From Academic to Retirement – A Case Study

| October 2, 2017 | 0 Comments

It’s been said that roughly 10,000 baby boomers retire every day. Even though so many people are doing it, there’s still a considerable amount of stress as you transition from working into retirement. The big financial transition is from drawing a paycheck to drawing down savings, but the emotional changes of purpose and identity can be even more powerful.

We recently helped one client, a research scientist and his wife, make this transition. Like many of our clients, they came to us as he was beginning to consider winding up his work and thinking about their options. If you haven’t worked with a financial advisor before, this period as you prepare for retirement is a good time to begin the relationship. This particular couple initially was looking only for help managing their savings and investments, which had grown beyond their comfort level to do it themselves.

The value of working with an independent financial advisor can be personalized analysis and consulting on the wide array of financial topics that form the complex web of interconnected financial decisions. For example, our scientist client had several topics that each required complex analysis and scenario modeling; well beyond the scope of the typical website, insurance agent, or broker. In the end, making better decisions about all of your finances is often well worth the higher cost of an independent advisor.

Here are some of the issues we helped this couple address:

Could he afford to retire? This was actually the easiest question to answer. We looked at their lifestyle expenses and compared that to the expected income from all sources, including Social Security, retirement funds and consulting income to reassure them they were in pretty good shape.

Could they afford a vacation home? This was a much more complicated discussion, because a second home would increase their expenses significantly, but was also an important retirement goal for them both. Rental income could offset that, but they weren’t willing to rent out the house, so we had to carefully analyze all of their options. The home they ultimately bought wasn’t what they had originally expected, but they are extatically happy with the result.

Did they need the insurance they were paying for? We reviewed their existing life insurance to ensure they weren’t paying too much for coverage they didn’t need. We also helped them decide whether or not to purchase long-term care insurance, a very complex and expensive decision.

How should they handle options and stock grants? Over the years, this client’s consulting work has been very lucrative, resulting in stock grants and options that needed to be addressed. Keeping their other financial goals in mind, we helped them analyze their options and decide what to do with the stock. We also helped with strategies to protect the shares they decided to keep.

How could they manage and reduce their debt? The change from earning a regular paycheck to drawing down their savings has really focused their attention on fixed costs, including mortgage payments and other monthly expenses. We’ve helped them compare loan options and consolidate and reduce their leverage, stabilizing their monthly cash flow.

Are they prepared for illness and death? One of the most challenging projects for these clients was their estate planning. They have very specific desires, and wanted to maintain a fair amount of control and flexibility over the money their children would ultimately inherit while making some significant philanthropic gifts. Balancing these priorities within the complexity of ever changing estate tax rules has been very challenging, but we’ve worked with their attorney and accountant to help craft a plan that comes as close to their goals as possible.

Every retiree’s needs are different, so retirement planning shouldn’t be a cookie-cutter approach using only data and software. These are useful tools, but the ability to look through the data and mold and shape the inputs to see the potential outcomes and pitfalls is the real value of working with a Certified Financial Planner® professional.

This column is prepared by Rick Brooks, CFA®, CFP®. Brooks is director and chief investment officer with Blankinship & Foster, LLC, a wealth advisory firm specializing in comprehensive financial planning and investment management. Brooks can be reached at (858) 755-5166, or by email at Brooks and his family live in Mission Hills.


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