A RETIREMENT PLANNING MINI-CASE / TUTORIALOUTLET DOT COM A RETIREMENT PLANNING MINI-CASE / TUTORIALOUTLET D | Page 2

out of Peter’s paycheck on a pretax
basis. The Mayfields currently use interest earned from their
municipal bond holdings to supplement their
income. Dedicated and Discretionary Expenses Asset and Liability
Information
Table VI.19 presents the Mayfields’ asset and liability information.
Tax Information
The Mayfields’ marginal state tax rate is 4.5%. The state income tax
is tied to the federal AGI figure. The
Mayfields are eligible for two state exemptions in the amount of
$1,300 each and a state standard deduction
of $10,000. The Mayfields are also eligible for $6,000 in state income
tax adjustments. The municipal
money market mutual fund is made up of general Anystate state
obligations. Insurance Information and Planning Issues
Life Insurance
Peter purchased a $250,000 10-year term policy when he turned age
50. Peter is the owner and insured. Ann
is the beneficiary. In addition, Peter’s employer provides him with a
group term policy in the amount of one
times his salary. When estimating life insurance needs, the Mayfields
would like to make the following
assumptions:
Life expectancy: age 95 each
Final expense needs: $12,000 each
Estate administration needs: Peter: $36,500; Ann: $9,500
Other immediate needs: $12,000 each
They would like to pay off all debts at the first death.
Anticipated expense needs at first death: $85,000 per year before and
after retirement (in today’s dollars).
They believe they can earn 6% on any proceeds from insurance prior
to retirement.
They believe they can earn 5% on insurance proceeds after retirement.
They anticipate being in a combined 25% federal and state marginal
tax bracket after retirement.
Projected inflation rate: 3%
In the event of a spouse’s death, Peter and Ann plan to stop working