Case studies are a great way to understand how we work with clients to reach financial goals and overcome challenges. Below are some examples of our success stories.
Survivorship Concern
Gary & Ann, Aged 60 & 62
GOALS
Gary needed to be able to take care of Ann during her periods of illness, but also needed to continue to work to sustain an income. He wanted to earn and save as much as he could so he could reach retirement early and spend more time caring for Ann. They also wanted to make some changes to their residence to make living there more comfortable for Ann. Gary also wanted to determine the amount of funds he would need to target his retirement date.
CHALLENGES
With their medical and other financial expenses, Gary wasn’t sure if he would ever be able to retire, but Ann needed him to be at home. They were concerned about their fixed cost and nursing needs and if there were any ways of reducing their costs. With Gary age 62, he needed to determine the date to best begin Social Security. They didn’t know where to go for help with their situation.
ANALYSIS
Gary and Ann needed to engage a certified financial planner to help sort out their issues by helping them build a personal financial plan. This planning brought into focus all of their resources and the demands on those resources to determine what was possible. The planning determined whether a change in investment portfolio was needed to create a stable income and asset appreciation. They needed to develop their plan to solve for a high level of confidence if one spouse lives longer than expected. We discussed how long-term care needs could be financed for the surviving spouse.
SOLUTIONS
Gary and Ann were advised to search for a financial advisor through National Association of Personal Financial Advisor (NAPFA) to find a financial planner that could meet their needs and they engaged our firm.
Through a number of meetings, we were able to deliver a plan that was designed to meet their financial needs.
- We considered the need to sell life settlement or viatical from life insurance policy to provide additional income
- We recommended a series of Roth conversions applying tax logic to each year's tax exposure
- Included was a "What If" scenario with reduced cash flow needs to reflect a one-person household if needed
- If the home might be sold, we suggested selling within 2 years of the spouse's death to maximize the capital gains housing exclusion.
- Recommendation and implementation of a plan for surviving spouse or to move to assisted living facility
OUTCOME
We provided financial planning and portfolio management services to Gary and Ann. A personal financial plan was developed. Ann survived her health condition and lived out her life expectancy. As needed, we were able to arrange assistance with financial management, elder care and assisted living.
Five Years From Retirement
Gretchen & Jim, Ages 65 & 67
GOALS
Gretchen and Jim wanted to be able to retire but needed to build up retirement saving to be able to do so. They needed to reduce current living expenses and continue working. Jim & Gretchen also needed to reduce their current tax expenses and change their portfolio design to be able to grow the portfolio for higher return without an increase in the risk level.
CHALLENGES
They lacked the financial expertise and time available to plan their goals and they needed a financial consultant to provide a plan and follow-through to meet their objectives. They had a discomfort and lack of understanding to accept more risk in their portfolio. They had some embedded tax liability which made it difficult to change over their portfolio. They had no retirement planning or accounts that were tax deferred.
ANALYSIS
It was clear that cash flow planning was the biggest issue. They needed to build a personal financial plan to determine spending assumptions and asset amount needed to fund spending goals. Next, they needed to prioritize their goals to fit into their budget. There was a need to build the value of their investment portfolio for retirement through tax deferred savings and the need to reduce their living expenses by 20%. They also needed to defer retirement and social security benefit distributions to age 70 (increasing social security by 24% more), design a new investment portfolio & target asset allocation and reduce their current tax liability through deferral of income to 401(k) plan (thus increasing their savings).
SOLUTIONS
Through a number of meetings, we were able to deliver a plan that improved their long-term financial picture:
- Based on PFP Gretchen and Jim needed to reduce living expenses, set up an individual 401(k) plan and fund it up to the maximum annual allowable amount through the client’s Sub-S corporation.
- Defer receiving proceeds from Social Security until age 70 which will build payout amount by 8% per year deferred.
- Develop a Roth conversion strategy coordinated beginning with retirement date to reduce on-going tax liability from investment distributions.
- Work through sales of securities with imbedded tax liability coordinated from date of retirement.
- Build a portfolio asset allocation to provide the best opportunity for a stable yet adequate portfolio rate of return required by the personal financial plan.
OUTCOME
Gretchen and Gary were able to retire at age 73 & 75 based on the Personal Financial Plan. They were able to maintain both primary residence and vacation home. Both retired with income needed to support their lifestyle. Their quality of retirement was enhanced based on client financial planning. They eventually moved into an assisted living facility near their family. At age 90 both clients passed away and a significant amount of estate proceeds were distributed to their 9 heirs.
Highly Compensated Couple with Many Questions
George & Lisa, Ages 50 & 52
GOALS
Lisa and George want to pay for their daughter’s college cost, increase investment savings, reduce monthly fixed costs (by paying off their mortgage) and plan for retirement. Their goal is to build an investment portfolio to provide a rate of return to support their financial goals. They wanted to measure their portfolio value to determine at what age they could retire and if that would be enough to provide for a non-working spouse if needed.
CHALLENGES
Lisa and George wanted to know how to manage paying for college, paying-off their mortgage and saving for their retirement at the same time. They were looking for their own resources and outside aid to be able to send their two girls to college without materially reducing their lifestyle and retirement savings. With the possible need for funds from the investment account, they wanted to know how much risk they could afford to take in their investment portfolio while earning as much as possible. They also needed help determining how much to save and earn for their retirement.
ANALYSIS
Clearly, cash flow planning was the biggest challenge. The best first step was to work together to build a personal financial plan to determine what was possible based on their current assets, income and expenses. In the process, they needed to quantify all of their goals and the priority and timing for each. From this, a financial plan was prepared in determining what was achievable with a high confidence level and what was most important to them. It was clear in the analysis that the college funds and maintaining a comfortable lifestyle was most important to them.
SOLUTIONS
They were able to reduce some of their fixed costs and create some strategies to be used to reduce their taxes. Through an understanding of his company compensation and benefit plans he was able to structure his payouts over the most needed time periods. After completing the payment of college expenses George utilized his deferred compensation plan to defer his bonus and save substantially on his current taxes. He was able to structure his deferred compensation plan distributions to retirement to minimize taxes during working years. Through a number of meetings, we were able to improve their long- term financial picture:
- Establishing an employee stock option plan liquidation strategy
- Funding Roth conversion to create tax-free growth
- Building a tax-efficient, low-cost consolidated investment strategy
OUTCOME
By aligning George & Lisa’s financial resources with their vision of their goals, they had a plan moving forward from now to retirement that gave them the confidence to maximize their quality of life now and in retirement.
They now have a clear understanding of how much they can spend on traveling, leisure and continuous home improvement in both their working years and in retirement. We also created a wealth transfer plan ensuring that Lisa would be provided for if something happened to Gary.
