AN INSURANCE PLANNING MINI-CASE / TUTORIALOUTLET DOT COM AN INSURANCE PLANNING MINI-CASE / TUTORIALOUTLET D | Page 6

increase 6.50% per year. They are
comfortable assuming a growth rate of 9.00% per year for educational
assets and savings in a taxadvantaged account before and after college
begins (6.75% if assets are held in a taxable account). Each of
the children is talented academically (GPA > 3.0) and in terms of
extracurricular activities.
Troy is currently enrolled at University of Anystate. Current cost:
$14,700/year (waiver).
He is on a ¾ baseball scholarship. His parents budget $5,000 per year
in extra support; they pay
tuition not covered in the scholarship and give Troy what is left from
their $5,000 budget as a
spending allowance.
The Butterfields have also allocated $1,200 per year to help pay for
Troy’s travel expenses.
He has completed one year of college.
His health insurance is provided under his father’s group health plan.
Holly wants to attend State University; current cost: $10,500/year
(possible tuition waiver).
Wants to go to school on an ROTC scholarship and fund any
additional expenses out of pocket from
money earned during summers.
Naomi’s college funding goals are unknown, but her parents want to
plan for college costs of $16,500 per
year (in today’s dollars).
They prefer to use tax-advantaged savings plans to fund any expenses.
Retirement Information
The Butterfields would like to retire when John turns age 67. Based
on today’s dollars, they are willing to
reduce their income by 80% of current income while retired. At full
retirement (i.e., age 67) John will
receive $18,000 per year in Social Security benefits; Haley will
receive $16,500 in benefits (in today’s
dollars) at age 67. When planning, they are comfortable assuming a
9.00% rate of return before retirement,
and a 5.75% return after retirement. Contributions to their defined
contribution plans are anticipated to