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Case Studies

Conservative Retirees...

Barbara & Glenn are in their late 70’s and have seen their share of difficult times. This has shaped the way they feel about money. They have always been good savers and have long since paid off their home. They have been troubled by the continuing low interest rates on savings and their CD’s and have felt the pinch of rising food, gas, and utility prices. According to Barbara, “We just can’t believe how much everything costs now. I used to walk to the store as a girl and buy bread for a nickel. Now it costs $3.” Glenn’s days as an Electrical Engineer are behind him but he still enjoys keeping busy around the house and playing golf a few days a week with friends. He receives a small pension from his days as an engineer and they both receive Social Security.
In their case, after discussing how much income they wanted versus how much they were receiving, we would develop a plan to help their money keep pace with rising prices in an effort provide enough money to live comfortably for the rest of their lives. We would also review their tax situation to help ensure that the best distribution methods were being utilized to reduce taxes on their interest income. After this analysis, we would recommend a combination of strategies to boost their “spendable income”. We would use tax free investments for current spending; dividend producing investments for offsetting inflation in the future; and, defer taxes on their kids’ “inheritance” money using a personal pension strategy that provides guarantees to their children and grandchildren. A strategy like this can help people like them drastically save on taxes and possibly increase their income potential. To help alleviate any worries about the devastating costs of an extended care illness and to hopefully avoid a possible future living in a nursing home, with the boost in interest and dividends and lower income taxes, we would look to purchase long term care insurance on both Barbara and Glenn to allow them to stay in their home for the rest of their lives. If they need care, the policy could allow them to receive their care at home where they are most comfortable. The goal of our meetings is to give people like Barbara & Glenn a clear picture of the future and help them see the benefits of simplifying the management of their money and protecting against the unexpected.

A Business Owner’s Retirement Transition….

Ted and Marie are in their early sixties, happily married, with four children and several grandchildren. Ted had built a successful business that he recently sold and wanted to have “a bit more play time” (according to Marie) to travel, enjoy family, and reduce stress. They worked their entire lives to build the business, but now find themselves too busy to enjoy life and are confused by the 24-hour television news cycle and how to invest the proceeds from his business. In a case like this, we would sit down together and discuss what types of things they love to do and how their lives would change if they were able to do them while they still could. Let’s just say Marie wants to help out more at her church and Ted thinks a golf vacation (or two) to Ireland with his sons and attending more of his grandchildren’s baseball games and school plays sounds just perfect. Principal preservation is important to them, but they understand that they need to grow their wealth too to keep pace with rising prices. We would determine how much income this might take and, using our Bucket Bliss model, plan out an income that could increase over time to offset rising costs. This would also allow them to do the things they love now. For people like Ted & Marie, we may build the plan for increasing withdrawals to keep up with the rising costs of goods & services needed. We would consider spreading their funds between a broad mixture of conservative investments (which could be drawn from first); balanced investments to spread out their risk and provide for growth; and, a small percentage in longer term investments to help hedge inflation over their expected 30+ year retirement. This type of strategy could be implemented not only to create a lifetime income plan, but also to help people understand how all the different pieces of their savings and retirement assets fit together.

A Strategy for Multiple Income Sources…..

Bob and Erin are a couple on the cusp of experiencing full retirement. Bob, a senior manager with a transportation firm, was weeks away from retirement. He had a small pension and several individual retirement accounts. After 32 years, Erin retired late last year as an executive secretary (city planning department) with a significant pension and a large 401(k) plan. Erin had yet to do anything with her old 401(k) Plan. She was confused by the process, and was unsure of which of the available options were best for her situation. Bob and Erin also own a number of rental properties, a vacation home and had previously paid off the mortgage on their beautiful hillside home.
Bob and Erin are great savers, and conservative by nature. They were concerned that, with the recent market turmoil, they might not have enough money to maintain their current lifestyle throughout their retirement. (Individuals, who are great savers before they retire, tend to be prudent in retirement.) In a situation like this we would begin the process of building a financial roadmap that is designed to provide income they could not outlive, and help them maintain a true sense of style through hopefully the next 30 or more years.
We would review their financial goals and concerns, and various insurance contracts (Long Term Care, Life Insurance, Auto and Home Owners insurance policies). Considering their net worth and the number of owned rental properties, we would attempt to point out any potential liability gaps. If necessary, we could provide them with a referral to speak with a seasoned property and casualty insurance agent.
Working with Bob and Erin, we would establish a prudent dollar amount required for emergency reserves (cash & savings). We would look at consolidating Bob's numerous IRA's into one well diversified portfolio designed to enhance their pension income in the future. If Erin's old 401(k) plan was large enough, we would look to diversify with multiple strategies. Typically, this might consist of a portion using a “traditional method” (a mix of stock and bond funds and balanced funds) and a portion employing “non-traditional investments” that historically are not tied to stock and bond fund performance.
We would discuss their tax consequences and suggest a distribution order to determine which retirement assets should be spent first. In exploring these issues, our objective is to offer clarity on the investment details and future required distributions by the IRS so we could proceed with a three-part implementation process -- an actively managed and diversified portfolio designed for future distributions; non-correlated "real assets" to help stabilize their overall portfolio; and, a personal pension product designed to provide guaranteed lifetime income no matter how the markets behave. (In a case like this, it can make sense to have an umbrella of protection on a portion of the retirement assets).
To sum up, Bob and Erin wanted to establish a financial roadmap that was easy to understand and implement; position and their investment assets appropriately; and, schedule regular updates and reviews to monitor progress and allow for changes that are inherent with all long term plans. This is the process we would use in a situation like this to help turn those objectives into reality.

A Retirement Plan for School Teachers…..

Robin married Dennis ten years ago. Not long after they were married, they got serious about planning for retirement. They are both educators. Dennis is a few years younger than Robin and does not plan on retiring for a number of years. As it is for so many, life has been being a moving target. So, in their case, we would work to adapt their plan through the years to facilitate the changes.
As we recommend for all of our clients, we complete a comprehensive financial plan. Based on the "Financial Planning Process", we develop a risk management plan to protect first Robin and later Dennis for the unforeseen. We would attempt to ensure that they have adequate emergency reserves and get them started early by maximizing contributions to their own 403(b) retirement plans. These will be used to supplement pension income well into retirement. Due to the ravages of inflation, most Americans have no idea they will need to double their income in retirement.
For Robin, who will retire this year, we would employ our "Pension Maximization" program that will allow her to choose the highest pension payout option. This could help to increase her monthly pension income and could help protect her husband, Dennis, should Robin predecease him.
We would also review Dennis’ pre-retirement benefits and potential risks, including premature death, and could employ some very simple strategies designed to protect their benefits today, and still leave the "Pension Max" option on the table to be implemented in the future for his own retirement income.
In addition, we would implement our Bucket Bliss strategy for Robin now, and later for Dennis when he retires. As with all of our clients, we schedule regular periodic performance reviews to monitor progress. As we have in the past, we will have the flexibility to adapt their plan as needed going forward as they work towards their personal financial goals and retirement dreams.

The preceding is a hypothetical financial planning scenario presented for illustrative purposes only. It should not be construed as an investment recommendation or solicitation. Please consult an advisor to discuss your individual situation prior to making any investment decision. Past performance is not a guarantee of future results. The rates of return do not represent any actual investment and cannot be guaranteed. Any investment involves potential loss of principal.