Case Class- Comprehensive Financial Plan

143 Market Street
Roanoke, VA 24011
(540) 703 – 0571
December 2nd, 2015
A Comprehensive Financial Plan Prepared for Tyler and Mia Bedo by:
Brandt Dawson
Emily Purdon
Megan Robinson
Jake Seraphin
Confidentiality Notice
The information in this plan is confidential to the recipient(s) and should not be disclosed to
any other person. If the reader of this message is not the intended recipient, you are hereby
notified that any form of modification, reproduction, distribution, or publication of this
material is strictly prohibited.
Summit Financial Advisors

143 Market Street
Roanoke, VA 24011
(540) 703 – 0571
Mr. and Mrs. Tyler Bedo
103 Buckeye Lane
Radford, VA 24141
November 9, 2015
Dear Tyler and Mia:
We would like to welcome you to Summit Financial Advisors. Understanding your
financial needs, goals and values is of utmost importance to a successful advisor-client
relationship. Our advisors and clients commit to honest communication. The privacy of
our clients’ personal and financial information is of utmost importance. We take
numerous precautions to ensure confidentiality. Our firm’s Privacy Statement can be
found on page 4 and outlines our firm’s policies to protect your information.
Financial planning is a process not a transaction. We will develop customized
recommendations based on your personal and financial information. Then, we will
inform you of feasible alternatives. These alternatives will address cost as well as
potential short-term and long-term effects. After discussing your thoughts regarding the
alternatives, we will utilize your feedback to choose the most appropriate
recommendation. While our advisors will make recommendations that we believe to be in
your best interest, you will make the final decisions regarding implementation.
Original plan recommendations rarely remain constant over time. Between changes in
your personal life and economic fluctuations, your goals or progress toward meeting your
goals may change. We hold quarterly meetings to review your financial plan. These
periodic reviews will allow our advisors to track your progress and implement any
necessary changes. At a minimum, we will meet with you annually. In the case of a major
life event, we ask you to schedule a meeting to discuss the financial implications. We
encourage you to be open about changes in your personal and financial goals, ask
questions, and express any concerns during these meetings.
A majority of communication is done by e-mail, but if you have an alternative preference
please let us know.
We look forward to being your trusted advisors through all stages of your life.
Sincerely,
Brandt Dawson
Emily Purdon
Megan Robinson
Jake Seraphin
The Partners of Summit Financial Advisors

Mr. and Mrs. Tyler Bedo
103 Buckeye Lane
Radford, VA 24141
November 9, 2015
Dear Tyler and Mia:
Re: Financial Planning Engagement
We, at Summit Financial Advisors, welcome the opportunity to work with you, and
appreciate the opportunity to help you meet your financial goals and dreams. This letter
confirms the terms of the financial services we will provide, per our recent conversation.
Any changes to the scope or term of our engagement will be documented in writing and
mutually agreed upon by all parties.
We will follow these steps to create a comprehensive, tailored financial plan is prepared:
1. Establish and define the relationship with the client
2. Gather necessary personal and financial information pertaining to the client
3. Analyze and evaluate the client’s current financial status
4. Develop and present the financial planning recommendations
5. Implement the financial planning recommendations
6. Monitor plan effectiveness and make necessary modifications
We will gather personal and financial information as provided by you. This information
will be both qualitative and quantitative. The qualitative aspects will revolve around your
objectives and goals. The quantitative data will include, but is not limited to, bank
statements, brokerage statements, insurance documents and your most recent tax return
information. We will make this task easier by providing information forms and clarifying
collected data with you. Due to the ever-changing state of financial planning, we ask that
you inform us when changes to your finances or goals occur. Keeping us appraised will
allows us to adjust the plan accordingly and more accurately make recommendations.
Once all relevant information is gathered, we will analyze your current financial
situation. Our analysis of your financial information will result in a Statement of Cash
Flows, a Statement of Financial Position and diagnostic financial ratios. In addition to the
cash flow analysis, we will deliver recommendations in income tax planning, risk
management, education, investments, retirement and estate planning.
You are under no obligation to follow recommendations, either completely or in part.
Please understand that recommendations may be integrated; carrying out a
recommendation in isolation may not meet your overall objectives.
To implement any planned changes, we suggest speaking with the qualified licensed
professional. We are not attorneys and are neither authorized nor qualified to provide
legal advice or to prepare legal documents for you. We are not accountants and are not

authorized to prepare or amend the filing of personal income, gift or estate tax returns for
you. We may complete some documents for the function of your comprehensive plan;
however, they are not to be viewed as prepared tax returns for the purpose of filing. We
are not insurance professionals; however, we will review your current insurance coverage
and make recommendations that we believe will minimize your risk exposure. You
should consult your own professionals for these services.
Regarding follow-through, our firm offers Service Assistance. This involves arranging
meetings with and delivering documents to any other advisors or professionals with
whom you choose to engage with for plan implementation. If you do not have
engagements with other professionals, such as attorneys, accountants, and insurance
agents, we will gladly provide you with the contact information of trusted professionals
we work with. You are not required to work with our recommended professionals. We do
not accept referral fees or incentives from professionals or firms. These professionals
have been selected because we are confident they will act in your best interest during the
implementation of your plan.
We take special care to protect client confidentiality. No information will be disclosed to
other parties without your specific request and written consent, or as required by law.
Due to the complexities of the financial services industry, we feel it important that you
have a complete understanding of our firm’s fee structure. As a fee-only planning firm
we neither receive nor pay commissions for any products recommended or referrals
provided. Our firm’s transparent structure allows for complete objectivity in the financial
planning process.
The cost of developing and delivering your initial financial plan is $3,000; however, as an
ongoing asset management client you will not pay for updates to your financial plan.
Instead we charge an annual fee for our services based on a percentage of your assets
under management (AUM) with our firm. The AUM fee structure is as follows:
AUM Fee
$1 – $500,000 1.50%
$500,000 – $1,000,000 1.25%
$1,000,000 – $3,000,000 1.00%
$3,000,000 – $5,000,000 0.75%
$5,000,000 or more 0.50%
The acceptance of this contract signifies the beginning of an ongoing, professional
relationship. Your financial plan will be reviewed quarterly and we will be contact with
you at these times. At a minimum, we will meet with you on an annual basis.
Either party may terminate this agreement by notifying the other party in writing. If you
cancel within five days of acceptance, you will receive a full refund. Thereafter, any fees
that you have paid in advance will be charged for the time and effort we have devoted
until then and the balance will be refunded.

143 Market Street
Roanoke, VA 24011
(540) 703 – 0571
If you understand and agree to the terms set forth in this document, please sign in the
space provided below.
Sincerely,
Brandt Dawson
Emily Purdon
Megan Robinson
Jake Seraphin
The Partners of Summit Financial Advisors
Agreed and Accepted By:
Tyler Bedo 11/9/2015
Tyler Bedo Date
Mia Bedo 11/9/2015
Mia Bedo Date

Table of Contents
Part I: Client Packet 1
Why Summit Financial Advisors? 2
Ethics Statement 3
Privacy Statements 4
Investment Policy Statement 5
Client Profile 9
Summary of Goals and Assumptions 10
Executive Summary 12
Part II: Financial Analysis 15
Section A: Financial Statements 16
Section B: Financial Ratios 20
Section C: Emergency Fund 26
Section D: Credit Card Debt 28
Section E: Mortgage Refinance 31
Part III: Tax Analysis 33
Part IV: Insurance Analysis 39
Section A: Life Insurance 40
Section B: Health Insurance 45
Section C: Disability Insurance 48
Section D: Automobile Insurance 51
Section E: Homeowner’s Insurance 55
Section F: Umbrella Insurance 59
Section G: Long-Term Care Insurance 61
Part V: Education Analysis 62
Part VI: Investment Analysis 70
Section A: Non-Qualified Investments 71
Section B: Qualified Investments 75
Part VII: Retirement Analysis 78
Part VIII: Estate Analysis 89
Part IX: Special Needs Analyses 99
Section A: Family Vacations 100
Section B: After-School and Summer Child Care 101
Section C: Art Gallery 102
Section D: Home Addition 103
Part X: Implementation & Monitoring 104

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Part I: Client Packet
Part II: Financial Analysis
Part III: Tax Analysis
Part IV: Insurance Analysis
Part V: Education Analysis
Part VI: Investment Analysis
Part VII: Retirement Analysis
Part VIII: Estate Analysis
Part IX: Special Needs Analyses
Part X: Implementation & Monitoring

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Why Summit Financial Advisors?
The summit of the mountain is the highest point achievable while still maintaining
contact with the ground. It inspires awe, stirs aspirations and prompts effort. It
represents the target and goal. It provides a sense of accomplishment when attained. We
hope to bring the ideology of the summit to our workplace and clients. We want to stir
aspirations, bring goals into focus, but while remaining constantly grounded in our
fiduciary responsibility and the highest standards of the financial planning profession. As
you climb to reach the summit of your life, our advisors will provide guidance,
encouragement and support every step of the way.
Firm Description
Summit Financial Advisors is a fee-only holistic financial planning firm located in
Roanoke, Virginia. We provide comprehensive personal financial planning to individuals
and families. The goal of our financial planning process is to appropriately identify and
prioritize your objectives, without overwhelming you with data collection and discovery.
Our firm’s areas of focus include, but are not limited to, income tax planning, risk
management analysis, investments, retirement planning, and estate planning.
Mission Statement
To provide our clients with the financial knowledge and advice necessary to achieve their
life goals while maintaining a professional relationship based on unyielding trust,
integrity, and personalized service.
Vision Statement
To be regarded throughout the New River Valley as a reputable firm committed to
providing an effective and enjoyable financial planning experience.
Core Values
Core values are not descriptions of the work we do to accomplish our mission as financial
planners; instead, these values are the basic elements of how we go about our work. In an
ever-changing world, our firm’s core values remain consistent.
The values that define our passion and dictate our action include:
 Integrity: We expect our associates to maintain high ethical standards in
everything they do, both in their work and in their personal lives.
 Client Focus: We serve our clients through honesty, clarity, and brevity. We are
confident that if we serve our clients well, our own success will follow.
 Accountability: We encourage our advisors to take responsibility for their work
and feel empowered by their decision-making in order to achieve effective
collaboration and transparency.

