TSP, is a retirement savings plan for civilians who are, or previously were, employed by the United States Government and for members of the uniformed services. The TSP encompasses many millions of investors and has substantial assets. , he should shift his assets from 50% government bonds, 20% fixed-income funds, and 30% equity funds to 75% growth mutual funds and 25% balanced mutual funds Balanced mutual fund This is a fund that buys common stock, preferred stock, and bonds. The same as a balanced fund. . "Because he has another 20 years before retirement he should be more on the growth side with mutual funds," says Clark. * INVEST CONTEST WINNINGS Clark says the Warners should place the $2,000 BE contest prize into Mary's existing Roth account. They should continue to invest in growth mutual funds. The Roth IRA allows them tax-free growth, tax-free withdrawals of earnings, and early withdraws without penalty for higher education higher education Study beyond the level of secondary education. Institutions of higher education include not only colleges and universities but also professional schools in such fields as law, theology, medicine, business, music, and art. . * PROTECT HOME WITH INSURANCE Mary will probably have to purchase her brother's ownership stake of the home with a home equity loan, but that option has been exhausted for now. An additional loan now would cause a financial hardship, so they should concentrate on debt reduction. Once that has been accomplished, the Warners should consider taking out a loan to buy out Mary's brother. To protect the home against death or disability, Clark suggests Mary and her brother purchase enough term and accidental death and disability insurance to cover their liabilities. "If something were to happen to either of them, the home equity loan and other debts would be paid off," Clark says. Financial Snapshot: Mary & Carlton Warner HOUSEHOLD INCOME Carlton (full-time) $40,000 Mary (part-time) 12,500 Total $52,500 ASSETS Market Value of Home $74,000 403(b) 40,000 Thrift Savings 12,000 Mutual Fund 10,000 Roth IRA 7,900 401(k) 4,000 Credit Union 2,000 Savings 1,500 Checking 400 Total $151,800 LIABILITIES Home Equity Credit Line $50,000 Car Loan 13,000 Credit cards 4,300 Child's Tuition 5,000 Marlow Stores 1,400 Victoria Secret 400 Total $74,100 Net Worth $77,700 |
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