Alex and Cathy* came to us in their mid 50s. They were high earners and, during the past 20 years, they’d done a great job accumulating assets for their most important financial goal: retirement. Their children had completed college, so they wanted to shift all their efforts to preparing for their next stage in life.
Alex and Cathy’s main concern was answering a question that’s common for individuals entering retirement: How will we replace our paychecks when we’re no longer working? Will we be able to maintain our lifestyle we’ve become accustomed to? Alex also wanted to ensure Cathy would be financially secure if he were to die first.
How We Helped
The first thing we did was analyze their entire portfolio. We discovered that they had the same types of investments through two different brokerage firms, so they were duplicating investments and fees. Neither firm took into account what the other was doing. They also were taking on more risk (i.e., uncertainty) than what was appropriate for their goals and stage in life. Furthermore, it appeared that the holdings weren’t rewarding them for taking on that level of risk.
We created a plan to fix these issues and get their financial plan in line with their current financial goals:
- Cash-flow planning – We compared different cash-flow strategies, quantified the income they wanted during retirement, and designed a new low-risk strategy to meet their goal. The plan was tax-efficient for retirement income, considered required minimum distributions (RMDs), and included a Social Security claiming strategy.
- Investment management – We changed Alex’s holdings so his portfolio would eliminate duplication and generate income at a much lower risk level. The focus became preserving wealth.
- Estate planning – We also met with their estate planning attorney and reviewed their insurance policies to make sure Cathy would be taken care of should her husband die first. We then updated the beneficiaries on their accounts and insurance policies to reflect their estate plan.
Through periodic check-ins, we now monitor Alex and Cathy’s financial plan, investment strategy and goals.
As you transition from one life stage to another, make sure you do this analysis as well.
* fictional name, but actual client