Question

You are a financial planner with a specialty in risk management. You've completed the insurance in financial planning course at GBC and have obtained your license to sell insurance products. You love your career and have built a successful practice based mainly on referrals from your satisfied clients.Jack, age 49, and Jill, age 48, are one of those referrals. Jack is Vice-President of Marketing at a mid-sized systems firm. His salary is $180,000 + bonus. Last year his bonus was $50,000. Jill is an accountant in private practice. She works from home and typically bills $150,000 a year (roughly $100,000after expenses). They feel pretty comfortable financially but have asked you to flag any gaps that you can see in their risk management strategy. They also have specific questions that they'd like you to address.

Answer 1

As their financial planner, it's crucial to assess Jack and Jill's risk management strategy and suggest improvements, considering factors like their high tax bracket and the importance of life insurance, especially in light of potential health risks. Saving for retirement and possibly pursuing further financial education are also key aspects that should be discussed.

Step-by-step explanation:

Addressing Financial Gaps in Risk Management for Jack and Jill

As a financial planner specializing in risk management, it's important to review Jack and Jill's financial situation comprehensively. Given Jack's role as Vice-President of Marketing with a salary of $180,000 plus a $50,000 bonus, and Jill's earnings as an accountant of roughly $100,000 after expenses, their combined income puts them in a higher tax bracket. This requires careful planning to ensure that they are managing the financial risks associated with high income earners effectively.

The tax brackets provided, with increasing marginal rates from 25% to 38% for various income levels, are crucial for understanding the couple's tax liabilities. It is also pertinent to discuss the need for sufficient life insurance coverage, exploring policies that fit their unique situation, considering factors such as a family history of health issues, like cancer, as mentioned in the examples. Additionally, emphasizing the importance of saving for retirement, as illustrated by Yelverton's example, will aid in securing their financial future post-retirement.

Given Jack and Jill's significant earnings, they must make informed decisions about their savings rate and investment choices to optimize their financial position. Moreover, exploring additional financial education could lead to better financial decisions and increased wealth over time. Therefore, reviewing and bolstering their risk management strategies is essential for maintaining and enhancing their financial security.