Soon to Retire

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Case Study

John & Barbara

Family Overview

John and Barbara are both 53 living in Richmond, Va and have two teenage children, both girls. He owns a local paving company. Barbara is a nurse and loves her job, but is looking forward to retirement after working many years for VCU. John is working long hours and is also making personal contributions to a company-sponsored 401(k) defined contribution plan. The couple’s current income is $440,000. Based on a risk tolerance questionnaire, John and Barbara are a moderate risk profile.

John and Barbara are both in excellent health and value their time outdoors and traveling.

Their biggest concerns include:

  • Not having enough money in retirement to live the lifestyle they desire.
  • They are concerned about stock market volatility and wonder if they are taking too much risk.
  • They also feel too dependent on the possible future sale of his business.
  • Barbara’s parents are aging and she is concerned how they will be cared for in the future.

Their goals include:

  • John would like to leave a legacy for his family, continue giving to his college, and provide for his kid’s education.
  • Barbara is also concerned about the kid’s education and she would like to spend time traveling in retirement and accomplishing her bucket list.

Financial Data.
John continues to contribute $10,000 per year to his qualified retirement account, and they plan to start adding $15,000 each year to their non-401(k) savings. They are also committed to giving $3,000 per year to John’s alma mater, Virginia Tech. They have been putting a combined total of $4,000 per year into their kids’ educational funds, hoping to do so for another 8 years.

The couple’s current retirement savings are $1,275,000 in old 401(k) accounts, brokerage accounts, and savings. They also have $475,000 in their company retirement plans. While John hopes to sell his business for $1 to $2 million in coming years, the couple needs to ensure a solid retirement, regardless of this possible sale. Their projected Social Security monthly income benefit at a normal retirement age of 67 is approximately $3,900.

How We Helped

  • Reduce portfolio risk. John and Barbara were taking too much risk in their investment portfolio based on their personal risk tolerance. We analyzed all of their holdings and determined that we could reduce their risk and improve their diversification. As a result, they are able to sleep a little better with a reduction in portfolio volatility.
  • Reduce taxation. John and Barbara weren’t taking advantage of investment tax strategies. We were able to restructure their holdings to reduce annual taxes due, and improve expected after-tax returns.
  • Move retirement date from 66 to 62. John and Barbara were delighted to know that we could give them a high probability of moving their retirement date forward by 5 years. This would allow them to enjoy more of their retirement while they are still young.
  • Increase social security income. John and Barbara were going to start taking social security at their full retirement age. However, we analyzed different social security strategies and found a way to increase their potential lifetime income potentially saving them tens of thousands of dollars.
  • Reduced insurance premiums. Through out network of low-cost insurance providers, we were able to restructure the couple’s life insurance and reduce their annual premiums. This allowed them to reallocate cash flow to charity.
  • Parents will be ok. We analyze Barbara’s parent’s finances, and determined that they will have enough between long-term care insurance and savings to pay for an assisted living home.
  • Outlined retirement income plan. We formalized a retirement income plan for Barbara and John and explained how they can create income for life and improve their chances of not running out of money.
  • Implemented healthcare strategy. We worked with John and Barbara to setup a Health Savings Account which would fund part of their healthcare expenses TAX FREE in retirement. Moreover, they are able to take a tax-deduction today.

 


The case study above, while hypothetical in nature, is based upon experiences from several clients that we have served in the past. The case study serves to give investors an understanding of how we help investors. Past performance is no guarantee of the future. Every client situation is different and results vary depending upon you personal situation.