Letter of Engagement:

Dear Mr. and Mrs. Berman:

Thank you for the opportunity to meet with you. I welcome the opportunity to work with you as your financial planner. This engagement letter outlines the specific terms of the financial planning engagement between: Case Competition Financial, Carl Berman, and Naomi Berman. If the scope or terms of the financial planning engagement change, they should be documented in writing and mutually agreed upon by all parties to the engagement. Please be assured that all information that you provide will be kept strictly confidential. During the financial planning engagement, I may, on occasion, be required to consult with other third-party professionals at which time I will obtain your written permission to disclose your personal information. As discussed during our introductory meeting, this engagement will include all services required to develop a comprehensive financial plan. These services will specifically include:

• Reviewing and prioritizing your goals and objectives. • Developing a summary of your current financial situation, including a cash flow

summary, and insurance analysis. • Reviewing your current investment portfolio and developing an asset management

strategy. • Completing a retirement planning assessment, including financial projections of assets

required at estimated retirement date. • Assessing estate net worth and liquidity. • Identifying tax planning strategies to optimize financial position. • Presenting a written financial plan that will be reviewed in detail with you. It will contain

recommendations designed to meet your stated goals and objectives, supported by relevant financial summaries.

• Developing an action plan to implement the agreed upon recommendations. • Referral to other professionals, as required, to assist with implementation of the action

plan. • Assisting you with the implementation of the financial plan. • Determining necessity to revise your financial plan.

This will be an on-going professional relationship. At a minimum, we will meet on an annual basis to ensure the plan is still appropriate for you. Either party may terminate this agreement by notifying the other in writing. Any fees incurred prior to date of termination will be payable in full. My services will be charged on a flat-fee basis. We agreed on a fee of $1500 for the first year of service. This includes development and delivery of your financial plan, unlimited email communication and a review meeting in December 2018. Please provide a check for $750 with a

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signed copy of this engagement letter. An additional $750 will be billed at the end of 2018. You agree to pay any outstanding charges in full within 15 days of billing. Please be advised that I do not receive a referral fee from any other professionals to whom I may refer you. In order to ensure that the financial plan contains sound and appropriate recommendations, it is your responsibility to provide complete and accurate information regarding pertinent aspects of your personal and financial situation including objectives, needs and values, investment statements, tax returns, copies of wills, powers of attorney, insurance policies, employment benefits, retirement benefits, and relevant legal agreements. This list is not all-inclusive and any other relevant information should be disclosed in a timely manner. It is your responsibility to ensure that any material changes to the above noted circumstances are disclosed to me as your financial planner on a timely basis since they could impact the financial planning recommendations. I have no known conflicts of interest in the acceptance of this engagement. I commit that I will advise you of any conflicts of interest, in writing, if they should arise. I acknowledge my responsibility to adhere to CFP Board’s Standards of Professional Conduct, and all applicable federal and state rules and regulations. At all times during this engagement, I shall place your interests ahead of my own when providing professional services. In addition, since this engagement includes financial planning services, I am required to act as a fiduciary, as defined by CFP Board. You can learn more about CFP Board’s ethical requirements at www.CFP.net. I look forward to working with you and helping you reach your financial goals. Sincerely, Case Competition Financial CFP® Professional: Client:

I accept the terms of this engagement letter. I accept the terms of this engagement letter.

_________________________________ ________________________________

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Comprehensive Financial Plan for: Carl and Naomi Berman

May 18, 2018

Presented by: Case Competition Financial

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Executive Summary Proposed Positions General:

• Emergency fund of $35,000 • Paying off credit card debit. • Purchase the home in the historical district in 7 years, making a down payment by selling

their current home. Retirement:

• Naomi should be contributing to a qualified plan. • Carl should contribute a minimum of $9,500/ year to his 401(k). • They will pay for half of the cabin in the first year of retirement in cash.

Insurance:

• The Berman’s should consider getting an umbrella insurance policy • The Berman’s each need an own occupation disability policy, that covers 65% of current

income until retirement. • Life insurance needs total $1,798,306.30 coverage, combined.

