Client Facts
- Single - Retiring this year
- Age 62
- Cash $400,000
- CDs $180,000
- Total Brokerage $900,000
- Total Tax-Deferred $975,000
- Total Roth $150,000
- Inherited IRA $675,000 (non-spouse)
- Pension $3,500/month
- Monthly spending $10,000/month
Retirement Goals & Concerns:
- Control the volatility of the overall portfolio
- Minimize lifetime taxes
- Cover basic living expenses with guaranteed income
- Update estate plan
What we did…
Cash-flow & Distribution Planning
- This client had a lot of “cash” sitting around that didn’t need to be so we discussed short/long-term cash flow needs and set them up with a growth to income ratio for their needs that was in line with their tolerance for volatility
- We redistributed which investments were in which accounts to make them more tax efficient
- This client wanted 80% of their baseline living expenses covered by guaranteed income sources
- Social Security and their pension covered 65% of that so we needed to find an extra 15% - See Investment Planning section
- We put together a plan on how we would take the money from different accounts
- Their inherited IRA has to be completely withdrawn by 2031 so we made a plan to get that money out in the most efficient way possible
Investment Planning
- We developed a plan to put the “cash” to work where they felt comfortable, and it could generate some return
- To create the extra 15% or $1,500/month in guaranteed income sources for this client to cover baseline expenses we recommended the purchase an annuity inside their IRA that would provide $18,000/year of income
- We don’t sell annuities so we placed it with a broker
- Purchasing the annuity inside the annuity allowed us to not change the tax characteristics and delay RMDs
Tax Planning
- Re-distributing their investments into the correct accounts helped improve tax efficiency in their portfolio to the tune of $21,000/year
- We outlined a multi-year Roth conversion strategy to maximize the 22% tax bracket which will save $450,000 in lifetime taxes
Estate Planning
- This client had no estate documents in place or a plan for it.
- We had them get the basic planning documents in place and put together a plan for all their assets on who and how they would pass down while remaining tax-efficient