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Ethics Statement
As associates of Summit Financial Advisors, we hold ourselves to the standards of the
Certified Financial Planner Board’s Code of Ethics. These guiding principles establish the
highest standards expected of CFP® (Certified Financial Planner) professionals.
Principle 1 – Integrity: Provide professional services with integrity.
Integrity demandshonesty and candor which must not be subordinated to personal gain and
advantage. Certificants are placed in positions of trust by clients,and the ultimate source of that
trust is the certificant’s personal integrity. Allowance can be made for innocent error and
legitimate differences of opinion, but integrity cannot co-exist with deceit or subordination of
one’s principles.
Principle 2 – Objectivity: Provide professional services objectively.
Objectivity requires intellectual honesty and impartiality. Regardless of the particular service
rendered or the capacity in which a certificant functions, certificants should protect the integrity
of their work,maintain objectivity and avoid subordination of their judgment.
Principle 3 – Competence: Maintain the knowledge and skill necessary to provide
professional services competently.
Competence means attaining and maintaining an adequate level of knowledge and skill, and
application of that knowledge and skill in providing services to clients. Competence also includes
the wisdomto recognize the limitationsof that knowledge and when consultation with other
professionals is appropriate orreferral to otherprofessionals necessary.Certificantsmake a
continuing commitment to learning and professional improvement.
Principle 4 – Fairness: Be fair and reasonable in all professional relationships. Disclose
conflicts of interest.
Fairness requires impartiality, intellectual honesty and disclosure of material conflicts of
interest. It involves a subordination of one’s own feelings, prejudices and desiresso as to achieve
a proper balance of conflicting interests. Fairness is treating others in the same fashion that you
would want to be treated.
Principle 5 – Confidentiality: Protect the confidentiality of all client information.
Confidentiality means ensuring that information is accessible only to those authorized to have
access. A relationship of trust and confidence with the client can only be built upon the
understanding that the client’s information will remain confidential.
Principle 6 – Professionalism: Act in a manner that demonstrates exemplary
professional conduct.
Professionalismrequires behaving with dignity and courtesy to clients, fellowprofessionals, and
others in business-related activities. Certificants cooperate with fellow certificantsto enhance
and maintain the profession’s public image and improve the quality of services.
Principle 7 – Diligence: Provide professional services diligently.
Diligence is the provision of services in a reasonably prompt and thorough manner, including the
proper planning for the rendering of professional services.

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Privacy Statement
We promise to maintain your trust by protecting your personal and financial information
with the highest level of security. In order to guarantee the safety of financial documents
our firm maintains a secure computer network. Confidentially is imperative to our firm.
Our advisors strive to make sure clients feel comfortable with the environment in which
to share private information about themselves, their family, and their goals.
We ensure the privacy of the following information:
 Personal Information is recorded information about an identifiable individual that
may include his or her (1) name, address, e-mail address, phone number, (2) race,
nationality, ethnicity, origin, religious or political beliefs, (3) age, gender, sexual
orientation, marital status, family status, (4) identifying number, code, symbol.
 Financial Information includes statements and data that may include his or her (1)
income statements, balance sheets, account balances, (2) bank account
information, credit ratings, (3) insurance, tax, investment information.
This information will be provided to other advisors, professionals, or third parties solely
at your request and consent. We do not disclose any private information about our former
or current clients, except as permitted by law.
Our sole intent of collecting your personal and financial information is to create a
financial plan that is both feasible and best suited to meet your goals. We will keep
personal and financial information accurate by amending our records as needed.

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Investment Policy Statement
I. Purpose of the Investment PolicyStatement
The purpose of this Investment Policy Statement is to establish a foundation of
understanding between the investor(s) and investment advisors pertaining to investment
recommendations and plan implementation.
This policy outlines our firm’s investment philosophy, explains portfolio construction
and describes our performance evaluation process. Furthermore, this statement is
intended to provide structured guidance for both the investor(s) and the investment
advisors.
II. Plan Investment Philosophy
At Summit Financial Advisors, we believe in the importance of long-term investment
strategies that are centered on the principles of patience and market understanding.
Therefore, the investment portfolio will maintain a passive management style. To
supplement this passive strategy, we ask our clients to sign a Ulysses Contract. The
terminology of this contract stems from Greek mythology. It is an agreement that
investors will not act hastily in volatile markets, just as Ulysses ordered his crew to tie
him down on his boat so that he could resist the Sirens’ deadly song. This contract is not
legally binding, but is meant to create an increased commitment to a dedicated
investment strategy.
We will evaluate the portfolios biannually in order to ensure that the investments are
ideally allocated based on an investor’s time horizon, risk tolerance, and risk capacity,
among other factors.
While Summit Financial Advisors does not hold any mantras concerning socially
responsible investing, which considers both financial return and social good, our advisors
will seek to help each investor meet their personal goals.
III. Portfolio Construction
Or advisors utilize data gathering and the discovery process to understand each investor’s
values, goals and dreams. Data gathering is quantitative, while the discovery process can
be more qualitative. Employing a risk tolerance questionnaire will assist in completing
the risk profile of an investor. Risk tolerance is determined by internal factors such as
personality. The second part of a risk profile is risk capacity. Risk capacity is defined by
external factors such as an investor’s specific financial situation. Our advisors will utilize
an investor’s risk profile and time horizon to determine how to approach portfolio
allocation.

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Regarding the factors above, our portfolios are appropriate for investors with a time
horizon of at least five years, as this is roughly a full economic cycle. Investors that are
not in a position to accept much risk will have their assets placed in low risk funds, while
investors with higher risk capacity and tolerance may be placed in more risky mutual
funds.
While risk tolerance and capacity are important, the weight that these variables have on
the investment allocations will be contingent upon a needs-based analysis of desired
future goals. Low risk investments often result in low investment returns, which may
create a need for riskier investments. On the other hand, high risk investments may not be
necessary if the client’s goals can be achieved through less risky terms.
IV. Portfolio Allocation
As stated in the portfolio construction section, investments are allocated based on the
needs of the individual investor(s). Based on an investor’s goals, risk tolerance, risk
capacity, and desired returns, we will place client investments in one of the following
categories. A portion of funds will be placed in conservative funds for liquidity needs.
 Conservative Funds
 Risk: Conservative
 Purpose: Liquidity
 Investments: Money Market Funds (60%), Treasury Bills (20%),
Certificates of Deposit (20%)
 After-Tax Expected Rate of Return: 3.7%
 Moderately Conservative Funds
 Risk: Moderately conservative
 Purpose: Intermediate income needs
 Investments: Small-Cap (15%), Mid-Cap (25%), Large-Cap (35%), Bond
Market Index Fund (25%)
 Moderately Aggressive Funds
 Risk: Moderately aggressive to aggressive
 Purpose: Long-term income needs
 Investments: Equities (80%), Bond Market Index Fund (10%),
Commodities for inflation protection (10%)
 Aggressive Funds
 Risk: Aggressive
 Purpose: Long-term income needs
 Investments: Equities (90%), Commodities for inflation protection (10%)

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Below is a list of our firm’s funds, organized by category. Alongside the categories are
the corresponding fund names, ticker symbols, and the index that the fund will be
benchmarked against.
Category Mapped Ticker Index
G&I Vanguard Growth and Income VQNPX S&P 500
Gov't Agency Vanguard GNMA VFIIX Citigroup Mort-backed
Hi-Yield Bond T Rowe Price High Yield PRHYX CSFB Hi-Yield
I/T Corp Harbor Bond HABDX Barclays US Agg
International Fidelilty International Discovery FIGRX MSCI EAFE
L/T Corp Vanguard L/T Investment Gr VWESX Barclays US Agg
L/T Gov't Wasatch U.S. Treasury WHOSX ML LT Treasury
Large Growth American Century Growth Inv TWCGX Russell 1000 Growth
Large Value Dodge & Cox Stock DODGX S&P 500
Mid Blend TCW Value Opportunities I TGVOX Russell Mid-cap
Mid Growth Fidelity Midcap Stock FMCSX
Russell Mid-cap
Growth
Mid Value Heartland Select Value HRSVX Russell Mid-cap Value
Money Market Vanguard Prime Money Market VMMXX Citigroup 3mo T-bill
Precious Metals
U.S. Global Investors Gold &
Precious Metal
USERX Commodities
Real Estate CGM Realty CGMRX NAREIT Equity
S/T Gov't American Century S/T Gov't TWUSX ML 1-3 Gov Cr
Small Blend Royce Opportunity RYPNX Russell 2000
Small Growth T Rowe Price New Horizons PRNHX Russell 2000 Growth
Small Value Northern Small Cap Value NOSGX Russell 2000 Value
V. Rebalancing
Rebalancing is the process of modifying allocations as they deviate from the target
allocations. If the variation is greater than 4% from recommended weighting the portfolio
will be rebalanced. Analysis for potential portfolio rebalancing will occur on a quarterly
basis.
If an investor’s goals or market conditions have substantially changed, our advisors will
discuss the possibilities and implications of readjusting the weightings in the portfolio.
VI. Performance Reporting
At Summit Financial Advisors we evaluate the performance of our funds quarterly. In
order to properly evaluate performance, we will use appropriately matched index funds as
benchmarks. While we will not utilize active investment management, we will review the
tracking error of our mutual funds. Tracking error is used to show how our funds deviate

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from the benchmarks in terms of return. Doing so will allow us to evaluate the quality of
our funds used, and will also help us determine if another custom benchmark is a more
appropriate representation or the investor’s investment allocation.
VIII. Disclaimer
Before partnering with Summit Financial Advisors, prospective clients should review our
firm’s investment policy and assumptions. If our investment strategy does not match your
preferences, we do not recommend requesting our services.
We believe that the investments chosen for you are the most appropriate given your
goals, time horizon, and risk tolerance.
Past returns are not indicative of future returns in the market place. The purpose behind
the use of the past returns is to provide a general idea of what a client may expect of their
portfolio. A client's portfolio may fluctuate from time to time in response to market
changes, and may not match the intended performance.

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Client Profile
Client Information
Name Tyler Bedo Mia Bedo
SocialSecurityNumber 555-55-5555 555-55-4444
Date of Birth 9/21/1971 9/13/1971
Age 44 44
Occupation Sales Consultant/ Manager Career Counselor
Employer Golden Tee Golf
Association, Inc.
The Family and Career
Institute
Address 103 Buckeye Lane
Radford, VA 24141
103 Buckeye Lane
Radford, VA 24141
State of Residence Virginia Virginia
Health Status No known health problems No known health problems
Dependent Information
Name Becky Bedo Benjamin Bedo
Date of Birth 8/28/2005 3/13/2010
Age 10 5
Health Status Healthy Healthy

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Summary of Goals and Assumptions
The exploration process and collection of information during our initial discovery
meetings, helps us understand you and your financial situation. We attempt to gain
enough information to develop a workable plan that is acceptable to you. This is
facilitated through the Client Intake Form we mailed to you, as well as some original
source documents.
Framing your goals and objections requires us to identify results that should follow the
planning process. We are here to help you prioritize your goals in a manner that is
financially possible and acceptable considering your needs.
Questions listed below have been collected based on our previous conversations. We will
thoroughly address them throughout the financial plan.
Because of the nature of financial planning, reasonable assumptions become the
foundation to achieving long-term success. From our side, using the collective expertise
of our team, we determine assumptions depending on various factors and review them
periodically. These assumptions reflect the current or projected marketplace, such as the
tax, economic, political and regulatory environments. There are also other assumptions
more specific to you and your family, for example planning for college education.
Overall, these assumptions will be fully disclosed to you throughout the plan.
Clear, mutually agreed-upon priorities, goals and assumptions are outlined below.
Priorities
 Achieve a relatively high level of financial satisfaction and security in the event
of an emergency or some other uncertainty.
 Retire at age 65 and be self-sufficient, which means no dependence on children.
 Secondary objective is to fund 100% of Becky and Ben’s college education, after
considering their retirement goal of age 65.
 Maintain privacy of financial affairs.
 Ensure Becky and Ben’s financial welfare, in the case of unexpected passing
before college completion.
Goals
 Build a cash reserve of eight months of expenses within the next two years.
 Complete a comprehensive insurance review that clarifies uncertainties.
 Budget for the upcoming costs of after-school and summer child care expenses.
 Retire at age 65 to pursue other talents and dreams.
 Build a small addition to home for an art gallery.
 Open a small art gallery in downtown Radford. If successful, donate net revenue
to local youth groups to enhance creative learning.
 Receive Social Security benefits at the earliest opportunity.
 Leave an estate for the benefit of Becky and Ben.

