Since Sonya is currently unemployed, opening a Roth IRA is her best bet. She has agreed to contribute $166.67 a month, which satisfies the $2,000 annual maximum contribution, and grows tax-deferred-in her case, in the Putnam Voyager fund (Nasdaq: PVOYX).
If necessary, Sonya can begin making withdrawals five years after inception, and because the account is portable, she can keep it or roll it over into her future employer’s 401(k) plan.
Since the Browns currently rely on Jerry’s salary, Walton recommends increasing his disability insurance coverage from a benefit of $750 a month to approximately $9,700 a month, which is roughly two-thirds of Jerry’s income.
The annual premium for this policy is $3,370, but it produces a more adequate safety net for a family of four should Jerry suddenly find himself out of work. And if Jerry never files a claim, the premiums are returned to him upon retirement.
Using a concept called pension maximization, Walton advises the Browns to establish an additional $350,000 life insurance policy in Jerry’s name as a supplement to his existing coverage-$500,000 from personal coverage and $262,500 from his employer.
Walton’s other recommendations for the Browns include: grow their personal savings account to $15,000; establish a separate emergency fund with three to six months worth of expenses in a traditional money market fund; and at least double their minimum monthly payments on their credit cards to eliminate their $3,000 debt.