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The Accumulators

Situation

Jim: 38 year old Medical Device Sales Executive
Anne: 39 year old Doctor
Children: 3 (2, 4, and 6)
Annual Household Income: $375,000

Investable Assets $500,000 (Joint account & IRAs)
Employer Qualified Plans: $325,000 (401(k) plan and 403(b) plan)

Annual Savings: $15,000 (between the two of them) to their employer retirement plans, in order to take advantage of the employer matching contributions; $5,000 to their joint account, which was contributed to on an ad hoc basis throughout the year.

College Savings: None
Wills & Powers of Attorney: None
Life Insurance: $200,000 ($100,000 each) in group term life insurance through their employers
Disability Insurance: Basic disability coverage through their employers

iThrive Life Planning Process™

Vision: Retire (Jim at age 65 & Anne at age 66); Fund 4 years of college for all 3 children; Buy a vacation home; Protect their family should something happen to them.

Awareness: Our analysis revealed they were below the Confidence Zone with a 45% probability of success of achieving their Vision.

Plan: In a live planning session, we demonstrated opportunities to increase their planning score to put them in the Confidence Zone with a planning score of 92%.

Implement: Thrive Implemented their plan (savings, investments, insurance, estate plan, tax management) every step of the way.

Monitor: Thrive continues to annually confirm their Vision, test their plan, and hold them accountable so they stay on path.


Results

Savings: Created a sustainable budget so they could maximize cash flow and implement an automated saving plans: $39,000 ($19,500 each) to their employer plans, $12,000 ($1,000 per month) to their Joint account, $12,000 ($6,000 each) to their new Roth IRAs, and $3,000 ($1,000 per child) to their new 529 plans. Roth IRA contributions were made possible by implementing a Backdoor Roth IRA strategy, which allowed them to maximize and diversify the tax treatment of their retirement savings. Total savings = $66,000 per year.

Investments: Created an investment strategy consistent with their financial plan and implemented it across all their accounts. Linked all accounts to report into their online portal to enable them to monitor their overall investment portfolio and track performance in one place.

Insurance: Increased their coverage by purchasing $3 million ($1.5 million each) of term life insurance to ensure they had coverage until their youngest finished college. Found that the supplemental coverage offered through their employer cost more each year than what they could get outside of their companies. Obtained a supplemental disability policy for Anne to provide appropriate coverage, given her profession as a Doctor.


Estate Planning: Mapped out their estate plan and made a referral to an attorney to execute their Wills and Powers of Attorney. They now have Guardians listed in their Wills, ensuring the state would not decide who would care for their children. Also included asset protection elements in their Wills so their children would gain access to their inheritance at the right age and it would be protected from taxes, divorce, creditors, and their own misjudgment.

Taxes: Introduced them to a qualified accountant and saved thousands per year in taxes by maxing out their retirement plans and contributing towards college savings plans. Backdoor Roth IRA strategy also ensured they would never have to pay taxes on any growth or distributions made from those accounts in retirement.



The above is a hypothetical case study and not based on actual individual client results.

The results achieved in our simulations do not guarantee future investment results. It is possible that the markets will perform better or worse than shown in the case study; that the actual results of an investor who invests in the manner these case studies suggest will be better or worse than the projections; and that an investor may lose money by investing in the manner the case studies suggest. The case studies assume the reinvestment of dividends and do not include transaction costs for purchases and sales of equities and bonds or mutual funds and ETFs. We assume no deduction for advisory fees, and that assets are allocated in the manner the projections suggest until the hypothetical client reaches age 95. The final results also address such factors such as annual spending, annual savings, timing and cost of goals. Although the information contained herein has been obtained from sources believed to be reliable, its accuracy and completeness cannot be guaranteed. While the case study results reflect rigorous application of the investment strategy selected, hypothetical results have certain limitations and should not be considered indicative of future results or results for any individual investor. In particular, they do not reflect actual trading in an account, so there is no guarantee that an actual account would have achieved these results shown. The 45% (before) and 92% (after) illustrated probabilities of success were derived from licensed forecasting software. The forecasting results are based on a Monte Carlo simulation. In addition to the facts listed in the case study: Investment assumptions in the “before” scenario include a 7.65% hypothetical average rate of return with a 12.50% standard deviation, while investment assumptions in the “after” scenario includes a 8.34% average hypothetical rate of return with a 13.91% standard deviation. Annual goal inflation assumptions include 2.35% for Retirement - Basic Living Expense, 5.15% for Health Care, 6.15% for College Funding, 2.35% for Vacation Home Down Payment, 2.35% for Vacation Home Expenses, and no inflation for Vacation Home Mortgage. Marginal tax rate assumptions include 32% for federal and 3.07% for state. Long-term capital gains are taxed at 15%. A federal standard deduction of $24,800 was assumed. 85% of Social Security income was included as taxable income. Social Security income was estimated to be applied for at 67 years of age for both hypothetical clients. $38,980 per year of Social Security income was assumed for each hypothetical client. Social Security income assumed inflation rate was 1.25% per year.