Prudent Long Term Planning is Essential

Here we outline one of our many success stories of helping our clients live well for today and plan meaningful legacies for future generations.

The Clients

Our clients, a 62-year oldexecutive and his wife, a 55-year oldcompany employee, were both preparing to retire within six months. In addition to $4.5MMin company 401(k) plans, they also had a $500Kafter-tax investment account, $500Kin Options, $1MMof deferred executive compensation, and a $1.5MMexecutive retirement plan from which to draw retirement income.

With an overall net worth of $10MMand a $2MMprimary residence, they had clearly saved and invested diligently throughout their careers. Even so, they had many questions about how they could best position their assets to reach their retirement goals.

The Need

Our clients came to us seeking a firm that could provide them with comprehensive financial planningand collaborative asset management, but also act as a trusted advisorthroughout the retirement process. They had concerns about how they could draw from each asset in the most optimal way and wanted more guidance about what they could continue to spend comfortably. During our initial meeting, our clients brought us the following questions that we often hear:

  • Do we have the asset base to retire?
  • How do we structure and allocate our assets to sustain our income level?
  • With this plan, how much will we have left to pass on to our children?
  • How can we build a plan to minimize our income and ultimate estate tax exposure?

The Solution

We analyzed income, savings and growth goals to advise how to receive optimal payouts from the deferred compensation and executive retirement plan. We ran multiple projections to illustrate tax effects, return rates, and exposure to loss by structuring the plans in various ways. Through detailed cash flow and corresponding net worth projections, we were able to recommend an optimized payout plan.

We also created an after-tax Revocable Family Trust Investment account to capture monthly surplus cash flow from the retirement payouts. With the executive compensation being directly deposited into the trust account, we established a way to distribute a net amount to our clients' checking account to pay bills and invest the balance. Additionally, we allocated a portion of the 401(k) plans to an income and growth oriented investment portfolio to meet income and wealth preservation goals.

Finally, the healthy couple was able to secure a cost effective life insurance policy, held outside of their estate in an Irrevocable Life Insurance Trust so that the death benefits would be income and estate tax free. This tool allows them to either leave a significant amount more to their heirs, or spend more during their lifetime and have the insurance proceeds replace what they have used during their lifetimes.

The Outcome

Using a conservative allocation approach aligned with their risk tolerance, we were able to ensure $3MM of the couple's 401(k) balance could be managed with minimal downside risk while securing a strong income stream.

Our detailed financial plan projection reportsgave our clients a high level of confidence that our conservative strategies would help them preserve their income in line with their spending and estate planning goals. Relying on particular investment products to provide steady income in replacement of the couple's executive retirement plan and deferred compensation income will help maintain an increasing asset base and net worth over our clients' lives, even with conservative investment management approaches.

67%
Have Never Invested

Over 67% of our clients had never invested before and didn't even know they could start with as little as $1000.

86%
Had Zero Savings

Prior to meeting with us over 86% of our clients had no medium to long term saving strategy.