Broker Check

The Case of an Imaginary Client

September 27, 2021
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          Recently, I was working on a Retirement Plan Update for a client and pulled up the last several years of case notes that I had, and I thought, how interesting it would be to part the curtains and share the inner workings and thought process of what we, as financial planners, do for our clients. Clearly, I couldn't share specific notes, so instead, I pulled a rabbit out of the hat and made up an imaginary client and addressed many of the same planning issues we confront, regularly, Enjoy! 

          Joe (63) and Mary (62) are both in great health and have been married for just over 33 years. They have two children together, Eddie and Laura. Their children are grown adults and independent. Joe has a child from a previous marriage name Sammie. Sammie is married and lives near her mother in Delaware. 

         We will need to address any estate planning conflicts regarding Sammie and Joe's other children. Joe has been working as an engineer and is considering starting his social security now. **We can run multiple scenarios to see what the most optimal time would be for both Joe and Mary to start their SS benefits. Mary has been working as a schoolteacher for just over 30 years and she will have a pension once she retires through the Florida Retirement System. **We need to look at pension maximization options beforehand. She is also considering going into DROP for one year. We can compare whether or not it's advantageous. 

          Their goal is to retire next year. **However, we will need to confirm how they are going to handle medical insurance before age 65 (Medicare). They have been aggressively saving for the past 5 years, maxing out Joe's 401k at work and Mary's 403b as well, including catch up contributions. Based on their current spending habits, it looks like they will need to supplement Mary's pension and their social security by $1,500 a month, once they both retire. **Therefore, we will need to have a cash flow strategy in place to use funds from their 401k, 403b and Roth IRA's to support their ongoing cash flow needs. Ideally, we may be able to begin some Roth IRA withdrawals, as well, to avoid jumping into a higher tax bracket when they initiate withdrawals from savings. 

          In addition, they are considering purchasing a vacation home in Delaware so they can be near Sammie. They might be willing to rent it out through Airbnb when they are not using it. This could help to make up the shortfall of income. **We will include a projected monthly mortgage payment (30 year amortized), with taxes and insurance as a separate goal. They do expect to downsize to one vehicle, but plan to trade every 3 years. **We will need to include an ongoing monthly expense in retirement for that. 

          Both Joe and Mary are avid golfers and would like to be able to travel more often and play at locations throughout the country. They estimate annual spending on this travel to be about $5,000. **We will include this as a medium priority (want) lasting from the point of retirement for 15 years. Though they are in good health now, there is a significant risk to their plan if either one becomes ill and requires long term care for an extended period. It is estimated they would need $3,500 per month from savings, which could dramatically impact the other spouse's retirement living standards. **I will address this with the client and discuss risk management solutions. 

          Abracadabra...poof...and there you have it! I have found that there are so many little bits and pieces in the planning process. It is extremely difficult to prioritize the importance of each item until you actually get to see how they all fit together through the process of a comprehensive, personal financial plan. If you would like to see us work our magic and help you plan for life's challenges and opportunities, give us a call! A magician NEVER reveals his secrets!