Dave and Deborah
Dave didn’t hear the
shout until it was too late. In
rough seas off the coast of Alaska, a container had shifted suddenly and severed
his leg below the knee. Quick work
by his shipmates and an emergency airlift to the mainland had saved his life and
he was now working hard in physical therapy to regain his ability to walk.
While happy to be
alive, Dave could not return to his prior work on the high seas and would need
retraining to prepare for another career. Although
not the way he would have planned it, Dave had always been interested in
computers and chose to take this opportunity to make a career change.
Dave, 43, and his wife
Deborah, 42, did not have children and, although their combined income exceeded
$75,000 per year, they had never made saving for retirement a priority. Approaching middle age, Dave had begun to worry about this but hadn’t
gotten around to taking action.
He wanted his
settlement to accomplish three things: cover the cost of his career change
(training and lost income for the three years it would take him to become a
certified computer network engineer), establish a retirement fund, and then use
whatever was leftover to increase their annual income and permit a somewhat more
comfortable lifestyle.
After fees and
expenses, his recovery was approximately $600,000. He decided to allocate it as follows: $100,000 for retraining, $300,000 toward retirement and $200,000 to
increase their monthly income. Converted
into structured future payments, the plan produced the following:
Cash held out for
training and career change: $100,000
Retirement Income: initial annual income of $58,000 per year beginning on Dave’s 65th birthday and increasing by 3% per year payable jointly to Dave and Deborah for
as long as either of them was living.
Supplemental Income: An additional $850 per month payable to Dave for life, not less than 20
years guaranteed. If Dave did not
survive the full 20 years, the remaining payments would be paid to his
beneficiary (Deborah).
Illustration
Including Taxable Equivalent Payments
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