With three dependent children, the Brocks are assessing their life insurance. Pa

Question

With three dependent children, the Brocks are assessing their life insurance. Pam has $5,000 of coverage. Josh has life insurance coverage equal to approximately eight times his annual salary.

With approximately 20 years to retirement, Pam and Josh Brock want to establish a more aggressive investment program to accumulate funds for their long-term financial needs. Josh does have a retirement program at work. This money, about $110,000, is invested in various conservative mutual funds.

In addition, the Brocks established their own investment program about four years ago, and today they have about $36,000 invested in conservative stocks and mutual funds. In addition to their investment program, the Brocks have accumulated $11,000 to help pay for the children’s college educations. Also, they have $5,000 tucked away in a savings account that serves as the family’s emergency fund. Finally, both will qualify for Social Security when they reach retirement age.

Questions

Q1. What changes would you recommend for the Brock's life insurance coverage?

Q2. What would you view as the strengths and weaknesses of the Brocks' financial situation at this stage in their lives?

Q3. Given that Pam is 43 and Josh is 45 and they have three children who will soon begin their college educations, what investment goals would be most appropriate?

Q4. Describe an investment portfolio (asset types, allocation, risk-return) that you would recommend for the Brocks.

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Explanation / Answer

(1) The recommendation to Brooke's could be changes in the cost of insurance. There must be investmetn divided into huge amounts for a long time period to increase in the returns.

(2) The strengths of Brock's financial situatin is that there is advance planning for future and previous investment made which could be used as a backup in case of emergency. The weakness is sudden investment on large insurance which could have taken time to do so.

(3) The investment goals could be equal investment by both working couple for future spendings. The more they invest, the more would be the returns. The planning of finance for college education must begin.

(4) The investment portfolio for the Brock's would include education policy for a short time period which would help them provide funds in nearest time. The money invested should be high in such a case. The allocation of funds must be on important sectors of life like education, future retirement plans and health insurance. Teh couple should look at the rate of returns of the policy started by them.

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