To replicate the financial situation facing many members of the sandwich generation, BusinessWeek
created a profile of a hypothetical couple who have seen the value of their investment and retirement portfolios slashed by the market downturn. They have three children in or nearing college and aging parents who may soon need help. Here are the details BusinessWeek provided each investment adviser:
Our couple consists of a 51-year-old man and his 49-year-old wife living in a high-tax state. He earns $195,000 and has the potential for a 10% bonus, but hasn't earned it the past two years because his company didn't meet its profit targets. His wife earns $15,000 from her fledgling business. Their parents are in their late 70s and may need assistance in coming years.
Our couple has three kids—one a junior at a private college, another a freshman at a public university, and the youngest a high school sophomore. At present, they spend $40,000 a year on college costs.
The couple have $320,000 in their 401(k) accounts, which are down 50% from their peak as a result of the market downturn and several withdrawals to help cover college expenses. They have $205,000 in a taxable brokerage account, which is down 35% from its peak. They have $260,000 in equity in a home now valued at $500,000 (25% off its peak), and they're sitting on $40,000 in home equity debt and $4,000 in credit-card debt. They pay $3,400 a month for their mortgage, property taxes, homeowner's insurance, and home equity debt. Both will be eligible for Social Security, but the wife's income will be reduced because she stayed at home raising the children between the ages of 34 and 48. They'd like to retire at 65.
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