Education:

• The Berman’s should open 529 plans for each child. • Matthew’s 529 plan will be funded by current investments. • Sarah’s 529 plan will be funded by annual contributions.

Investments:

• A portion of the Berman’s brokerage account will be liquidated to fund Matthew’s 529 plan.

• The Berman’s current asset allocation is conservative for their age. • Certain investments are doing poorly in their investment accounts; accounts will need to

be diversified and rebalanced. Estate:

• The Berman’s need to meet with an estate attorney to draft proper estate documents listed in the financial plan.

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Objectives Based on our conversation, we have laid out and prioritized the following objectives that will be

discussed in the plan:

1. The Berman’s would like to pay for their children’s college education.

2. One day, the Berman’s want to own a home in the historic district of Harrisonburg,

Virginia.

3. The Berman’s would like to own a small cabin in the Blue Ridge Mountains of Virginia

during retirement.

4. The Berman’s need to allocate their savings to each of their goals.

5. Case Competition Financial will evaluate Life Insurance and Disability Insurance needs.

6. The Berman’s need to get appropriate estate documents drafted and plans in order.

Case Competition Financial will assess the Berman’s current financial status and develop a plan

to assist in achieving these goals.

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Assumptions

• Carl’s current salary is $140,000 and expected to grow 3% annually.

• Naomi’s current salary is $100,000 and expected to grow 3% annually.

• Current and future inflation rates are going to average 2% annually.

• The Berman’s currently own a house in Harrisonburg, VA worth $453,750.

• The Berman’s owe $314,118 on their mortgage.

• The Berman’s current living expenses of $129,900.

• Carl is contributing $7,500 to his 401(k) annually.

• Naomi is not contributing to a qualified retirement account.

• Pay off current mortgage if they were to die

• Will purchase the home in the historical district when Sarah goes to college

• Will pay for the Cabin half in cash in the first year of retirement.

• All stocks in the brokerage account has been held for longer than a year.

Scenario Assumptions

• Both Naomi and Carl will retire when Carl is 65

• Naomi and Carl will begin receiving social security income at age 67.

• Carl and Naomi have a life expectancy of age 90.

• Their retirement account rate of return is 8%

• Current 529 plans average a 9.14% rate of return.

• College tuition inflation is 3.6%.

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Recommendations

General Observations Recommendations

The Berman’s have $30,000 in their checking account and their necessary Emergency Savings Fund is $35,000. This is calculated by finding three months’ worth of the following expenses:

• Fixed expenses • Mortgage • Car Payment • ½ Discretionary expenses • Carl’s tax liability •

We recommend using their monthly surplus to immediately increase their checking account by $5,000.

The Berman’s have credit card debt totaling $7,515

We recommend paying this off over the next few months, after increasing their emergency savings, with their excess cashflow.

The Berman’s currently spend $50,000 on discretionary expenses and $40,000 on fixed expenses annually.

We request a breakdown of what these expenses are in order to adequately evaluate cash flows.

The Berman’s would like to own a home in the historic district of Harrisonburg, Virgina. The average home in that area costs $415,000. When Sarah goes to college, the value of a home, using the average home appreciation rate of 2.11% in Virginia, will be $480,000. The appreciated value of their current home will be $520,000.

We recommend selling their current home and using sale to cover the down payment of the home in the historic district. We would also like more information on their current mortgage interest rate to determine how much will still be owed on their current home at the time of the move. Estimating $200,000 equity in their current home would bring the historic district home to $280,000. If interest rates for 15-year mortgages stay the same, this will make their monthly payments $2,300, and it will be paid off in their third year of retirement.

We do not know the breakdown of their expenses, property taxes, and interest rate of the home.

Assuming they will take the standard deduction, the Berman’s will owe $38,600 in federal taxes this year. We request additional information to decide whether itemized deductions would be more beneficial.

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Retirement Observations Recommendations

• Naomi and Carl currently have $793483 in qualified assets.

• After adjusting for inflation and salary growth, 80% of their preretirement income will be $336,673 in their first year of retirement.

• With their life expectancy at 90, retirement income will need to last 28 years.

