Getting investments in order

George and Janice Timms
George, 59?, and Janice, 61, recently moved from good-paying jobs in Virginia to moderate-income jobs in Florida. Fortunately they chose to settle in the low-cost living area of central west Florida. Their objective is to buy a manufactured home for $125,000 and they want to know if paying cash is a wise decision. They also face investment decisions.

Currently the Timms can easily pay for the $125,000 home they wish to buy. They have $157,000 in a certificate of deposit and $9,000 in a money market fund. Their only debt is $3,000 outstanding on credit cards.

Overview
George also has an inactive 401(k) plan from his former employer, American Greetings, in a Vanguard account. The funds are invested in a 2015 Target Retirement fund. George is looking for guidance on what to do with these assets. Their current employer, Interstate Mini Storage, offers medical insurance for the Timms, but it does not provide a pension savings plan.

George and Janice each make $15,000 per year. Janice is eligible to take Social Security in January 2008 when she turns 62. The Timms are wondering if it is wise to take Social Security at age 62 (the payout would be $1,100 a month). An alternative would be to wait for the higher payout at full retirement age ($1,400 a month at age 66).

George is in good health, but Janice has had some health problems. The couple has a $40,000 life insurance policy on George and pay $40 a month for the coverage. The policy has $8,700 of cash value currently. They carry their auto insurance with Nationwide and intend to get their homeowners policy also through Nationwide. Their auto policy limits are $100,000/300,000 for bodily injury and uninsured/underinsured motorist coverage. George and Janice want a reassessment of all their insurance needs.

George has two children from a previous marriage and Janice also has two children from a previous marriage. There are no children from their union. George has complications in his contingent beneficiary designations, but is expecting the children to work out the details. George and Janice would like to solidify their estate planning. They have no will, power of attorney or advanced directive.

Key issues: Pay house with cash or take mortgage? Reassess car and home insurance needs. Consider long-term care insurance. Decide when to begin Social Security income. Determine how to invest retirement assets. Identify estate planning needs. Ramp up savings in Roth IRA.

This report was prepared by Andrew Tignanelli, CPA, CFP, and president of The Financial Consulate in Lutherville, Md.