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Client Questions
 Should we refinance our mortgage? If so, should we include closing costs in the
mortgage or pay directly from assets?
 How much will after-school and summer child care cost? How will we be able to
afford this cost while saving for their post-secondary education and our
retirement?
 Should Tyler’s parents gift $10,000 to fund Becky and Ben’s college costs? If so,
should it be gifted now or upon their death? Should it be gifted to Tyler or directly
to Becky and Ben?
 What are the changes in Flexible Spending Account (FSA) rules? What is a
Health Savings Account (HSA)?
 It is necessary for us to purchase an umbrella insurance policy?
 Is it possible for us to increase the amount we spend on vacations, as Becky and
Ben are growing up quickly?
 Is it possible to retire at age 65 considering today’s economic environment?
 Can the guardian for Becky and Ben be outside of the family?
Universal Assumptions
In each portion of the financial plan, specific assumptions will be listed that were
considered in calculations. There are several assumptions that were used across planning
areas:
 The universal inflation rate is 3.00%.
 The prime interest rate is 3.25%, but is expected to increase in the future.
 Life expectancy is age 100.
 Liability payments are due at the end of the period (month, year, etc.).
 Normal retirement age is age 67.

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Executive Summary
Behind every financially confident individual, couple, or family, there lies a master plan
outlining the minute details and action items that guided them to that point. The purpose
of this financial plan is to take you, the future financially confident family, on a journey
through your present situation and down the path of achieving your most desired goals, a
reflective and educational process. In order to do so, we have examined your current
financial situation, and provided recommendations tailored specifically to you and the
pursuit of your goals.
Education
In order to fund Ben and Becky’s education, we recommend selling your EE bonds worth
and redeeming some of your non-qualified assets from your brokerage account to fund
Virginia 529 inVEST plans. After paying state and federal taxes on the EE bonds as well
as capital gains tax on the non-qualified assets, you will be left with a lump sum to put
towards Ben and Becky’s 529 accounts. Based on our assumptions, these contributions,
along with Tyler’s parents’ gift to each account, and a monthly payment to Becky’s 529
plan should ensure that the children’s education is fully funded.
Retirement
You should both be very proud of your saving efforts, as we believe it is feasible for you
to retire at age 65. In order to take this retirement we suggest that you start collecting
social security benefits at age 65 as well, even though you would like to take those
benefits as early as possible. Furthermore, in order to prepare for retirement we also
suggest that you begin funding a Roth IRA. We believe you will be subject to increased
tax brackets in the future, and paying taxes on your contributions now will provide you
with significant tax savings upon distribution of these assets.
Estate
To ensure that Becky and Ben are well taken care of in the event that anything was to
happen to the two of you and ensure your family’s privacy, we suggest drafting the
following estate planning documents: new wills, living wills, power of attorney, and a
joint living trust. Additionally, we suggest writing a letter of instruction to assist your
family in dealing with your assets upon passing. By updating contingent beneficiary
designations on your life insurance and 401(k) accounts to your trust and transferring a
number of your personal assets into the account, they will not be subject to probate in the
future.

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Insurance
While examining your financial situation, we noticed a few lapses in insurance coverage
that we would like to address. Protection of your most valuable personal property item,
Mia’s heirloom rings, does not fall within your current insurance policies, but can be
achieved with the purchase of a personal property endorsement. By buying an umbrella
policy, you will be able to insure your net worth as well as your boat, at a very reasonable
price. In order to meet the minimum insurance amounts required for the umbrella policy,
you will need to purchase a new personal auto policy, terminating your current one.
Additionally, we believe it best to terminate your current HO-3 policy purchase a new
one in order to increase the replacement cost of your home to full value and include an
inflation rider and sewer endorsement. According to our calculations based on the
information you have provided, Tyler’s current whole life policy does not meet his
current coverage needs. To remedy this, we suggest terminating the cash-value policy and
purchasing a new 20-year term life policy before the current premiums are due in June.
Our last and final recommendation is to contribute to a flexible spending account (FSA)
to cover out-of-pocket medical expenses in a tax-advantaged manner.
Investments
In regards to non-qualified investment assets, one of the first primary steps to implement
by our advisors is to reallocate your assets in order to fit your investing style and in order
to provide you with higher returns you should be achieving.
Not only should you allow us to reallocate your non-qualified investments, we also
suggest that you allow us to reallocate your qualified investments as well. One major
benefit of reallocating qualified investments is due to the fact that no taxes will be
incurred assuming the assets are placed in other qualified accounts.
Following this reallocation of investments, we believe it would be very beneficial to stop
funding your Potsdam Annuity and to use a 1035 exchange to transfer the full balance to
the Bostonian Variable Annuity. Doing so will allow you to earn a much more
respectable return on your investments, and the exchange is tax free.
Tax
In order to leverage your tax situation to create more discretionary cash flow, there are
two things you need to do. You first should go to HR at your respective companies and
request to fill out a new W-4 stating that you want to have $2,411 less of with holdings.
Doing so will allow you to place the money in interest bearing accounts where your
money can work for you, rather than sitting somewhere earning nothing. After this
strategy is implemented, and assuming you still would like to give $6,220 to charity, you
should gift $6,220 of appreciated stock to charities of your choosing. Not only will this
free up $6,220 of discretionary cash flow, but it will also allow you to reduce your
current capital gains, thus further reducing your tax liability.

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SpecialNeeds
As it is important for Mia to have a small addition added to your home for her art
collection, we would like to help you ensure that goal is taken care of. In order to most
effectively plan for this goal, we would like to set aside $21,164 of your non-qualified
investment assets and not touch that amount until retirement. This will allow the lump
sum to grow to the necessary future value to fund your goal at age 65.
Not only would Mia like to add a small addition to her house, but she would also like to
fund an art gallery for her retirement. In order to accomplish this goal we feel the first
place to begin would be to place the $5,000 in checking account II into a money market
account, as it is currently not earning any return. Upon completing this step we would
like to set aside a lump sum in your non-qualified investment account of $51,158 to grow
until retirement, just as we did with the home addition lump sum.

15

16
Section A: Financial Statements
We have calculated your Income and Expense Statement, Statement of Financial Position
and diagnostic financial ratios. Together, these documents provide baseline data for
monitoring the financial planning process and evolution of existing or new financial
goals.
An Income and Expense Statement differs from a budget, which is simply a projection of
how much you will earn and spend in a given period. Instead, this statement reflects your
actual consumption and projected consumption considering the recommendations were
implemented.
A Statement of Financial Position, also referred to as a Net Worth Statement, provides a
snapshot of your assets owned and debt owed.
Income and Expense Statement
Tyler and Mia Bedo
Year Ended December 31, 2015
Before After
Earned Income
Wages, Salaries, and Tips $159,006 $159,006
Bonuses and Commissions $5,000 $5,000
Section 79 Income $294 $294
Total Earned Income $164,300 $164,300
Unearned Income
Taxable Interest $200 $206
Ordinary Dividends $2,330 $2,400
Realized Capital Gains $2,150 $49,290
Total Unearned Income $4,680 $51,896
TOTAL INCOME $168,980 $216,196
DEDICATED EXPENSES
Salary Reduction for Employer-Provided
Cafeteria Plan Contributions $$$3,600 $3,600
Disability Premiums $300 $300
Flexible Spending Account $0 $2,160
Retirement Contributions $8,492 $8,492
Total Salary Reductions $12,392 $14,552
GROSS INCOME $156,588 $201,644
Taxes
Social Security Estimate $12,270 $12,867
Federal Tax Estimate $19,727 $32,602
State Tax Estimate $6,968 $8,365
Total Taxes $38,965 $53,834
Debt Payments
Mortgage Payments $17,968 $13,391

17
Auto Loan Payments $5,412 $5,412
Credit Card Payments $5,100 $5,716
Total Debt Payments $28,480 $24,519
Insurance Premiums
Auto $3,000 $1,358
Homeowner’s $900 $964
Life $2,064 $3,459
Umbrella (+ Boat) $0 $146
Total Insurance Premiums $5,964 $5,927
Savings/ Investments
Emergency Fund Savings $2,100 $2,100
Art Gallery Savings $1,800 $1,800
Potsdam Fixed Annuity Savings $3,300 $0
Other Non-Specified Goals $10,800 $1,850
Reinvestment of Non-Qualified Earnings $0 $49,920
Reinvestment of Capital Gains & Dividends $4,680 $4,530
Total Savings/ Investments $22,680 $60,200
TOTAL DEDICATED EXPENSES $96,089 $144,480
DISCRETIONARY EXPENSES
Communication
Subscriptions (Magazine, Newspapers, Etc.) $200 $200
Telephone (Landline, Cell) $1,800 $1,800
Total Communication $2,000 $2,000
Education
Ben’s Pre-K Costs $300 $300
Entertainment
Satellite TV/ Internet $2,400 $2,400
Entertainment (Movies, Plays, Shows, Etc.) $2,400 $2,400
Recreation (Boating, Hiking, Etc.) $3,600 $3,600
Dues (Organizations, Golf Course, Etc.) $2,400 $2,400
Travel (Vacation) $3,500 $3,500
Total Entertainment $14,300 $14,300
Food
Food/ Groceries $6,900 $6,900
Dining Out $4,500 $3,300
Total Food $11,400 $10,200
Housing
Real Estate Taxes $1,820 $1,820
Utilities $4,800 $4,800
Other Services (Yard, Waste Removal, Etc.) $400 $400
Home Improvements $1,800 $1,800
Housekeeping Service $1,800 $1,800
Total Housing $10,620 $10,620

