Client File: Organizing Your Retirement Income
ORGANIZING YOUR RETIREMENT INCOME
Many couples and individuals just don’t know what to do or where to start. They are intelligent, talented and skilled in their chosen fields—but as busy professionals and parents they really don’t have that much time to consider all of their options. Just having a sizeable nest egg or sufficient savings for retirement is not necessarily enough anymore. Substantial assets don’t necessarily equal a sense of well-being or confidence about your financial future.
One couple like this came to us a few years ago. They were in their late fifties and wanted to retire early. They wanted to spend more time together travelling to destinations they had always dreamed of visiting and getting to know their first grandchild. Both were executives at large corporations, and had a wide variety of benefits available to them. The benefits were only available to highly compensated executives but they were not maximizing what was offered due to the complexities associated. They wanted to plan for the present and the long term but didn’t know where to begin.
As we do with all of our clients, we began our discussion not with numbers but goals. We asked the husband and wife how they envisioned their lives in the coming years and what their goals and dreams were. Through this discovery, we learned that their goals would require substantial assets, even with the sizeable nest egg they had accumulated.
We learned that each of their parents were advanced in age and needed some financial support for housing and daily expenses. They voiced that they were happy to continue to provide that support as long as their accumulated wealth would sustain it and not deplete too quickly. They were paying for undergraduate and graduate school for their three children. They wanted to pay for their daughters’ weddings, family occasions, and a vacation home on the water to retreat to after they left full time employment. They also wanted to support charities that were meaningful to them, and leave money to their children in a responsible manner.
The retirement income sources were wide-ranging and various: deferred compensation, a sizable pension, Social Security, restricted stock, brokerage accounts and IRAs that would eventually require minimum distributions. As long time corporate executives, the husband wanted to take part in a mentoring leadership program and the wife wanted to work part-time as a consultant, so there would be earned income to consider as well.
Our challenge was to improve their retirement income plan and minimize the tax liability (as they were in the highest tax bracket.) We helped this couple develop a plan that would satisfy their family’s needs and goals.
For example, we determined that the appropriate use for their restricted stock was for emergency reserves and short-term savings. That helped them meet an immediate goal and establish a solid financial foundation. Deferred compensation packages were set to pay out for ten years starting upon retirement. That allowed them to defer Social Security and pension benefits, because this deferred compensation would replace nearly all of the full-time salary that was currently their main source of income.
Through the various tax planning strategies that we were able to take advantage of we developed a streamlined investment plan and an appropriately allocated portfolio for them. Once the investment plan was in place we were able to show them, in detail, how their retirement income and investments could help them fund their needs, goals, charitable wishes and legacy in a concise and measurable way.
CONSIDER YOUR FUTURE
For these clients, a Comprehensive Financial Plan formed the structure they needed to fulfill their shared life goals. The objective guidance we provided helped them see their options and make the decisions that would have a favorable impact on their future.