A Life Makeover

Leslie Henderson plans to retire from her job to pursue her 'reel' passion

outpace inflation. She should find a qualified financial professional who can help her determine which investments are appropriate for her, given her age and time frame.

Wright also recommends that Henderson review the current asset allocation of her deferred-compensation plan. Wright suggests the following portfolio allocation: 24% large-growth; 24% large-value; 6% each in mid-growth, mid-value, and small-value; 14% international; 7.5% each in a short-term government bond and an intermediate-term government bond; and 5% in high-yield bond funds.

Plan for the unexpected. While Henderson’s parents are not dependent on her, she should talk to them about their financial situation and determine their ability to handle a long-term illness or death. Wright says it might make sense for Henderson to obtain long-term care insurance for her parents.

Henderson should also have a will and other documents, such as living wills and durable powers of attorney, drafted and executed for her parents — and herself. She will need to have a will in place to direct the distribution of her assets that are outside of her work benefits. Additional life insurance may also make sense, as the benefits offered by the city of Houston are minimal.

Rethink business structure. Right now, Henderson has set up a sole proprietorship to handle her screenwriting business. Wright recommends that she consult with a business attorney regarding the appropriate business structure.

Determine retirement income. “Up to now, Leslie hadn’t given much thought to the type of lifestyle she envisions for her retirement,” Wright points out. “We assumed a monthly retirement income of approximately 60% of Leslie’s pre-retirement income, or $3,500 a month.” The good news? “Leslie is on target to reach her retirement goal if she were to leave the Houston Police Department [in 10 years] at age 51, but also at age 46,” says Wright.

If Henderson were to retire today, she would receive 55% of her average monthly salary, or more than $3,300 per month. This amount increases each year by a cost-of-living-adjustment based on the previous year’s change in the Consumer Price Index. Overall, Wright says Henderson is well positioned to reach her financial goals.

HOUSEHOLD INCOME

Gross Income  $70,000

ASSETS

Checking $2,200
Savings 41,000
Stocks 44,000
Pension 64,754
Value of Home 202,000
Value of Car* 12,080
Total $366,034

LIABILITIES

Mortgage $146,865
Credit Card Debt 1,500
Total $148,365
NET WORTH $217,669

*According to Kelley Blue Book.

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