Starting a Family

Stan and Alexis are a young couple that needs guidance on financial decisions relevant to the upcoming birth of their first child.  Both are working in the medical profession as physicians so they have high earned incomes.  They have different options for benefits provided by their employers including retirement plans.  Alexis would like to stay home for the first year after the child is born and they are considering moving to a larger house.

Some of the questions they have:

• How will losing Alexis’ income impact their financial stability?
• Is buying the larger home feasible at this time?
• How much should they be deferring into the employer benefit plans?
• What are their options for saving for their child’s education?

Planning:

Once Stan and Alexis sat down with an advisor during the planning process, they realized that they both wanted Alexis to have the option of staying home longer than one year.  Alexis also talked to her employer about her options for returning to work and was told that a part-time situation could be negotiated. With the new goal of Alexis staying at home longer than originally anticipated, the decision was made to stay in their current home.  A target was set to purchase a new home five years from the planning date.  This allowed them to put a manageable savings strategy in place for the down payment.

Because they were aggressively saving for the down payment it was determined that they should minimize their retirement deferrals while making certain that they received the full employer matching contribution. The decision was made to wait until they had enough saved for their home and Alexis went back to work full-time before they began saving for their child’s education.  Once they were able to maximize their retirement deferrals they would be in a better position to begin funding a 529 plan.

Implementation and Monitoring:

• Create steps in the financial plan and monitor their targets for savings and goals, so Alexis can have a flexible part-time schedule to have more time to enjoy with the new baby.
• Consider monthly automated savings plan to build down payment savings for home in 5 years.
• Given the increased need of tax savings strategies and portfolio management, Stan and Alexis decide to pursue a relationship with an advisor. This will allow them more time to focus on their most important goal, being a family.