Situation
Jane: 57 year old Pharmaceutical Sales Manager
Children: 2 (26 and 28)
Annual Income: $235,000
Investable Assets: $375,000 (Individual account, company stock purchase plan, & IRA)
Employer Qualified Plan: $675,000
Annual Savings: $12,000 to her individual account, $10,000 to her company stock purchase plan, and $23,000 to her 401(k) plan
Will & Powers of Attorney: Executed 12 years ago after being divorced
Life Insurance: $200,000 group term life insurance through her employer
Disability Insurance: Basic and some supplemental disability coverage through her employer
iThrive Life Planning Process™
Vision: Retire at 64; Fund a wedding for her daughter; Live comfortably and independently throughout retirement; Continue to travel every year.
Awareness: Our analysis revealed that Jane was below the Confidence Zone with a 63% probability of success in achieving her Vision if she continued her current path.
Plan: In a live planning session, we demonstrated how to move Jane into the Confidence Zone with a planning score of 79%.
Implement: Thrive Implemented her plan (savings, investments, insurance, estate plan, tax management) every step of the way.
Monitor: Thrive continues to annually confirm her Vision, test her plan, and hold her accountable so she stays on path.
Results
Retirement: During a live planning session, Jane shared that she loves what she does and is willing to work two more years. Working a little longer provided her with confidence that she could fund her retirement lifestyle, daughter’s wedding, and travel goals.
Investments: Created an investment strategy consistent with her financial plan and implemented it across all of her accounts. Aligned her asset allocation to her financial plan and, in doing so, reduced her overall investment risk. Since her company stock constituted 20% of her total portfolio, stopped contributions to her company stock purchase plan and redirected those annual savings to her individual account instead. Then mapped out a strategy to tax-efficiently diversify this holding down to 10% over a two-year period. Updated her 401(k) deferral rate so that she maxes out every year.
Insurance: Purchased a long-term care policy, as she did not want to be a burden to her family.
Estate Planning: Worked with Jane’s attorney to update her Will and Powers of Attorney. Also aligned her beneficiary designations to her updated estate planning documents.
Taxes: Harvested losses in her after-tax individual account, allowing Jane to offset future gains. Introduced her to a proactive accountant.
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 63% (before) and 79% (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 8.10% hypothetical average rate of return with a 13.87% standard deviation, while investment assumptions in the “after” scenario includes a 7.72% average hypothetical rate of return with a 12.13% standard deviation. Annual goal inflation assumptions include 2.35% for Retirement - Basic Living Expense, 5.15% for Health Care, 2.35% for Wedding Funding, and 2.35% for Travel. Marginal tax rate assumptions include 35% for federal and 3.07% for state. Long-term capital gains are taxed at 15%. A federal standard deduction of $12,400 was assumed. 85% of Social Security income was included as taxable income. Social Security income was estimated to be applied for at 67 years for the hypothetical client, with the assumption of $38,138 per year of Social Security income. Social Security income assumed inflation rate was 1.25% per year.
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