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Personal Care
Clothing $2,800 $2,800
Personal Care (Hair, Dry Cleaning, Etc.) $1,500 $1,500
Total Personal Care $4,300 $4,300
Medical
Dental & Eye Care Expenses $780 $780
Medical Costs (Co-Pay) $480 $480
Prescriptions $900 $900
Total Medical $2,160 $2,160
Transportation
Auto Maintenance (Oil, Fuel) $2,700 $2,700
Virginia Vehicle Plate/ Tag $125 $125
Personal Property Tax $525 $525
Total Transportation $3,350 $3,350
Gifting
University Alumni Fund $1,000 $0
Church $4,200 $0
United Way, American Cancer, Etc. $1,020 $0
Holiday Giving $2,400 $2,400
Total Gifting $8,620 $2,400
Miscellaneous
Bank Charges $120 $120
Tax Preparation Fees $500 $500
Pet Care Expenses $900 $900
Postage, Etc. $1,200 $1,200
Total Miscellaneous $2,720 $2,720
TOTAL DISCRETIONARY EXPENSES $59,770 $52,350
TOTAL DISCRETIONARY INCOME REMAINING $729 $4,814

19
Statement of Financial Position ($)
Tyler and Mia Bedo
(As of December 31st, 2015)
Assets Liabilities
Monetary Assets Current Liabilities
Checking Account JT 5,500 Visa JT 3,500
Savings Account JT 12,000 MasterCard JT 2,000
Money Market Account JT 8,000
Investment Assets Long-Term Liabilities
EE Bonds JT 25,000 Mortgage JT 220,566
HRSVX JT 69,000 Auto Loan JT 10,396
FMCSX JT 43,000
VFIIX JT 13,000 Total Liabilities 236,462
RYPNX JT 8,000
Retirement Assets NET WORTH 942,388
FIGRX T 79,000
CGRMX T 60,400
USERX T 63,600
DODGX T 52,000
PRNHX M 15,250
VFIIX M 34,500
VQNPX M 50,000
Potsdam Fixed Annuity M 125,000
Insurance Assets (Cash Value)
Whole Life T 8,750
Whole Life M 8,350
Special Funding Assets (Art Gallery)
Checking Account II JT 5,000
Real Assets
Primary Residence JT 365,000
Personal Assets
Acura TSX Sedan JT 20,000
Dodge Grand Caravan JT 8,500
Aluminum Boat JT 5,500
Mickelson Signed Club JT 5,000
Golf Artwork JT 1,000
Lifestyle Assets
Furniture JT 65,000
Yard Equipment JT 1,500
Mia’s Jewelry M 10,000
Tyler’s Jewelry JT 2,500
Golf Clubs JT 3,000
Paintings JT 500
Collectibles M 6,000
Total Assets 1,178,850

20
Section B: Financial Ratios
We performed the following financial ratio analysis to gain insight into your financial
strengths and weaknesses. These ratios were calculated based on the Income and Expense
Statement and the Statement of Financial Position in Section A: Financial Statements.
Financial ratios complete your financial picture by providing a quantitative measure of
financial health that can be compared to a benchmark. Benchmarks are provided to serve
as a guide for interpretation purposes. Financial analysis is limited to the past and
therefore is not necessarily predictive of the future.
With the exception of a couple small items, you are in very good excellent financial
health.
Current Ratio
The current ratio determines whether sufficient monetary assets are available to pay off
all outstanding short-term debts. The recommended benchmark is a number greater than
one to ensure that if all current liabilities were paid then you would still retain monetary
assets.
In the event that you must quickly pay off your $5,500 credit card balances, you have
4.64 times more monetary assets available in your three accounts to do so.
Current Ratio =
𝑴𝒐𝒏𝒆𝒕𝒂𝒓𝒚 𝑨𝒔𝒔𝒆𝒕𝒔
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
Target: > 1.0
Monetary Assets
Checking Account $5,500
Savings Account $12,000
Money Market Account $8,000
Total Monetary Assets $25,500
Current Liabilities
VISA $3,500
MasterCard $2,000
Total Current Liabilities $5,500
Current Ratio = 4.64
Current Condition – Excellent
Emergency Fund Ratio
The emergency fund ratio has become increasingly more important due to the uncertainty
of our economy. In the past, 3 to 6 months was used as the benchmark for this ratio; our
firm now recommends 6 to 12 months – however you have provided a mandate for 8
months.

21
This ratio is calculated using your dedicated expenses, such as debt payments (mortgage,
auto and credit card), insurance premiums (auto, homeowner’s, and life) and
reinvestment of capital gains and dividends. The savings and investments portion of your
dedicated expenses, such as emergency fund savings, art gallery savings, annuity
payments, and other systematic savings for non-specified goals were excluded. This is
because an emergency situation, this payments would likely be halted temporarily. Your
discretionary expenses excluded miscellaneous spending such as chartable contributions,
travel, gifts and postage.
Your emergency fund will provide you with four months of living expenses without
liquidating other assets. You are willing to use the accumulated art gallery savings, as
long as this money remains in the bank. Please keep in mind that you could potentially
live on your savings for a longer period of time if you were to further decrease or
eliminate discretionary spending. As you mentioned previously, given your inclination to
be prepared, your goal is to build a cash reserve of 8 months.
Emergency Fund Ratio =
𝑴𝒐𝒏𝒕𝒉𝒍𝒚 𝑳𝒊𝒗𝒊𝒏𝒈 𝑬𝒙𝒑𝒆𝒏𝒔𝒆𝒔
Target: 6 – 12 months
Monetary Assets
Checking Account II $5,000
Monthly Living Expenses
Dedicated Expenses $3,260
Discretionary Expenses $3,796
Total Monthly Living Expenses $7,056
Emergency Fund Ratio = 4.32
Current Condition – Needs attention (see SectionC, which follows)
Savings Ratio
The savings ratio totals your personal savings and employer retirement contributions, and
then divides by your annual gross income to determine whether you are saving enough.
We recommend saving at least 10% of your annual gross income.
You are currently saving 18% of your annual gross income, allocated to different savings
vehicles and goals as outlined below. This is excellent and demonstrates your
commitment to all of your future financial goals. Savings committed to your cash
reserve, art gallery and annuity are included in this calculation. Based on your systematic
savings outside of qualified retirement plans, you are saving $900 per month, or $10,800
per year, in three funds: Royce Opportunity, Heartland Select and Vanguard GNMA.

22
Savings Ratio =
𝑷𝒆𝒓𝒔𝒐𝒏𝒂𝒍 𝑺𝒂𝒗𝒊𝒏𝒈𝒔 + 𝑬𝒎𝒑𝒍𝒐𝒚𝒆𝒓 𝑪𝒐𝒏𝒕𝒓𝒊𝒃𝒖𝒕𝒊𝒐𝒏𝒔
𝑨𝒏𝒏𝒖𝒂𝒍 𝑮𝒓𝒐𝒔𝒔 𝑰𝒏𝒄𝒐𝒎𝒆
Target: > 10%
Personal Savings + Employer Contributions
Emergency Fund Savings $2,100
Art Gallery Savings $1,800
Potsdam Fixed Annuity Savings $3,300
Other Non-Specified Goals $10,800
Tax-Sheltered Retirement Contributions $8,492
Reinvestment of Capital Gains & Dividends $4,770
Total Personal Savings + Employer Contributions $31,262
Annual Gross Income
Tyler $113,192
Mia $56,538
Total Annual Gross Income $169,730
Savings Ratio = 18.42%
Debt Ratio
The debt ratio illustrates the amount of your assets that are financed by borrowing. A
benchmark of 40% is used to ensure that you have not taken on too much debt.
Your assets are funded by 20% of debt. This is excellent and shows that you do not have
too much debt compared to the recommended benchmark of 40%.
Debt Ratio =
𝑻𝒐𝒕𝒂𝒍 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕𝒔
Target: < 40%
Total Liabilities
Current Liabilities $5,500
Long-Term Liabilities $230,962
Total Liabilities $236,462
Total Assets
Monetary/ Liquid $25,500
Investment Assets $158,000
Retirement Assets $479,750
Insurance (Cash Value) $17,100
Special Needs $5,000
Real Assets $365,000
Personal/ Collectible Assets $40,000
Use/ Lifestyle $88,500
Total Assets $1,178,850
Debt Ratio = 20.06%
Current Condition – Very good

23
Long-Term Debt Coverage Ratio
This ratio illustrates how many times you could make your debt payments based on your
current income. The benchmark is to ensure that you have enough annual gross income to
make payments for 2½ years.
Considering your current gross income of $169,730, you could make your payments for
just over 7 years. Your long-term debt payments include your mortgage payments and
automobile loan payments, as these payments take longer than one year to repay.
LT Debt Coverage Ratio =
𝑻𝒐𝒕𝒂𝒍 𝑨𝒏𝒏𝒖𝒂𝒍 𝑳𝑻 𝑫𝒆𝒃𝒕 𝑷𝒂𝒚𝒎𝒆𝒏𝒕𝒔
Target: > 2.5
Annual Gross Income
Tyler $113,192
Mia $56,538
Total Annual LT Debt Payments
Mortgage Payment $17,968
Auto Loan Payments $5,412
Total Annual LT Debt Payments $23,380
LT Debt Coverage Ratio = 7.26
Debt-to-Income
This ratio measures the percentage of take-home pay that is committed to consumer
credit repayment. Consumer credit payments include all revolving and installment
nonmortgage debts. When an individual commits more than 15% to consumer debt
repayment then very little is left for meeting other financial obligations.
With less than 9% of your take-home pay going toward consumer credit payment, you
are well within the benchmark.
Debt-to-Income =
𝑨𝒏𝒏𝒖𝒂𝒍 𝑪𝒐𝒏𝒔𝒖𝒎𝒆𝒓 𝑪𝒓𝒆𝒅𝒊𝒕 𝑷𝒂𝒚𝒎𝒆𝒏𝒕
𝑨𝒏𝒏𝒖𝒂𝒍 𝑨𝒇𝒕𝒆𝒓−𝑻𝒂𝒙 𝑰𝒏𝒄𝒐𝒎𝒆
Target: < 15%
Annual Consumer Credit Payment
Credit Card Payments $5,100
Total Annual Consumer Credit Payment $10,512
Annual After-Tax Income
After-Tax Income $118,373
Debt-to-Income Ratio = 8.88%

