Case Study: Five Years From Retirement

Case Study – Five Years From Retirement

Goals

Only five years from retirement, Gary and Vivian already live in their forever home and they love spending time tending to their garden and working on their home.

Gary is passionate about collecting classic cars and wants to know his budget to continue his hobby in retirement. They are avid travelers and want to take at least 3 trips abroad every year in retirement.

Gary wants to ensure that Vivian is taken care of in the event that he predeceases her and that his children will inherit his estate in the most tax-effective manner possible after Vivian’s death. These were one of their biggest concerns being five years from retirement.

Challenges

With such busy careers and lifestyles, they know their lack of financial expertise will take up a lot of their free time and increase their margin for error. They don’t want to jeopardize five years from retirement and the security they already have by making any mistakes.

As an executive at a publicly-traded company, Gary wasn’t exactly sure how his deferred compensation plan and stock options worked.

They also had very different levels of comfort with investment risk and managed their investments separately, which resulted in an uncoordinated investment strategy.

Lastly, Gary has 4 children from a previous marriage, which made wealth transfer complicated.

Analysis

Being five years from retirement, we all agreed that taxes were their biggest issue. We pointed out a number of strategies to reduce taxes that were not being utilized.

We worked directly with Gary’s human resources team to understand his executive benefits package and show him how he can benefit by deferring salary & bonus now and structuring payments over a ten-year timeframe upon retirement.

Gary and Vivian provided us all of their investment account statements and investment options from their employers so we could ensure they are using low-cost investment vehicles and investing tax-efficiently.

Solutions

Through a number of meetings, we were able to deliver a plan that significantly improved their long-term financial picture:

• Utilizing Gary’s deferred compensation plan to defer salary, bonus and save hundreds of thousands of dollars annually
• Structuring deferred compensation plan distributions to optimize tax-efficiency upon retirement
• Establishing an employee stock option plan liquidation strategy
• Funding backdoor Roth IRA’s to create tax-free growth
• Building a tax-efficient, low-cost consolidated investment strategy

Outcome

By aligning all of Gary and Vivian’s financial resources with their vision of their ideal life, they had a plan moving forward five years from retirement that gave them the confidence to maximize their quality of life now and in retirement.

They now had a clear understanding of how much they could spend on traveling, collecting classic cars, and their continuous home improvement in both their working years and in retirement.

We then created a wealth transfer plan ensuring that Vivian would be provided for if something happened to Gary. After Vivian’s life, Gary’s children would likely inherit more assets and in the most tax-efficient manner.

Are you five years from retirement or even closer? Click here to learn more about the financial planning services we offer at Satori Wealth Management.