Case Study: Building a Retirement Financial Plan

Case Study: Building a Retirement Financial Plan

James and Cheryl Simpson (not their real names) hired Old Peak as they neared retirement. They had worked with another advisor for years, primarily for investing. They wanted more comprehensive advice as they approached a critical milestone.

Their main questions:

  • Could they afford their living expenses, even assuming an unusually long lifespan? They had saved aggressively but had not yet moved from saving to spending their assets.
  • How could they create a paycheck in retirement?
  • Was their investment mix still appropriate?
  • How could they reduce their tax burden? Because of substantial balances in employer 401k accounts, they expected to be in a high tax bracket once they started withdrawing from those accounts.
  • When should they claim Social Security?
  • Their long-term care insurance premiums had increased twice. Should they keep his/hers policies even with future increases, or should they reduce the coverage to save premium dollars?
  • Could they afford to continue aggressive charitable giving?
  • How could they support their daughter, who recently graduated from college?

Over the first three months, Old Peak Finance worked closely with James and Cheryl to develop a comprehensive financial plan.


The highlights:

  • We confirmed they could afford living expenses even if they lived beyond ninety. This conclusion required careful modeling and multiple discussions about their living expenses today and in the future.
  • We agreed on a strategy to create a quarterly paycheck – initially smaller while Cheryl continued working and then larger after her retirement. We considered factors including capital gains tax on selling investments and several near-term home renovation projects.
  • We created a new investment plan, which would reduce their risk modestly but still give them the opportunity for long-term growth. This approach was critical because we planned for over thirty years of retirement.
  • We reviewed all their insurance coverage. We concluded they could afford to reduce the long-term care benefit amount, but we agreed to keep it as-is and re-assess in the future.
  • We agreed to an appropriate level of charitable giving and created a donor-advised fund, making giving easier. They contributed appreciated securities to the charitable fund, creating a further tax benefit.

Since the initial plan more than five years ago, we have worked together on a range of issues:

  • Tax planning: They will remain in a low bracket for several more years until required minimum distributions start. So, we have accelerated capital gains to take advantage of the 0% capital gains tax bracket.
  • Investing: We continue to manage their significant investment portfolio, keeping it at targets as the stock and bond markets have moved, sometimes violently.
  • Social Security: Finalizing a claiming strategy to maximize benefits.
  • Financial Gifting to Their Daughter: As a graduate student with no income, their giving of appreciated securities, which she could sell without capital gains tax, is another tax-savvy move for them and her.
  • Ongoing Financial Planning: Providing annual updates to help them stay on track.
  • Estate Plan Review: They already had a living trust, appropriate last wills, and powers of attorney.
  • Reviewed a new offer from their long-term care insurance company to reduce the benefits in return for a lower premium increase.

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