24
Credit Usage Ratio
This ratio determines the adequacy of the emergency fund ratio and is a factor in
determining credit score. Using a steady amount of credit is important to maintaining and
improving your credit score.
You have been approved for certain limits on your Visa and MasterCard accounts of
$24,000 and $15,000 respectively. By measuring how much your available credit you are
currently using, we are able to benchmark against the 30% target. With only 14% credit
usage, you are using an appropriate amount of credit.
Credit Usage Ratio =
𝑻𝒐𝒕𝒂𝒍 𝑪𝒓𝒆𝒅𝒊𝒕 𝑼𝒔𝒆𝒅
𝑻𝒐𝒕𝒂𝒍 𝑪𝒓𝒆𝒅𝒊𝒕 𝑨𝒗𝒂𝒊𝒍𝒂𝒃𝒍𝒆
Target: < 30%
Credit Used
VISA $3,500
MasterCard $2,000
Total Credit Used $5,500
Credit Available
VISA Limit $24,000
MasterCard Limit $15,000
Total Credit Available $39,000
Credit Usage Ratio = 14.10%
“Front-End” and “Back-End” Mortgage Qualification Ratios
You mentioned that you have considered refinancing your mortgage. In order to qualify
to refinance, lenders will look at these measures.
The “Front-End” ratio determines how much of your gross income is dedicated to your
annual mortgage payment. Your annual mortgage payment includes principal, interest,
real estate taxes and homeowner’s insurance (PITI). Most lenders will require that you
spend no more than 28%. You are currently spending 12% of your gross income.
Front-End Mortgage Ratio =
𝑨𝒏𝒏𝒖𝒂𝒍 𝑴𝒐𝒓𝒕𝒈𝒂𝒈𝒆 𝑷𝒂𝒚𝒎𝒆𝒏𝒕
Target: < 28%
Annual Mortgage Payment
Principal & Interest $17,968
Real Estate Taxes $1,820
Homeowners Insurance Premiums $900
Total Annual Mortgage Payments $20,680
Annual Gross Income
Tyler $113,192
Mia $56,538
Front-End Mortgage Ratio = 12.18%

25
While similar to the “Front-End” ratio, the “Back-End” ratio takes into account all credit
payments. With 18% of gross income being applied to credit payments, you are well
below the 36% limit.
Back-End Mortgage Ratio =
𝑨𝒏𝒏𝒖𝒂𝒍 𝑴𝒐𝒓𝒕𝒈𝒂𝒈𝒆 𝒂𝒏𝒅 𝑪𝒓𝒆𝒅𝒊𝒕 𝑷𝒂𝒚𝒎𝒆𝒏𝒕
Target: < 36%
Annual Mortgage and Credit Payment
Principal & Interest $17,968
Real Estate Taxes $1,820
Homeowners Insurance Premiums $900
Credit Card Payments $5,100
Total Annual Mortgage and Credit Payment $31,200
Annual Gross Income
Tyler $113,192
Mia $56,538
Back-End Mortgage Ratio = 18.38%
Ratio Analysis Summary
We applied ratios dealing with liquidity (adequate income to cover expenses) and
solvency (adequate assets to cover liabilities) to your financial situation. All calculations
feel within the recommended benchmark, except for the Emergency Fund Ratio. Given
that you currently have just over 3 months of living expenses covered, we would like to
see this ratio reach your cash reserve goal of 8 months. We will help you achieve your
goal within your desired two year time period.
All ratios considering your debt usage demonstrate that you have not taken on too much
debt given your financial position. We want to commend you on managing your use of
debt. Living within your means creates the opportunity to save, which leads to wealth
accumulation and the eventual ability to meet longer-term goals.

26
Section C: Emergency Fund
Overview
Factors that affect the number of months of needed expenses include job security,
consistency of income (salary vs. commission), number of earners and availability of
unused credit capacity. A common approach to building an emergency fund is to increase
monetary assets. One source can be designated as, or multiple sources combined to create
a savings fund. Liquidity may be key if a planner and client believe that the assets must
be readily available. Of course, monetary assets that pay the highest rate of interest
should be chosen.
Additionally, an emergency account can be considered unfunded, such as with credit
available. The cash value of a life insurance policy, other investment assets and credit
cards can be used as supplements to or substitutes for traditional monetary assets.
Assumptions
 Cash reserve goal of 8 months of expenses.
 Mia is willing to use her accumulated art gallery savings (Checking Account II)
for an emergency, as long as the money remains in a bank, checking, or money
market account.
 Visa available limit of $24,000.
 MasterCard available limit of $15,000.
Current Situation
You currently have $8,000 of cash reserves in your money market account. To this
account, you are systematically saving $175 on a monthly basis, or $2,100 each year.
There are currently no other efforts being put forth to increase your emergency fund.
Your emergency fund as addressed in the previous section is 4.32 months.
Recommendations
Considering your current assets and expenses, increasing this ratio to 8 months will
require $26,000 in additional monetary assets. While our recommendations stated
throughout this plan will affect your dedicated expenses, we will re-evaluate the status of
your emergency fund in July of 2016 after implementation of recommendations
To achieve $26,000 in additional monetary assets in the next two years, the following
should be considered:
1. Systematic savings of $175 per month to your Money Market Account, resulting in
$4,200 over the course of the two years.
2. Charitable giving strategy freeing $6,687 of cash flow, resulting in $13,374 over the
course of the two years. This will be deposited to your Money Market Account.
3. Refinance mortgage freeing $4,576 of available cash flow, resulting in $9,152 over
the course of two years. This will be deposited to your Savings Account.

27
These recommendations result in $26,726 of dedicated assets to your emergency fund.
Emergency Fund Ratio =
𝑴𝒐𝒏𝒕𝒉𝒍𝒚 𝑳𝒊𝒗𝒊𝒏𝒈 𝑬𝒙𝒑𝒆𝒏𝒔𝒆𝒔
Year Ended December 31, 2017
Monetary Assets
Checking Account II $5,000
Monthly Living Expenses
Dedicated Expenses $3,260
Discretionary Expenses $3,796
Total Monthly Living Expenses $7,056
Emergency Fund Ratio = 8.11
These three recommendations will allow you to meet your emergency fund goal of 8
months by 2017.

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Section D: Credit Card Debt
Overview
Looking at the liability side of a net worth statement depicts a client’s type of debt as
well as available and outstanding balances. Restructuring consumer credit is key to
improving discretionary cash flow. One method is to pay off unsecured debt with assets
paying little or no after-tax return. Paying off high-interest, non-tax-deductible debt using
low yielding monetary assets is essential. Credit card interest rates invariably exceed the
interest monetary assets earn; however, through proper debt management, discretionary
cash flow may be freed.
Assumptions
 Savings Account balance of $21,152, mortgage refinance strategy is implemented.
Current Situation
You currently have outstanding credit card debt of $3,500 (Visa) + $2,000 (Master Card).
Please see the below table for more details regarding your credit cards.
Visa Credit Card MasterCard
BIG National Bank (Joint Liability) University Bank (Joint Liability)
18.25% 16.75%
$250
Minimum payment: the greater of 4% of
the balance or $50
$175
Greater of monthly interest charge + 1.5%
of balance or $50
Monthly Monthly
$3,500 (Current Balance)
$24,000 available limit
$2,000 (Current Balance)
$15,000 available limit
If you were to continue your current payment of $425 per month, it will take 15 months
total to pay off the balances on both cards.
Visa
Mo. Interest Rate 1.52%
Ann. Interest Rate 18.25%
Mo. Payment $425.00
Payment # Bal. Payment Interest Ending Bal.
1 $3,500.00 $425.00 $53.23 $3,128.23
2 $3,128.23 $425.00 $47.58 $2,750.80
3 $2,750.80 $425.00 $41.84 $2,367.64
4 $2,367.64 $425.00 $36.01 $1,978.65
5 $1,978.65 $425.00 $30.09 $1,583.74
6 $1,583.74 $425.00 $24.09 $1,182.83
7 $1,182.83 $425.00 $17.99 $775.81
8 $775.81 $425.00 $11.80 $362.61
9 $362.61 $368.13 $5.51 $0.00

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MasterCard
Mo. Payment $425.00
10 $2,000.00 $56.87 $27.92 $1,971.04
11 $1,971.04 $425.00 $27.51 $1,573.56
12 $1,573.56 $425.00 $21.96 $1,170.52
13 $1,170.52 $425.00 $16.34 $761.86
14 $761.86 $425.00 $10.63 $347.49
15 $347.49 $352.34 $4.85 $0.00
Total Payments $5,877.34
Total Interest $377.34
Recommendations
1. Increase Credit Card Payment to $800/ month
As part of your current situation and cash flow analysis we reviewed your use of
revolving credit. While we considered alternatives for lowering the interest rate such as a
home equity line of credit (HELOC) or taking cash from your mortgage refinance, we
recommend that you simply increase your monthly credit card payment amount from
$425 to $800.
This increase will result is both cards having zero balances in 9 months rather than 15
months, and reduces your total interest paid from $377 to $216; a total savings of $161.
While not a huge savings, we think that this addresses your debt reduction goal. This has
the added benefit of freeing-up available credit in the event of an emergency while we
assist you with your subsequent goal of establishing an emergency fund capable of
meeting 8 months of expenses.
The following analysis addresses the effects of implementing the recommendation of
increasing payments to $800/ month.
Visa
Mo. Payment $800.00
1 $3,500.00 $800.00 $53.23 $2,753.23
2 $2,753.23 $800.00 $41.87 $1,995.10
3 $1,995.10 $800.00 $30.34 $1,225.44
4 $1,225.44 $800.00 $18.64 $444.08
5 $444.08 $450.83 $6.75 $0.00

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MasterCard
Monthly Interest
Rate 1.40%
Annual Interest
Rate 16.75%
Monthly Payment: $800.00
Payment # Balance Payment Interest
Ending
Balance
6 $2,000.00 $349.17 $27.92 $1,678.75
7 $1,678.75 $800.00 $23.43 $902.18
8 $902.18 $800.00 $12.59 $114.78
9 $114.78 $116.38 $1.60 $0.00
Total Payments $5,716.38
Total Interest $216.38

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Section E: Mortgage Refinance
Overview
Considering today’s economic environment of low interest rates, a mortgage refinancing
alternative should be considered. When a mortgage rate is at least 1% or 2% lower than
the current mortgage rate, a refinancing strategy makes sense. Of course this percentage
range can differ depending on the client situation and costs associated with refinancing.
Other factors such as estimated time in the house should be considered.
There are three primary reasons to refinance mortgage debt:
1. To reduce monthly payment
2. To reduce total amount of interest paid
3. Take available equity out of the house
Refinancing is not typically cost free, because it involves paying all closing costs (usually
between 1% and 3% of the mortgage value). It is possible to borrow an extra amount to
cover these costs, which will marginally increase the monthly payment. This strategy
allows the client to avoid paying closing costs from monetary assets.
Assumptions
 Any mortgage refinancing will incur 3% of the mortgage as a closing cost.
 Mortgage loan payments of $1,497.
Current Situation
You would like to see an analysis showing the impact of 1) including closing costs in the
mortgage and 2) paying closing costs from assets. Your current mortgage is through BIG
National Bank at a rate of 6.375%. The original balance was $240,000; however, after 74
monthly payments the remaining balance is $219,584. Considering the low interest rate
environment, a mortgage refinance strategy should be considered.
Recommendations
By analyzing two potential mortgage refinance strategies, which can be found in the
Appendix C, we have determined an optimal strategy for you to consider. In each of these
cases, it is assumed that the closing costs are included in the balance of the new
mortgage. At this time we have not performed an analysis based on paying closing costs
from monetary assets, as a slightly higher monthly payment is sustainable over the long
run; whereas, your monetary assets are currently in flux as we attempt to grow your
emergency fund and implement other recommendations.
1. Maximize free cash flow: Refinance for 30 years at 4.250%.
This refinance results in a monthly payment of $1,115, over $380 per month lower than
the current payment. With this additional cash flow, we would recommend contributing
to your Money Market account to meet your cash reserve goal.

