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Client Success Stories

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John & Jane Doe

Age: 65 and 63, respectively

Life Stage: Retired

Overview: John and Jane have recently retired from fulfilling careers and are busy transitioning to the next stage of life. Up to this point they have been living off some rental income and some excess bank savings. Health insurance was provided through John’s retiree health insurance but that is now gone since John is Medicare-eligible. They want a plan going forward that will allow them to live the lifestyle desired but not have to worry about running out of money or leaving behind a large lump sum that they could have enjoyed in their more fruitful years. They have several different retirement and brokerage accounts spread across various providers as a result of a lifetime of saving.. To date, they have not accessed any of these dollars, but anticipate needing to do so in the near future.

Financial Goals

Get organized and understand their long-term financial trajectory
Gain a better understanding and become less reactive around their tax picture
Be more purposeful around how they invest their dollars
Know when to start social security and their pension along with where to pull additional cash needs from
Satisfy their ongoing charitable giving along with the potential for larger one-off gifts in the future.
Develop a plan around how to handle their rental real estate
Purchase a condo in a warmer climate
Understand healthcare options for both
Develop a plan for giving to their children/grandchildren
Gain greater confidence that they’ve addressed all relevant issues to their personal/financial life

Challenges

Some level of retirement account distributions will need to come from the investment portfolios to supplement cash flow needs.
Large pre-tax balances in qualified accounts will result in big tax years starting at the required minimum distribution age.
Their rental real estate has appreciated has increased significantly in value since their original purchase
The various investment accounts are spread across multiple providers and operate independently of each other
They are unsure when to claim social security and pensions
They are not sure to what degree they can do charitable giving, giving to kids, and making a larger purchase of a condo for themselves.
John needs to evaluate medicare options and Jane needs help understanding what is available to her.
Taxes in retirement are unclear and handled on a year-by-year basis

Our Approach

We needed to hear John and Jane’s goals and how they wanted to spend their time. Our goal was to make the planning process enjoyable and stress-free.
The first step was to get clear on everything they had and establish a baseline.
Taking inventory of assets, income, liabilities, insurance, and expenses, we were able to identify short and long-term opportunities and challenges.
Using this information we were able to craft a plan customized to John and Jane. With that information, John and Jane had various “what-if” questions that we were able to illustrate the iteration of actions.
Using the plan as a guide we tackled the highest priority items and established a timeline to execute financial tasks as the future unfolds.

Planning Strategy & Outcomes

Net worth and income projections highlighted far higher spending potential than currently needed for their current lifestyle needs. It also indicated they were on track to have millions in excess savings remaining well beyond their life expectancy.
This excess spending potential allowed us to develop specific budgets for higher travel expenses, annual/one-off gifts to family and charity, and the purchase of a second property.
We put together a plan for the next several years of income needs that included the timing of turning on pension/social security and guidance on how to tax-efficiently make distributions from various accounts.
As part of the income plan we outlined two scenarios, one with them keeping the real estate and another with them selling. (both plans showed similar financial success) We then coordinated with tax counsel to develop a strategy to sell the property and recognize the majority of capital gains at a 0% Federal tax rate.
Strategically managed income levels so that Jane would be eligible for a tax credit subsidy to help offset the cost of health insurance until age 65.
Outlined the potential for partial Roth conversions annually to help reduce the impact of higher tax rates and income levels at the Required Minimum Distribution (RMD) age.
We established a tax-efficient charitable giving strategy coordinating gifts of appreciated securities to a Donor Advised Fund for giving prior to age 70; use of Qualified Charitable Distributions (QCD) for any gifts after age 70.5.
Their plan was stress-tested for potential long-term care costs and we compared the costs of self-funding vs. purchasing a long-term care policy for one or both of them.
We consolidated nearly a dozen investment accounts into four. This resulted in lower cost, ease of administration and oversight, and a more coordinated approach to investment strategy and income distribution.
Developed a comprehensive, all-weather investment portfolio aligned with the needed return of their new plan while also providing enough safe-asset exposure to ride out market downturns.
As part of the investment design, we also put together a cash management strategy as an alternative to bank CDs. This brought higher yields, increased safety and security of cash, and a reduced State income tax burden.
Connected them with a local attorney to draft a Revocable Trust to avoid probate and the corresponding costs and privacy issues.
Created an annual plan for withholding and estimated tax payments. We also got them connected with a local CPA to help coordinate overall tax strategy.
Established a system of quarterly check-ins, annual advisory review, and year-end tax planning meetings.
John and Jane are living on their terms, spending time doing things they love. They were able to make a meaningful gift to the charity and also to their kids. They travel between their home in the Midwest and Florida. During the winter months, the kids and grandkids come down for an extended stay. They are on track to fully fund all the grandkid's college education goals. John and Jane have a long-term tax plan to minimize the amount of taxes paid in retirement. John and Jane have peace of mind knowing their retirement plan is sustainable. John and Jane review their plan regularly to understand their trajectory and make changes as new opportunities become available to them.