• The lump sum needed at retirement is $5,126,487.34.

• At the minimum, Carl should contribute $9,500 to his 401(k).

• Naomi should begin contributing $5,500 to an IRA if she no longer has access to a 401(k) plan.

• After calculating possible annuities, the required contributions would be too high in order to adequately fund their retirement, so we suggest using their qualified plans.

Carl contributes $7,500 annually to his 401(k) and Naomi is not contributing to a qualified account.

We request additional information on any employer-sponsored retirement plans, including possible employer matches.

The Berman’s want a cabin in Blue Ridge Mountains during retirement. The average price of a small cabin is $250,000.

At retirement, the cabin will cost approximately $518,000. The Berman’s should take $209,000 to put down on the cabin, and finance the other 50%.

Please refer to Exhibit A and B for a breakdown of calculations and retirement account balances through retirement.

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Insurance Observations Recommendations

Life Insurance: • The Berman’s would like to know if

their current coverage is adequate. • If Carl were to pass away, he would

want to provide for every goal to be met.

• If Naomi were to pass away, Carl would not want the cabin.

• Both Naomi and Carl should have life insurance policies that cover until age 65.

• Carl needs $850,000 of life insurance coverage.

• Naomi needs approximately $1,000,000 of life insurance coverage.

**Please see Exhibit C for the breakdown of what the life insurance policy would cover.

Disability Insurance: Both Carl and Naomi work.

Both Naomi and Carl should have own-occupation disability insurance that covers at least 65% of their income until age 65.

Umbrella Insurance The Berman’s should purchase a $1.5 million umbrella policy to cover their net worth.

Education

Observations Recommendations The average cost of tuition, room and board of a public university in Virginia is $22,000 per year.

Matthew is four years away from attending college.

At the time he begins college, he will need $93,912.14. The Berman’s should use the five year accelerated gifting method to contribute $66,189 into a 529 plan. With 9.14% growth, this will adequately cover his college expenses.

Sarah is seven years away from attending college.

At the time she begins college, she will need $!04,424. The Berman’s should open a 529 plan for Sarah and begin contributing $12,690 per year.

*Funding of Matthew’s 529 plan will be discussed in the investments section.

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Investments Observations Recommendations

The Berman’s need to liquidate assets to fund Matthew’s 529 plan.

The Berman’s need to sell $70,000 of their brokerage account investments. Included in this sale should be the entire amount of McKesson holdings, because the investment is continually losing value. We can offset the other capital gains with this $6,000 loss. The best way to liquidate the remaining amount necessary would be to proportionately sell some of the other investments. This would maintain diversification in the portfolio. We estimate Long-term capital gains of just over $12,000, creating a $1850 long term capital gains tax.

The Berman’s are 19 years away from retirement, and their asset allocation of their qualified plans are 70% equity, 30% bonds.

The Berman’s should become more aggressive with their investments and use an 80% equity, 20% bond allocation until they get closer to retirement.

The Berman’s investments are not very diversified.

While rebalancing, we need to diversify their securities in order to reduce unsystematic risk.

Some of the investments in the Berman’s qualified accounts are decreasing in value. These securities are: TWHIX, MDBSZ, FNGAX, TSCSX, and TSLA.

While rebalancing their portfolio to become more aggressive, the Berman’s should sell these investments.

Not all investment income is being reinvested. All investment income should be automatically reinvested.

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Estate Observations Recommendations

The Berman’s do not have any proper estate documents.

We will refer the Berman’s to an estate attorney, which will need to draft the following documents:

- Durable Power of Attorney - Medical Power of Attorney - Physician’s Directives - HIPAA Forms

It is unknown whether proper guardianship for the children has been addressed.

The Berman’s need to address a plan for the children if they were to pass away.

It is unknown if any accounts currently have beneficiaries

Each of the Berman’s accounts should have at least a primary beneficiary, and possibly contingent beneficiaries.

The Berman’s do not have an estate tax liability.

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EXHIBIT A:

EXHIBIT B:

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EXHIBIT C: ** After taking out current financial assets, this is the total amount needed.

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