32
Although we recommend refinancing for 30 years because of the much lower interest
rate, you would still pay approximately $35,000 less in interest over the life of the loan.
2. Minimize mortgage interest: Refinance for 20 years at 3.875%.
This refinance results in a monthly payment of $1,360, over $137 per month lower than
the current payment. Again we recommend putting this additional cash flow to your
Money Market Account.
Between the shortened repayment period and the lower interest rate, you would end up
paying over $111,000 less in mortgage interest.
Mia and Tyler, after much consideration we believe that the first option offers the
greatest combination of short and long term benefits. We will of course assist you with
the implementation of this strategy should you desire our help.

33

34
Overview
At Summit Financial Advisors, we believe in a strong client tax analysis in order to give
the client numerous financial advantages. Tax implications can be found in every section
within this plan, and these different sections of the plan can be leveraged to decrease
income and social security taxes.
Key Terms
 Filing Status: Defines the type of tax return an individual will use.
 Tax Bracket: Shows you the tax you will pay on each portion of your income.
 Marginal Tax: Determines what tax rate your next dollar of income will be taxed
at.
 Capital Gains: Additional appreciation above the value at which you acquired an
asset.
 Capital Gains Tax: A preferential tax rate applied to capital gains on assets held
for at least one year.
 FICA Tax: Payroll tax to fund Social Security and Medicare.
Federal Tax
Your federal tax liability is calculated using the Form 1040 provided by the Internal
Revenue Service. Form 1040 determines your tax owed in several steps.
You must first determine your initial taxable income. Income is derived from wages, as
well as dividends, capital gains, IRA distributions, and several other sources. Once this
income is determined, you are allowed to deduct certain expenses, known as above the
line deductions, to arrive at an Adjusted Gross Income. Some of these above the line
expenses include Health Savings Account deductions, IRA deductions, and tuition and
fees. Once you have calculated your AGI, there are several additional deductions and
exemptions, known as below the line deductions, that you can take in order to further
reduce your taxable income.
In regards to deductions, you are allowed to take the higher of a standard deduction or a
sum of your itemized deductions. The standard deduction for a Married Filing Jointly
couple this year is $12,400. Some of the commonly used itemized deductions include
mortgage interest, state and personal property taxes, education expenses, and
medical/dental expenses. It is important to note that this is not an extensive list, and that
there are certain thresholds and limitations that must be met before certain itemized
deductions can be taken.
Once standard or itemized deductions are chosen, exemptions can be used to further
reduce the taxable income. Exemptions can be taken for each taxpayer as well as the
clients’ dependents. The personal exemption amount is currently $3,950 per person.
Once your income is adjusted for all above the line and below the line adjustments, you
arrive at your taxable income. Your taxable income allows you to determine what tax
bracket you fall into in order to calculate your tax liability. This tax liability can then be
reduced dollar for dollar by additional credits.

35
State Tax
Your Virginia state tax liability is calculated using Form 760 provided by the Internal
Revenue Service. Using Form 760, the state tax is calculated similarly to your federal tax,
with a few exceptions.
In order to determine your taxable income for state purposes, you use the adjusted gross
income stated on the federal return as a starting point. In order to reach the Virginia
Adjusted Gross Income you then subtract out the state tax refund claimed on your federal
return.
Once you have your Virginia Adjusted Gross Income you then deduct the greater of the
standard deduction or the itemized deductions taken on your federal return. If you use the
itemized deductions you add back the state and local taxes claimed used for federal
itemized deductions. Following deductions you then reduce taxable income by the
allowed exemptions.
After the previous step, if you contribute to a Virginia 529 plan you are allowed to take a
deduction of up to $4,000 in contributions if you are using the married filing jointly tax
status. If you claim childcare expenses on your federal return, you may deduct the full
childcare expenses for state purposes up to $6,000
After these steps are completed you arrive at your Virginia taxable income that then
allows you to calculate your state income tax liability. This tax liability can then be
reduced dollar for dollar by additional credits as well as the spousal tax adjustment
amount.
FICA Tax
FICA taxes are determined by calculating earned income and subtracting out qualified
expenses. Qualified expenses for FICA purposes are section 125 contributions, employer
sponsored health care premiums, and other pre-tax benefit expenses.
Assumptions
 Married Filing Jointly tax filing status.
 Marginal tax bracket is 25%.
 Capital gains tax rate is 15%.
 Virginia marginal tax bracket is 5.75%.
 FICA tax rate is 7.65%.
 The universal rate of inflation is 3%.
 Tax rates will increase in the future.
 Interest and dividends will grow at 3%
 Interest and dividend income will be reinvested.

36
Current Situation
In order to implement advantageous tax strategies, it is important for you to understand
where you are currently standing, and how your taxes are derived. As of right now you
currently have an expected federal tax liability of $19,727, an expected state tax liability
of $6,968, and a Social Security/FICA tax estimate of $12,270.
Federal Tax
After analyzing your tax situation and making an adjustment for the capital gains tax rate,
you should have a federal tax liability this year of $19,512. Your current amount set aside
for tax withholdings is $22,138, which is $2,626 more than your expected tax liability.
 Income
 $164,006 wages and bonus
 $200 taxable interest
 $2,330 ordinary dividends
 $750 taxable state refund
 $1,290 capital gains; adjusted for capital gains tax rate
 $294 Section 79 income
 Above the line expense adjustments
 $3,600 to a Section 125 Cafeteria Plan
 $8,492 in qualified investment contributions
 $300 other pre-tax benefits
 No funding of available employer sponsored health care premium
 Itemized Deductions
 $14,132 mortgage interest
 $6,220 charity contributions
 $6,086 state tax
 $525 personal property tax
 $1,820 real estate tax
 Exemptions – $16,000
 Credits – None
Income: $168,870
Expenses: $ (12,392.00)
Adjusted Gross Income: $ 157,338.07
Itemized Deductions: $ (28,783.00)
Exemptions: $ (16,000.00)
Taxable Income: $ 112,555.07
Tax Liability: $ 19,512.00
Credits: N/A

37
State Tax
Federal AGI: $156,478
Virginia AGI: $155,728
Itemized Deductions: ($22,697)
Exemption: ($3,720)
Virginia Taxable Income: $129,311
Estimated Tax: $7,178
Spousal Tax Adjustment: ($259)
State Tax Liability: $6,919
FICA Tax
This year your expected FICA tax liability is $12,621.
Recommendations
After analyzing your tax data and reviewing different possible courses of action based on
a federal tax analysis in conjunction with other planning areas, there are several
recommendations we have developed for you going forward. It is our goal to present you
with our recommended course of action, as well as other possible courses of action in
order to arrive at a mutually agreed upon tax strategy that best suits you.
1. Reduce federal tax withholdings
One area we have identified for change is your current federal tax withholdings amount
for this year. As of now you are having your company withhold more money for your
federal tax liabilities than is necessary. As you will get this money back later in the form
of tax refunds, you are essentially providing the government with an interest free loan for
the amount of excess withholdings. We believe you would benefit from reducing your
withholding amount by $2,411 and using this increase in cash flow to fund other goals
2. Gift appreciated stock to charity
Charitable contributions are currently being funded with discretionary cash flow, but
stock can be used to fund desired charities while freeing up discretionary cash flow.
When gifting appreciated stock directly to charity, no capital gains taxes are applied to
the distribution. The full fair market value of the stock can be applied as a charitable
deduction for federal tax purposes, and the appreciated amount of stock over the basis
can be further used to reduce capital gains.
Alternatives
In addition to these recommendations some additional strategies to implement could be to
sell investments at a capital loss to offset capital gains.

38
Who What When Where Why How How Much
Tyler and
Mia
Reduce
withholdings
Within 1
month
Respective
companies
Increase
discretionary
cash flow
Fill out new
W-4
$2,411
Tyler and
Mia
Use
appreciated
stock for
charitable
contributions
Before tax
filings due
From non-
qualified
investment
to desired
charities
Increase
discretionary
cash flow
and realize
tax benefits
Gift
appreciated
investments
directly to
charities
$6,220
(subject to
change)
After adjusting for comprehensive planning recommendations in addition to our
recommended tax strategies, below are your current projected taxes for the following 1,
3, and 5-year period.
2016 2018 2020
Federal Tax $32,602 $28,235 $31,449
State Tax $8,365 $7,468 $8,128
FICA Tax $12,845 $13,680 $14,543
Total Tax $54,881 $49,383 $54,120
Disclaimer: As we are not tax professionals, we advise that you review these strategies
with a CPA before implementing our recommendations.

39

40
Section A: Life Insurance
Overview
Life insurance is purchased to ensure the financial security of the surviving spouse and
family in the event one of you was to pass away unexpectedly.
The need for life insurance is founded on three basic notions:
1. People earn money during working lives.
2. Money that is earned supports a desired standard of living.
3. A desired standard of living should not have to change due to the death of an earner.
There are two basic types of life insurance policies:
Term Life Insurance Whole-Life Insurance
Length of Policy 1-30 years Life
Premium (year to year) Fixed or Increasing Fixed
Cash Value No Yes
Loans/ Withdrawals No Yes
Death Benefits Guaranteed Guaranteed
There are many commonly used methods for determining a client’s gross life insurance
need. After considering your situation, the Needs-Based Analysis Approach was selected.
This approach provides a framework that focuses on projecting financial needs and then
discounting for the effects of inflation, taxes and potential investment returns.
Assumptions
 Assets available at Tyler’s death include his IRA and 401(k).
 Assets available at Mia’s death include her Rollover IRA, 401(k) and the annuity.
 Need $130,000 in income (before-tax) to fund household expenses.
 Willing to allocate $100,000 of nonretirement investment assets toward survivor
needs.
 Surviving spouse will invest any cash settlements in a moderately conservative
portfolio before and after retirement; this rate will supersede all other rate-of-
return assumptions.
 Your state and federal tax bracket is 30.75%, until the surviving spouse retires.
 Your combined marginal tax bracket is 30.75%, while in retirement.
 Pre-fund retirement and education objectives, even if one of you dies.
 Surviving spouse needs $125,000 per year (in today’s dollars) when they retire.
 Final expense needs:
 $20,000 for final debts (credit cards, auto loans, etc., but not the mortgage)
 $5,500 for final illness costs
 $10,000 for funeral expenses
 $9,500 for estate administration costs
 $10,000 for other short-term needs
 $25,000 for a spousal adjustment period

