Financial Planning Stories

Early Retirement

Challenge

Bob wasn’t planning on retiring until he turned 65. He enjoyed his work and co-workers, and his wife Jane was comfortable finishing her career at about the same time as Bob. However, Bob was unexpectedly presented with an early retirement “golden handshake” which would require him to retire now—at age 57.

Since Bob’s offer expired in 21 days, he had to make a decision fast. After discussing his options, Bob and Jane had more questions than answers: Could Bob really afford to take the offer? Would they be better off if Bob declined? What other factors should they consider?

Early retirement is a “compound” challenge. Retiring early means you have fewer years to accumulate assets, but will need those assets to stretch further and provide income for a longer period of time in retirement. Additionally, early retirement penalties, health care costs, decisions about when to begin taking Social Security and Jane’s ability to retire complicated the couple’s decision.

Action Plan

After meeting with Bob and Jane, we created both a “Base Plan” (assuming both spouses retired at age 65) and an alternate “Early Retirement Plan” (with Bob retiring at 57 and Jane retiring at 65). This effectively illustrated the two different scenarios for the couple and enabled Bob and Jane to compare their expected earnings, income, taxes, net worth statements, and other variables side-by-side. This simple but comprehensive, multi-dimensional view of potential outcomes enabled them to see and understand the tradeoffs between the two scenarios and make a confident decision regarding Bob’s retirement.


Family Values

Challenge

Linda and Jay are a married couple who care a great deal about family, friends and making a difference in the world. They worked for many years in their chosen professions and were good stewards of their money. While they had accumulated significant assets, they were concerned about whether or not they could really accomplish the three things they valued most:

  1. Set aside enough money to pursue their vision of a fulfilling retirement.
  2. Positively impact the quality of life of their adult children while they were still around to see the results.
  3. Leave a legacy for each adult child that would make a long-term difference in their lives.

Action Plan

Barrett Financial Services worked with Linda and Jay to create a values-based financial plan that would give them the confidence to accomplish all three goals.

First, we developed a strategy that seeks to provide income for life, anticipates and adjusts for inflation, and provides for emergencies. Second, we created a separate pool of assets that could be used to help their children without affecting or depleting their personal retirement cash flow. And third, we helped in the creation of a trust account that would provide for a future tax-free legacy for their grown children.


Lifestyle Choices

Challenge

Olivia, a longtime client and retired hospital administrator, embraces every day with a contagious enthusiasm that makes those around her appreciate the beauty in their lives. One afternoon, she entered our office brimming with excitement. She had just found the home of her dreams. With great delight she explained that the house was on a lake with sunlight streaming through a two-story wall of windows, providing magnificent views of a cove with ducks paddling and fish jumping. It sounded idyllic and like the perfect place for Olivia.

While she already had a financial plan in place, she wanted to know how much flexibility her current plan could accommodate if she made a significant change in her lifestyle. While she had already accomplished many of the goals reflected in her current financial plan, including retiring several years before at age 65 and paying off her current mortgage, she anticipated that the new property would require a small investment above what she would likely receive if she sold her current home.

Action Plan

We created an alternate planning scenario to illustrate and evaluate the impact of selling Olivia’s existing home and purchasing the new dream home. Although she could afford to purchase the dream home without taking out a mortgage, she would have to reduce other discretionary spending to ensure she would have enough assets to cover her lifestyle needs throughout retirement. We illustrated multiple scenarios with various tradeoffs for Olivia to enable her to make an informed decision that she could feel comfortable with now and in the future.

While planning does not always offer a simple “yes” or “no,” it does provide a foundation for presenting clear alternatives to assist in decision making. 


Beneficiary Concerns

Challenge

Glenn and Eileen are responsible, caring individuals who have devoted the majority of their lives to their three grown children and community. Now that they are retired, they spend much of their free time organizing and assisting with a variety of community outreach programs sponsored by their church. While they enjoy occasional trips abroad and weekends spent out of town visiting their children and grandchildren, they refer to themselves as fiscally conservative.

Lately, they have experienced growing concerns about how their children are handling their money and their casual attitudes regarding the accumulation of debt. They have been forced to confront the unfortunate reality that their heirs do not share the same values and may not carry on the legacy set before them to the next generation.

Action Plan

When we initially met with Glenn and Eileen, we discovered that the majority of their assets were in retirement accounts with significant balances. This posed a problem. In the event of their death, the account assets would pass directly to their children and could be spent down without any controls in place. The inevitable consequences of that scenario would be a quick depletion of capital resulting in severe tax consequences. Instead of the inheritance being a blessing, it could actually create a burden for their heirs.

We worked closely with Glenn, Eileen and their attorney to develop an action plan that would provide the couple with the confidence they were seeking and protect their heirs from an unnecessary tax burden.

We are always happy to work with our clients’ attorneys and other professionals. 


Concentrated Stock

Challenge

It’s not uncommon for people to accumulate a very large position in a single stock. For instance, individuals often accumulate large holdings in employer stock through their company retirement plans or in the form of stock awards or options. That was the case for John who was increasingly losing sleep over the potential risks associated with 80% of his investable assets being held in employer stock. While he understood the need to diversify his holdings, he didn’t know how to minimize the tax consequences.

Before coming to us, John had spoken to several advisors who proposed one or two ideas, none of which were ideal for John’s situation.

Action Plan

Using sophisticated planning software, we were able to model seven different strategies for John. Once we had a complete set of possible solutions, we were able to help John reduce his concentration risk in a tax efficient manner.


Do you have an isolated planning need that may not require a full financial plan to resolve? Contact Us to learn how we may be able to assist you. 

Case studies are provided for illustrative purposes only and are not intended as financial or investment advice. The names used do not represent actual current or past clients.