Martin and Louise are making plans for their upcoming retirement lifestyle.  Martin has been an employee of a large engineering firm for over thirty years.  They own their home outright and have no debt.  Much of their savings has been accumulated in Martin’s employer sponsored retirement plan.  Both Martin and Louise are currently eligible to begin receiving Social Security but haven’t reached the required age for maximum benefits.  One of their main goals is to travel the country extensively visiting family and friends.

Questions to be addressed:

  • Are they invested properly?
  • When should they begin receiving Social Security?
  • How much will they need to draw from investments annually to meet their goals?
  • Is their lifestyle sustainable over the long term?

Planning:

Because Martin was planning to work a few more years it made sense to hold off on taking Social Security in order to avoid punitive taxation.

Since Martin and Louise never kept a strict budget or tracked expenses, we helped them get a sense of how much they were spending with our expense tracking software.  This gave us their base level of consumption spending to which we added extraordinary items such as travel, car purchases, and home maintenance.  This process determined how much they would need to draw from their investments each year to meet their goals.  After setting suitable targets for each category, we decided to set up monthly transfers to their checking account so they had easy access to spending money.  This also helped them stick to their expense targets by not having excess cash on hand.

It was determined that the options in the employer plan were not a good match for their risk tolerance.  The choices available were all variable annuities with high costs and substandard returns. We recommended that Martin roll those assets into a traditional IRA account where the allocations can be structured appropriately using our preferred mutual fund managers.  This approach also offered more flexibility with their cash flow withdrawal needs.

Ongoing:

Martin and Louise felt the Continuous Service relationship would benefit them most with their new lifestyle.  They began taking Social Security after Martin stopped working and reduced their monthly withdrawal from investments.  When they prepare for any trips one of the items on their “to-do-list” is to contact our office and let us know how much they will need to pay for it.