Case Study #2

Tom & Donna:
Recent Retirees

The Situation:

For a client who is retired, the number one question often is: How do I make my money last during retirement?

And, related: How much money can I safely spend each month?

A few other issues tend to be:

• How do I lower the taxes I pay over time?

• How do I transfer assets to my family in a tax-efficient way?

• How do I account for higher health care costs later in life?

Of course, there are all sorts of other issues going on, but those are often the most pressing questions.

Our Approach:

The appropriate service for Tom & Donna would be Comprehensive Financial Planning.

As with all Comprehensive Financial Planning clients, we would at least consider each area of the Circle of Financial Health, and then do a deep dive into the ones that pertain to that particular person’s situation. For Tom & Donna, we would likely focus heavily on Investments, Tax Planning, Retirement Planning, and Estate Planning.

Strategies would likely include:

First, we would take some time to clarify and understand what Tom and Donna hope for their lives. We would think through their goals and life priorities, and get a better idea of what the money is ultimately for.

Spending strategy:

We would look at Tom & Donna’s situation to get an idea of how much they are currently spending.

Then we would look at their assets, spending preferences, health expectations, and risk profile to determine their “spending capacity”. That is, a recommended amount of money they can spend each month that balances (1) them being able to spend on what’s important to them, (2) putting them in a position to not run out of money long-term, and (3) supporting any inheritance goals they have for their family.

For example, their recommended spending plan may look like what’s below. Notice that it would include an income adjustment plan, where their spending capacity may rise or fall depending on the level of their portfolio and other economic factors. The goal would be to allow them to spend as much as they’d like, without going too far and jeopardizing the health of their plan.

Other strategies we may consider for Tom & Donna:

• A plan to allow them to enjoy their early years of retirement, spending on things that are important to them.

• A tax-efficient investment strategy that seeks to reduce risk and improve returns.

• An appropriate investment rebalancing strategy.

• Reduction of taxes through the appropriate use of strategies such as Roth conversions and charitable contributions.

• A smart plan of when to file for Social Security benefits for each of them.

• A plan for how to deal with higher healthcare costs as they age.

• Discussions around transferring assets to their heirs in a tax-smart way.

• Ensuring they have enough to fund what matters most.

The ultimate goal would be for Tom & Donna to be able to enjoy the peace of mind that comes from a clear financial plan and overall Financial Health.