Please note that the previous case study is hypothetical and does not relate to an actual client of Custom Wealth Planner. Clients or potential clients should not interpret any part of the content as a guarantee of achieving similar results or satisfaction if they engage Custom Wealth Planners for investment advisory services.

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Billy & Bella Mays

Age: 57 and 56, respectively

Life Stage: Near Retirement / Work Optional

Overview: Billy and Bella have been diligent savers and are in their prime earning years. Billy is still enjoying work, but the hours and workload are becoming more stressful. Billy sees himself dialing back the hours and potentially engaging in contract work part-time on a glidepath to full retirement. Bella would like to formally retire and spend more time with her grandchildren. They both have 401(k)s and various brokerage accounts. They know they have done a good job saving, but struggle with the shift to spending the nest egg they’ve accumulated. They’re also unsure how their spending will evolve in this new phase and how to go about distributing and investing their dollars.

Financial Goals

Gain better clarity around their current spending levels and how that might change through semi and full retirement
Pay off their mortgage and vehicle debt before retirement.
Determine when full retirement for both of them can occur and what kind of income Billy would need to earn during his semi-retirement years.
Have a plan for health insurance for both of them pre-medicare age.
Develop an income plan that provides for the greatest level of flexibility, particularly accessing retirement accounts without penalties prior to age 59.5
Get an investment strategy that is tailored to retirement needs
Evaluate other possible risks that they are unaware of

Challenges

Lower earned income going forward; lack of clarity around current spending and how that will change over time.
Anxiety around shifting from a savers mentality to spending some of their nest egg.
Billy will likely lose employer-provided health insurance once he dials back to part-time or engages in contract work.
Penalties taxes associated with accessing tax-advantaged retirement accounts before age 59.5.
High current tax burden and the potential for larger tax issues down the road due to tax-deferred retirement account balances.
Uncoordinated investment strategy

Our Approach

We needed to hear Billy & Bella’s goals and how they wanted to spend their time. Our goal was to make the planning process enjoyable and stress-free.
The first step was to get clear on everything they had and establish a baseline.
Taking inventory of assets, income, liabilities, insurance, and expenses, we were able to identify short and long-term opportunities and challenges.
Using this information we were able to craft a plan customized to Billy and Bella. With that information, Billyand Bella had various “what-if” questions that we were able to illustrate the iteration of actions.
Using the plan as a guide we tackled the highest priority items and established a timeline to execute financial tasks as the future unfolds.

Planning Strategy and Outcomes

Net worth and income projections showed that not only could Bella fully retire, but Billy also has the option to join her in full retirement. While Billy will ultimately continue some level of work, he now knows he’s doing so because it’s fulfilling personally, not because it's necessary financially.
As part of the projection work, we also uncovered their current spending habits and reviewed how that might change in the coming years.
We discovered a forgotten retirement account and a cash balance pension of Billy’s from a previous employer. We also consolidated a number of accounts for ease of oversight and management.
We increased savings to tax-deductible savings accounts in their final year of both of them working to capture the higher tax benefit.
Given the very low interest rate on their debt, we decided to not accelerate the payoff of the debt to provide a greater level of flexibility around cash flow down the road.
Outlined various options for getting access to retirement accounts before age 59.5 that allows us to avoid penalties.
Developed a low-cost, broadly diversified investment strategy that aligned with their return and distribution needs.
Transitioned away from higher cost, more tax-inefficient holdings held in their taxable brokerage accounts.
Developed multi-year tax projections and outlined opportunities to keep income levels below thresholds required for tax credit subsidies for health insurance
Assessed the impact and ability to finance longer-term health care costs and a long-term care event for one or both of them.
Discussed several planning opportunities for Billy should he become an independent contractor for his part-time work.

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