41
 All liabilities, including your mortgage, will be paid off if possible.
 In the event of Tyler’s death, Social Security benefits would be:
 $2,384 yearly to Mia from age 67 to age 95, if Tyler dies.
 $1,788 yearly to Becky and Ben each until age 18, if Tyler dies.
 $1,788 yearly to Mia until Becky and Ben turns age 16, if Tyler dies.
 $1,705 yearly to Mia from age 60 to age 67, if Tyler dies. This represents
a 28.50% reduction in benefits based on age 67 survivor benefits.
 In the event of Mia’s death, Social Security benefits would be:
 $1,622 yearly to Tyler from age 67 to 95, if Mia dies.
 $1,216 yearly to Becky and Ben until age 18, if Mia dies.
 $1,216 yearly to Tyler until Becky and Ben turns age 16, if Mia dies.
 $1,160 yearly to Tyler from age 60 to 67, if Mia dies. This represents a
28.50% reduction in benefits based on age 67 survivor benefits.
 Surviving spouse plans to stop working at age 60 and begin taking early
retirement survivor benefits, if available.
 For conservative planning purposes, neither interest nor dividends will be used as
an income source when planning insurance needs.
Current Situation
By using the Needs-Based Analysis Approach and assumptions addressed above, we
calculated the amount of life insurance needed. Please keep in mind that each of your two
current life insurance policies were factored into the coverage needed calculation.
Assuming a 30.75% combined marginal tax bracket pre-retirement and post-retirement,
your life insurance needs are:
Coverage Needed
Tyler $856,834
Mia $369,855
Per your assumptions of a 30.75% combined marginal tax bracket pre retirement and
25% post retirement, your life insurance needs are:
Coverage Needed
Tyler $792,211
Mia $310,317
Our recommendations are based off of the constant 30.75% combined marginal tax
bracket, as it is likely that tax rates will continue to climb. We wanted you to understand
the impact that assuming a lower tax bracket can have on coverage determination.
Your life insurance policies are outlined below for your review.

42
Tyler Mia Tyler Mia
Type of
Policy
Whole Life Whole Life Group Term Group Term
Insurance
Company
Manhattan
Insurance
Company
Manhattan
Insurance
Company
Great Plains
Assurance and
Protection
Corporation
Virginia
Highland Life
Insurance
Company
After-tax
rate of
return
5.50% 5.50% 0% 0%
Death
Benefit
$100,000 $100,000
2 x salary (not
including bonus)
2.5 x salary (not
including bonus)
Cash Value $8,750 $8,350 $0 $0
Annual
Premium
$1,104 $960 Company paid Company paid
Tyler’s Total Coverage = $309,820
Mia’s Total Coverage = $235,240
To evaluate the cost-effectiveness of your cash value life policies, the Yearly Price per
Thousand (YPT) method must be applied. This formula provides quick insight into
whether the policy should be replaced. By using an established benchmark cost
determined by your age, it becomes possible to compare policies.
Current YPT
Benchmark (Age 44): $4.00
Tyler $4.90
Mia $3.55
The interpretation of the YPT is as follows: Because Mia’s policy’s YPT is less than the
benchmark then the policy should be maintained. On the other hand, Tyler’s policy’s
YPT is greater than the benchmark. It is only when the YPT becomes greater than two
times the benchmark price that the policy should be replaced. Based on the calculations
above, neither policies are overpriced.
Regarding the group term policies, your current employers pay the premiums on your
behalf. You must include any premiums paid on coverage exceeding $50,000 as gross
income, also known as Section 79 Income. Tyler, you had $192 of Section 79 income last
year and Mia, you had $102.
Recommendations
1. Purchase New Term Life Policies
As addressed above, there is a life insurance coverage shortage. While your current
private policies are not overpriced, they do result in a large coverage gap (over $500,000
for Tyler and nearly $150,000 for Mia). Therefore, our first recommendation is to
purchase new private term policies. This will ensure that you are appropriately covered in

43
the event one of you was to pass away unexpectedly. We spoke to several insurance
agents and found a policy that best meets your needs through Eric Johnsen, a State Farm
agent.
Tyler, we found a 20-year term policy that provides a death benefit of $900,000 with an
annual premium of $1,832. This will increase the cost of coverage by $477 annually, to a
total of $2,309. Furthermore, we recommend a policy that includes a disability waiver
provision. This optional provision ensures the policy to remain in effect during a period
of disability, without the additional cost of continuing premium payments.
Mia, we found a 20-year term policy that provides a death benefit of $500,000 with an
annual premium of $885. Similar to Tyler’s policy, with the disability waiver provision
this will increase the cost by $256 annually, to a total of $1,150.
Both of these policies have guaranteed renewable provisions, meaning that you will be
able to continue the policies without the need to provide updated proof of insurability.
However, the subsequent premium will be higher than the premium you are paying for
the first 20-year period.
These changes will require you to pay $3,459 annually, which is $1,395 more than you
are currently paying for your combined life insurance coverage.
2. Terminate Current Cash-Value Policies
After the new policies are in place, we recommend terminating your current cash-value
policies. It is vital to make sure that your new policies have been purchased and are in
place, as any lapse in coverage could be disastrous.
Requesting that the insurance company return the cash surrender value of the policies
will result in $17,100. However, the value of the cash received in excess of net paid
premiums is subject to federal and state income taxation. When we determine the
earnings portion of your policies, we can calculate these taxes and determine your net
proceeds. Please fill out and send the necessary form, which we can help you locate, to
the insurance company to request the surrender. Depending on several factors, it could
take weeks to receive the check.
3. Maintain Current Employer-Provided Policies
Concerning your employer provided group term policies, we would like for you to leave
these in place. While these policies provide coverage during your employment, it is
important to note that coverage will most likely cease when you leave your positions.

44
Tyler & Mia Purchase
new 20-
year term
life policies
Before your
current
premiums
are due in
June
Through
Eric
Johnsen, or
another
agent of
your choice
To fill your
current
coverage
shortfalls
Meet with
an agent to
purchase the
policy; A
physical
exam may
be required
Tyler:
$2,309/ year
Mia:
$1,150/ year
Premium
payments:
$3,459/ year
Tyler & Mia Terminate
current
cash-value
policies
Before your
premiums
are due on
your old
policies in
June but
after your
new policies
are in place
Through the
agent that
provides
your current
policies
Although
not
overpriced,
these
policies do
not provide
adequate
coverage
Contact
agent to
terminate
policy and
request
receipt of
cash value
Tyler:
Cash Value
$8,750
Mia:
Cash Value
$8,350
Total Cash
Value:
$17,100
End
premium
payments:
$2,064/ year

45
Section B: Health Insurance
Overview
President Obama signed the Patient Protection and Affordable Care Act (PPACA) into
law March 23, 2010. As a result, the health insurance industry underwent dramatic
changes affecting health care providers, insurers, businesses, and individuals.
The following two changes are especially relevant to your situation:
 Individual Mandate: Individuals who do not have health insurance or a qualifying
plan will be forced to pay a shared responsibility payment.
 Flexible Spending Accounts (FSA): The use it or lose it rule has been modified to
allow a $500 annual carryover of unused contributions.
Many different types of plans exist to meet various health insurance needs, including:
 Traditional Indemnity Plan:
 The insured can obtain services from any provider for a higher premium
and service fee.
 There are many restrictions placed on these plans.
 Managed Care Plans:
1. Preferred Provider Organization (PPO)
 Restricted to a network of physicians and hospitals
 May go outside of the network (higher deductible and copayment)
 Lower expenses than Traditional Indemnity Plan
2. Point-of-Service Plan (POS)
 Physician choice is restricted
 May go outside of the network for additional costs
 Hospital choice is limited to network
3. Health Maintenance Organization (HMO)
 Lowest cost
 Restricted to a network of physicians and hospitals
 Best for households that frequently use medical services
 High-Deductible Health Plan (HDHP):
 These plans may be an indemnity, PPO, POS or HMO
 Best for households that are generally healthy
 Required disciplined saving to fund HSA to cover expenses
Several types of tax-advantaged accounts are offered to provide assistance with health
insurance costs. These two accounts are available through your current employer:
 Flexible Spending Account (FSA)
 Designed to offset qualified out-of-pocket medical expenses
 Funds contributed are deducted from paycheck before taxes are imposed
 Individuals may roll over $500 of unused funds to the next year
 Contribution limit of $2,550 (2015) per year

46
 Health Savings Account (HSA)
 Designed to offset qualified out-of-pocket medical expenses
 Contributions are deductible on your tax return
 Contributions are not forfeited but rather roll-over from year to year
 At 65, all contributed money and earnings can be rolled into an IRA
 Contribution limit of $3,350 (2015) for individuals and $6,650 (2015) for
families
Assumptions
 Tyler’s employer offers a FSA; the FSA is not being funded.
 Mia’s employer offers a HDHP with a HSA account.
Current Situation
Your family is covered through Tyler’s employer. The health provider, Peacock &
Peacock is a Health Maintenance Organization (HMO). Tyler, the $300 monthly
premium is paid pre-tax through your company’s Section 125 plan. You were curious
about the lifetime ceiling for services per family member of $1,000,000. After the
passage of the PPACA, this ceiling is no longer in place as long as the services are
considered medically essential.
Additionally, your employer offers a FSA, which has remained unfunded due to
confusion surrounding the use it or lose it rules. Beginning in 2014, participants are
allowed to roll over up to $500 of unused funds at the end of the plan year.
Thank you, Mia, for following up with your firm regarding the rumors that they offer a
High Deductible Health Plan (HDHP) with a Health Savings Account (HSA). With a
monthly family premium of $210, this would be significantly less expensive than the
$300 each month paid for Tyler’s plan.
Recommendation
1. Retain Health Insurance Through Tyler’s Employer
As addressed above, enrolling in the HDHP through Mia’s employer would save $90 in
premiums each month. HDHPs offer many benefits for those who have minimal health
care needs. Due to the high deductible nature of the plan, premiums are much lower than
other health care plans. Considering your two young children, the chances of requiring
health care services are high. Therefore the potential premium savings will not outweigh
the deductibles.
2. Contribute to FSA
Your family’s current insurance plan through Tyler’s employer seems to meet your health
care needs. You pay $2,160 in out-of-pocket expenses toward co-pays, prescriptions and
dental and eye care expenses. With some more background information regarding FSAs
and the $500 annual carryover, we encourage you to fund this account with $2,160.

