Client Facts
- Married - ages 60/57
- She is retired and he is retiring in 2 years
- Income: $197,000
- Cash: $200,000
- CDs/Bonds: $400,000
- Brokerage: $80,000 (company stock)
- IRA: $2,085,000
- Roth: $425,000
- Social Security:
- Him: $3,915/mo at 67
- Her: $2,500/mo at 67
- Spending Goal: $10,000/month
Retirement Goals & Concerns
- They have excess cash flow and want to know the best way to save it.
- They wanted to know the best use of their cash/CDs/bonds.
- They wanted to reduce exposure to their company stock.
- They wanted to leave a specific amount for inheritance.
- He wanted to be sure everything was in place so his wife was taken care of upon his passing.
- They wanted to make sure they had enough to never reduce their lifestyle.
- They wanted to have the cheapest health insurance possible before Medicare.
- They wanted a clear and defined estate plan for their legacy goals.
What we did...
Cash-flow/Distribution Planning
- We outlined their first 5 years of retirement and how much they will need to pull from their portfolio.
- We insulated this money from the stock market to protect against down markets.
- We reviewed his 401k plan summary and had him execute a mega back door Roth.
- With their excess cash flow, we were able to build up more Roth money.
- We will spend their non-IRA money first while supplementing with IRA money early in retirement.
- This will keep their income low to get them the cheapest health insurance possible.
Investment Planning
- We kept $100,000 in savings as an emergency fund and then invested the rest of their cash/CDs/bonds.
- Cash is a losing asset and we wanted to get their money working better for them.
- We moved the cash to their brokerage account and invested it in stock based ETFs covering all the asset classes.
- This allocates the money to growth and gives it good diversification.
- We moved them to a 70/30 growth to income allocation.
- Their cash-flow would put them at an 80/20 allocation but a 70/30 allocation will be less bumpy while still having good growth.
Tax Planning
- We ran a detailed income/tax projection for this year along with all future years.
- This helped us determine which money to early in retirement and which to use later.
- We will spend down his company stock first, early in retirement.
- This will give them money to spend while also paying no taxes on it (capital gain harvesting).
- After Medicare, we will start converting their IRA money to Roth.
- This will help reduce their RMDs and their lifetime taxes by $800,000+.
Estate Planning
- We reviewed their already in place, trust, Will and power of attorney documents.
- We were looking for the names executors and decision makers to ensure they aligned with what they told us.
- We ran projections to determine what size of legacy was possible.
- We used this information to start planning for inheritance now and which accounts to leave behind.
- We reviewed every account's beneficiary and confirmed the correct person(s) was listed.
Insurance & Risk Management
- After retirement we will fund a second-to-die permanent life insurance policy with IRA money to reach their legacy goals.
- This turns their premiums into well over $2M in legacy, tax-free.
- We reviewed their current home/auto policies and had them increase their liability amounts.
- A sudden large outflow of cash could put their retirement at risk.
- We had them purchase a $1M umbrella policy.
- This is to further protect their assets from a liability lawsuit.