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CQ review to help the client



Reviewing the CQ below, what are your recommendations for how I can help them?  Please note: the client says they only have $10K to save.




Coaches response:

So looking at the CQ looks like they are just getting started which is a great thing because you can help them form some fantastic long-term money habits!
As for the major wealth transfers:
  1.  Mortgage: keep doing what they're doing. They have a 30 year plan at an all time low interest rate! So encourage them not to pay any extra towards the principle if they're ever tempted! Plenty of modules in COW to educate them on this concept. Additionally you may want to coach them on the idea of putting down the LOWEST possible down payment when they purchase their next house...
  2. Taxes: Not sure what their tax circumstance looks like but they likely don't have many deductions to offset their taxable incomes. They are likely taking the standard deduction of $ kids yet (see below). And their taxable investment accounts aren't big enough (yet) to generate any substantial annual tax. But you may want to show them Taxable Accounts 101 so that they're aware of the future tax consequences of that account will be if they continue to put money into it.
  3. Qualified Plans: they're doing just enough to the get the full match so that's good. Walk them through Qualified Plans 101 so they know not to contribute more than the match in the future.
  4. Major Capital Purchases. These folks are PERFECT candidates for the Private Reserve Strategy discussion using high cash value life insurance. 
I would also run their numbers in Retirement Ready or Not so that they see what it's going to take to prepare for retirement (Position A). They have time on their side...but getting started now makes perfect sense. In all likelihood they need to be saving at least 20% of their gross that's roughly $35k (and don't include the match in that number). 
Additionally, I suggest asking if they plan to have kids. Regardless, I'd get them each all set up with about $3M of convertible term life insurance....especially while they're young and healthy.  Use the Lifetime Capital Potential calculator to show this and the Needs vs Wants conversation. And then as I wrote above...some of that $3M death benefit should be high cash value policies acting as the Private Reserve.
Regarding their comment that they only have $10K to save ... I suggest using that $10k per year to get them each a combo of convertible term insurance and max funded policies on each of them. They’re each in their late 20s so getting $2.5M of 20-year term should be in the area of $3,000-$4000 combined. That leaves $6,000-$7,000 to contribute to max-funded policies on each of them that can be used as a long term Private Reserve Strategy.  Perhaps they will balk at the idea of spending money on term but getting that protection in place now is very important, especially if they have a change in health in the future that would prevent them from getting permanent insurance. And if they plan to have children it simply is the prudent thing to do.
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