The Ready to Retire-ees

Elizabeth and Richard Collins, 62 & 63

CPA and CFO
Income: $120,000 and $150,000

Profile

When I met Elizabeth and Dick their biggest concern was retirement. They both had strong incomes and had been saving, but they just weren’t sure they had enough to retire in a few years. They also weren’t sure if they were taking advantage of the tax opportunities they could be when it came to retirement. The fact that Elizabeth was in corporate accounting meant she felt like she should know all the answers and she was embarrassed so she never asked her old advisor or the investment rep who managed her company’s 401(k). Elizabeth and Dick shared that they’d made promises to their kids about paying for college and weddings and they were concerned about going back on those promises even if running the numbers meant that doing so would negatively impact their ability to retire on time. Dick and his siblings were left a family home on Nantucket when his father passed away. He and Mary love it and want to retire there so buying out his siblings was a big part of their overall retirement goal.

Plan Options To Consider

The first step for the Collins’ was doing a retirement analysis. They needed to know if what they were currently saving was enough for them to be able to retire when they expected, or if any adjustments to the allocations needed to be made. Although their current advisor was a friend, they just didn’t have clarity about what his overall strategy was for them and whether they were making progress towards their goals. As such, alternative investment opportunities with potentially lower fees and different investment outcomes could be compared and explained in a way that Elizabeth and Dick understood. Because of Elizabeth’s accounting background, one of the biggest questions was whether or not they should be utilizing the Roth 401(k)s available through work rather than just using their regular 401(k)s for retirement*. An analysis can be provided to help create balance from a tax perspective in retirement.

The next step was to figure out how to make the Nantucket home a reality. Options could include selling their primary residence, or keeping the primary residence and potentially working with a mortgage broker to see what mortgage options might be better from a cash flow perspective. These should be examined from a tax perspective and in light of the decisions they might make later in life with regard to the properties.

The last piece of the puzzle for the Collins’ was Estate Planning. They’d done so much for their kids in the way of college and wedding funding, but had never done any estate planning. Part of this planning involved long term care insurance planning both to protect the assets they’d worked so hard to accumulate and to ensure they were able to afford the care they needed should something happen to either one of them. Another part of the estate planning was options for securing permanent insurance for final expenses, to cover the mortgage on the Nantucket property, and to pay estate taxes. The final piece was bringing in an estate planning attorney to talk about trust planning and to ensure the Collins’ had updated living wills, healthcare proxies, and durable powers of attorney.

*The Roth 401k and Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth 401ks and IRAs. Their tax treatment may change. [add line space] Tax deferred account withdrawals, such as traditional 401k and IRA, are subject to income taxes, and if made prior to age 59 1/2, a 10% penalty tax may apply.

The client experience described may not be representative of any future experience of our clients, nor considered a recommendation of the advisor’s services or abilities or indicate a favorable client experience. Individual results will vary. Strategies mentioned may not be suitable for every individual.