CASE STUDY 1

Meet Mike and Jen

Both are age 62 and ready to retire; It’s time to make important decisions. When should they start Social Security? Can they afford to retire right away? How will they create income from their savings? Did they save enough?

Strategy 1:
What if they begin taking Social Security benefits now but spend their 401(k) first, followed by the taxable accounts?

Strategy 2:
What if they coordinate the date at which they start Social Security with the distribution of their savings in a tax-efficient way? Each year they would withdraw funds from both accounts tax efficiently and use a partial Roth conversion when appropriate.

BLUEPRINT ANSWERS

The graph shows Mike and Jen’s savings longevity given each of the strategies we compared. In Strategy 1 Mike and Jen spend their 401(k) first — a common recommendation for retirees — and you can see that their portfolio will exhaust their savings in about 39 years. But look at Strategy 2. We’ve optimized when Mike and Jen should begin their Social Security and directed them to strategically withdraw from each account in a tax-efficient manner. Their portfolio now runs out of money in about 46 years.

FINANCIAL FACTS

  • Total Assets: $1,500,000
  • $ 1,000,000 in 401(k)s through their employers
  • $ 500, 000 in taxable savings such as brokerage accounts or bank accounts
  • No current $ in ROTH or TAX-Free

THE CHALLENGE

Mike and Jen are pretty sure they had enough to retire but also hoped they could leave a legacy for their kids and grandkids. They knew a better plan was needed to retire confidently to meet their goals. The plan needed to increase their overall nest egg tax efficiency, include strategies to increase their after-tax income in retirement, and help them understand how they should be invested.

ANTICIPATED SPENDING IN RETIREMENT:

$107,800 annually after taxes, with 25% less after one of them passes away.

AFTER-TAX VALUE OF FINANCIAL PORTFOLIO

BY COORDINATING THEIR SOCIAL SECURITY WITH MANAGING THE LOCATION AND TIMING OF ASSET WITHDRAWAL, THEIR PORTFOLIO LASTED ABOUT SEVEN YEARS LONGER.

Why the WEALTH MANAGMENT BLUEPRINT?

Like Mike and Jen, you’ve worked hard to accumulate savings for retirement. Whether you’ve saved a lot or a little, you can get the most out of your assets by developing a smart, personalized investment, tax, and withdrawal plan.

RESULTS

Mike and Jen hired a retirement focused , fiduciary, fee-only financial advisor. They understood the importance of finding a trusted partner to be there along the way. With the plan in place, Mike and Jen felt incredibly confident in their short and long-term goals, and that their immediate planning concerns were addressed. Moving forward, they will be able to embrace remaining work years and retirement .

√ TAX PLANNING
√ INVESTMENT MANAGEMENT
√ INCOME PLANNING

A COMPREHENSIVE PLANNING APPROACH

REDUCE TAXES

Different savings plans are taxed at different rates. We can help you plan your withdrawals from accounts in a way that reduces your taxes.

INVEST SMARTER

Organize accounts and invest based upon time horizon and income needed

OPTIMIZE INCOME

As you move through retirement, your needs will change. Your Withdrawal Plan can change with your needs

WHAT YOU GET

  • Step-by-step instructions to optimize your Social Security benefits.
  • Advice on how to allocate and locate your assets to reduce taxes and other costs.
  • Comparisons showing estimates of how long your portfolio will last based on factors you can control.
  • Outline of how to strategically withdraw money from your accounts.
  • Simple schedules showing how to create income from your
    savings

*Assumptions for this case study: They maintain a 50% stocks-50% bonds after-tax asset allocation with stocks earning 9% per year including 2% dividend yield and bonds earning 3% interest per year. For the stocks, 20% of capital gains are realized each year with all gains being long term. The original cost basis of assets held in the taxable account is set at the market value. His Primary Insurance Amount for Social Security is $2,500 a month and hers is $1,500 a month. They both have Full Retirement Ages of 66, begin Social Security benefits at 66, and receive their Primary Insurance Amounts. We assume one partner dies in 16 years at age 78 and the survivor lives on 75% of the real amount they lived on when both were alive. Both Strategies locate stocks and bonds in the accounts (i.e., taxable account and 401(k)s) in a tax-efficient manner, while maintaining the 50% stocks-50% bonds after-tax asset allocation. We can help clients with this asset location decision, which may further extend the portfolio’s longevity. Based on today’s Tax Code, they will usually be in the 25% tax bracket in retirement. They take the standard deduction each year. Inflation is 3% per year with all tax brackets, standard deduction, over 65 tax exemption, and personal exemption amount rising with inflation. This information is provided for general informational purposes. The securities and strategies referred to in the information may not be suitable for you; therefore, it is important that you consider the information in the context of your own investment needs and objectives, including risk tolerance, investment goals and time horizon. This information is not intended to be a substitute for specific individualized investment planning advice.

Case Study 2
Case Study 3