Client Facts
- Married - ages 61 & 59
- He is recently retired and she will retire in 2 years
- Part-time income: $40,000/year
- Social Security:
- Him: $3,000/mo at 67
- Her: $2,100/mo at 67
- Total Savings: $85,000
- Total Brokerage: $620,000
- Traditional IRA: $1,830,000
- Total Roth: $210,000
- Retirement spending: $95,000/year + $12,000 travel budget
Retirement Goals & Concerns:
- They were worried about a large market decline early in retirement and how it would impact them.
- They wanted to keep their income as low as possible to keep their health insurance costs under control.
- They wanted to see the impact of a long-term care event and if their plan could handle it.
- They were unsure which money they should be spending from.
- They wanted to know when the best time to start Social Security was.
- They were worried about their IRA money turning into huge tax bills.
- They wanted to help their grandchildren with college.
What we did…
Cash-flow & Distribution Planning
- We are using their brokerage account to tax gain harvest to supplement her part-time income for living expenses.
- This generates cash to live on while keeping income low.
- Once fully retired, we will use brokerage money for spending while taking IRA money out up to the standard deduction.
- We are targeting a specific level of income each year until Medicare starts to get health insurance subsidies.
Investment Planning
- We outlined exactly how much they need from their portfolio over the next 5 years and moved that money to income-based investments.
- This will protect their retirement from a large market decline early on.
- We rolled his 401k into an IRA then invested that money into a 75/25 growth to income portfolio.
- This will be less volatile and we are using ETFs that cover all the asset classes.
- We using their IRA accounts to hold all their income-based investments allowing the brokerage to hold all equities.
- This is more tax efficient and we will rebalance across the accounts to keep the target allocation in line.
Tax Planning
- We are using their state's 529 account to get a state income deduction for seeding their grandkid's college fund.
- After they start Medicare, we will convert money from IRA to Roth to fill up the 22% tax bracket fully. This will continue until at least age 75.
- Prior to Medicare, we are tax gain harvesting their brokerage account. This keeps income low while also generating cash to live on.
Estate Planning
- We reviewed all their account beneficiaries. We made sure they listed spouse and then their trust as the contingent.
- They are using their trust to restrict the access their grandchildren have to their money prior to certain ages.
- We are prioritizing leaving brokerage money (step-up in basis) and Roth money (tax-free) as their inheritance.
Insurance & Risk Management
- We reviewed their home/auto/umbrella coverages. We had them increase their auto liability coverage and purchase a $1M umbrella policy.
- We ran retirement scenarios including long-term events. They decided, in an extended long-term care event, to use the equity in their home to fund LTC.
- They have term life insurance policies that are set to expire at age 65.
- We decided to keep these policies because the premium was low enough compared to coverage amount and the premium wasn't impacting cash-flow.