47
We want to briefly review the tax implications of this decision:
Tax Liability
Without $2,160 Contribution
Federal $19,727
State $6,968
FICA $12,270
Total Taxes $38,965
Tax Liability
With $2,160 Contribution
Federal $19,186
State $6,844
FICA $12,105
Total Taxes $38,135
Contributing $2,160 to the FSA will result in an annual tax savings of $830.
However, please be aware that once your yearly election is made, you are unable to
change it unless a qualifying life event occurs. Contribution amounts can only be adjusted
at open enrollment, which may have already passed for plan year 2016. Tyler, please
confirm with your employer’s Human Resources department when this period is and let
us know if you can implement our recommendations for the upcoming year.
Retaining your current insurance while funding your FSA will cover your out-of-pocket
medical expenses and provide tax savings.
Tyler Contribute
to FSA
During the
next
enrollment
period for
plan year
2016
Through
your
employer’s
HR
department
To cover
out-of-
pocket
medical
expenses in
a tax-
advantaged
manner
Meet with
HR
department
to fill out
forms to
specify
contribution
amount
$2,160/ year

48
Section C: Disability Insurance
Overview
In today’s workforce, the probability of becoming disabled is more likely than dying in a
given year. The Americans with Disabilities Act defines a disability as broadly meaning a
physical or mental impairment that substantially limits a person’s major life activities.
When an individual becomes disabled, they lose their ability to earn income. Without
income, forced liquidation of assets to meet living expenses may occur. Additionally,
unexpected expenses associated with a disability can quickly deplete an emergency fund.
Disability insurance policies cover the loss of earned income in order to protect a
family’s net worth. Unearned income is not insurable with a disability policy, as this
The amount coverage purchased is typically a percentage of income and is normally
acquired as monthly or annual income replacement. Disability policies have elimination
periods, benefit periods, and income replacement percentages. Benefits begin following
an elimination period, or waiting time during which no benefits are paid and the client
can recover. Income replacement ratios are usually around 60% of pre-disability earned
income.
Policy Duration
 Short-Term Disability Policy
 Coverage begins after the claimant has exhausted medical and personal
leave days
 6 months – 2 years
 Coordinated to work with a long-term disability policy
 Long-Term Disability Policy
 Provide benefit coverage for as little as three years or as long as a lifetime
 Typically offer coverage until a specific age, such as 65 years old
Types of Policies
 Any-Occupation Policy
 Pays reduced or no benefits as long as insured can maintain any
employment
 Own-Occupation Policy
 Pays benefits if insured is unable to perform specific duties related to own
occupation
 Highest premium
 Modified Own-Occupation Policy
 Pays benefits if the insured is unable to perform specific duties related to
own occupation AND is also unable to work in an alternative occupation
for which they are qualified

49
Taxation of Benefits
Taxability of benefits is based on who paid the annual premium during the year in which
the disability occurs. If the individual and employer paid premiums during the year, the
employer paid portion would be taxable to the employee. However, if the employee
elects to include the contributions as income then the benefits are not taxable.
Social Security Disability Insurance (SSDI)
Social Security is another option for receiving disability benefits when you are unable to
work. We do not recommend assuming these benefits will be available because the
qualification process can be difficult. The worker must be currently eligible to receive
Social Security benefits, be totally disabled, and expect that disability to last for at least
12 continuous months.
Assumptions
 No SSDI benefits will be received.
 In the event of a disability, you will continue saving for other goals.
 Cash settlements received will be invested using a moderately conservative asset
allocation.
Current Situation
Your life disability policies are outlined below for your review.
Tyler Mia Tyler Mia
Type of Policy Group Group Group Group
Insurance
Company
MA Disability
Assurance
Corp.
All-World Life
and Disability
Company
MA Disability
Assurance
Corp.
All-World Life
and Disability
Company
Wait Period 0 days 0 days 90 days 90 days
Benefit Period 90 days 90 days To age 65 To age 65
Disability
Benefit
100% of salary
& bonus
100% of salary
& bonus
60% of salary
(not including
bonus)
70% of salary
(not including
bonus)
Definition
Own
Occupation
Own
Occupation
Own
Occupation
Modified Own
Occupation
Benefit
Frequency
Bi-weekly Monthly Bi-weekly Monthly
Premium
Amount
Company Paid Company Paid Company Paid
$25 Monthly
(pre-tax dollars,
employee
benefit)
These policies all have sufficient short-term coverage because the entire waiting period of
the long-term policies are covered. Both long-term policies provide coverage until the
age of retirement and therefore are ideal.

50
You both had expressed concern regarding the negative outcomes associated with
disability. Here are the findings considering your current policies:
Short-term disability (after elimination period):
 Tyler becomes disabled: Monthly income shortfall of $217.
 Mia becomes disabled: Monthly income surplus of $566.
 Disablement of both of you: Monthly shortfall of $977.
Long-term disability (after elimination period):
 Tyler becomes disabled: Monthly income shortfall of $2,638.
 Mia becomes disabled: Monthly income shortfall of $272.
 Disablement of both of you: Monthly shortfall of $4,236.
Recommendations
1. Tyler, Retain Coverage Through Employer
Tyler, you are covered by your employer and therefore changing the policy becomes
difficult and potentially impossible. We do not want you to opt out of your current
insurance as your company pays the premiums.
Although you see the shortfalls listed above and may worry, disability insurance presents
the potential for over-insurance between employer and private policies. Additionally,
paying for a disability policy that covers 100% of salary would be cost-prohibitive.
2. Mia, Retain Coverage Through Employer
Similarly, Mia you are covered by your employer. You pay $25 per month pre-tax for
your long-term Modified Own Occupation policy. We recommend that you stay covered
under your employer-sponsored plans as well.

51
Section D: Automobile Insurance
Overview
Automobile insurance ensures that you remain legal while on the road, protects your
vehicle(s), and defends the welfare of your family. Owning a car insurance policy will
protect your finances from unexpected and astronomical expenses.
A personal automobile policy (PAP) may be structured to include liability, personal
injury protection, medical payments, uninsured and underinsured motorists, and physical
damage coverages. The six main parts of a PAP are outlined below.
Part A: Liability Coverage
Liability coverage protects a covered individual against a suit or claim arising out of the
ownership or operation of a covered vehicle. This coverage applies to the insured and any
resident family member, as well as any person using the named insured’s covered
automobile.
Coverage amounts are written in split limits, where the amounts of insurance are stated
separately. The Virginia state-required limits of 25/50/20 are as follows:
 Bodily injury/ death of one person: $25,000
 Bodily injury/ death of two or more persons: $50,000
 Property damage: $20,000
Part B: Medical Payments
Medical payments cover all reasonable medical and funeral expenses incurred by an
insured in an accident. The coverage includes medical expenses for the insured,
passengers, and family members driving the covered vehicle at the time of the accident,
regardless of who is found at fault. Additionally, it covers the insured and family
members injured in another car or injured as a pedestrian.
Part C: Uninsured Motorists
Uninsured motorists coverage pays for bodily injury, and property damage in some states,
caused by an uninsured motorist, a hit-and-run driver, or a negligent drive whose
insurance company is insolvent. The coverage applies to the insured, family members,
any other person occupying a covered auto, and any other person legally entitled to
recover damages.
Underinsured motorists coverage can be added to a PAP to provide more complete
protection. This coverage fills in the gap that arises when the negligent party meets the
legal insurance requirements, but is legally responsible for additional amounts.

52
Part D: Coverage for Damage to Your Automobile
The insurance company will pay an amount in excess of your deductible for direct and
accidental loss to your covered automobile or any non-owned automobile. A non-owned
automobile is a private passenger car, pickup, van or trailer that is not owned by,
furnished by, or made available for your regular use.
Two optional coverages are available:
 Collision Coverage: The upset of your covered automobile or non-owned
automobile, or its impact with another vehicle or object.
 Comprehensive Coverage: Covers specific situations or perils, including glass
breakage, missiles or falling objects, fire, mischief or vandalism, explosions and
earthquakes, windstorms and contact with animals or birds to list a few.
Comprehensive coverage requires that you pay a separate deductible in addition to the
deductible for collision coverage.
Temporary transportation expenses are included with Part D coverage. This coverage
applies if you have a loss of your car or another car, such as a rental car. Temporary
transportation expenses include train, taxi, bus and rental car costs. For this coverage to
apply there is no deductible. Towing costs can be added to this coverage and apply when
your car breaks down.
Part E: Duties After an Accident or Loss
As the insured you will be required to perform certain duties after an accident. These
duties include promptly notifying the insurance company, cooperating with the insurer in
the investigation and settlement of a claim, sending the insurer copies of notices and legal
papers received, and taking a physical exam if required.
Conditional duties include notifying the police if a hit-and-run driver or uninsured
motorist is involved and allowing for the inspection of your vehicle if you are seeking
coverage under Part D.
The insurance company has no duty to provide coverage unless there has been full
compliance with all of the duties outlined in your policy.
Part F: General Provisions
The PAP provides coverage for the insured while in the US, US territories, Puerto Rico
and Canada. All states restrict the insurer’s right to cancel or prevent renewal of
coverage. Termination provisions regarding cancellation allow the named insured to
cancel at any time, provided written notice. However, the insurer may only cancel if the
premium has not been paid, the driver’s license of the insured has been suspended, or the
policy was obtained through material misrepresentation. The insurer must notify the
insured if coverage will be discontinued at least 20 days prior to the end of the period.

53
Assumptions
 Tyler and Mia are both insured and have good driving records.
 Tyler and Mia drive an average amount each year, about 1,000 miles per month.
 A Multi Car discount has been applied.
 A Multi Line discount has been applied (Home 15% + Umbrella 5% = 20%
discount).
Current Situation
You currently have full coverage on both of your vehicles (Acura TSX Sedan and Dodge
Grand Caravan). The automobile insurance is provided by Missouri Valley Insurance
Corporation. The policy has a $500 deductible for both comprehensive coverage and
collision coverage. Coverage includes car rental coverage, towing and $5,000 for medical
payments. A premium of $1,500 is paid semi-annually.
Your current insurance includes:
 Bodily injury/ death of one person: $100,000
 Bodily injury/ death of two or more persons: $300,000
 Property damage: $50,000
 Uninsured/ underinsured motorist: $100,000
Recommendations
1. Purchase New PAP
To hold umbrella insurance, you must meet the minimum amounts of coverage for
property and casualty. This includes minimum PAP coverage of 100/300/100, which you
currently do not meet due to the property damage limit. Umbrella insurance will be
addressed in Section F.
After speaking with Eric Johnsen at State Farm, he suggested that we increase your
coverage limits to 250/500/100 to meet your needs. This will apply to your uninsured/
underinsure motorist coverage as well.
The premiums would be $350 for the Acura and $329 for the Dodge, semi-annually. This
results in annual savings of $1,642, outlined in the table below, compared to your current
policies. Please keep in mind that discounts were applied to these premium figures. Your
medical payments coverage decreases from $5,000 to $2,000. There will be a $100
deductible on comprehensive coverage and a $500 deductible for collision coverage.
While this specific policy was found through State Farm, we are willing to work with
your current agent or another agent of your choosing to ensure the best coverage and
policy cost.

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