Situation
Steve: 70 year old retired Dentist
Kathy: 68 year old retired Teacher
Children: 1 (40 years old)
Grandchildren: 3 (8, 10, 13)
Investable Assets
$2,800,000 (Joint account, IRAs, & old employer qualified plans)
Wills & Powers of Attorney: Recently updated
Life Insurance: $1,000,000 ($500,000 each) in whole life insurance policies
iThrive Life Planning Process™
Vision: Ensure they do not outlive their assets and do not become a burden to their family; Pay for their grandchildren’s college educations; Make charitable contributions to their favorite organizations and alma maters each year.
Awareness: Our analysis revealed they were above the Confidence Zone with a 99% probability of success in achieving their Vision if they continued on their current path.
Plan: In a live planning session, we demonstrated how to optimize their financial plan to put them in the Confidence Zone with a planning score of 89%. This enabled them to reduce their investment risk and to spend more in retirement.
Implement: Thrive Implemented their plan (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
Life Style: Showed Steve and Kathy that they would not outlive their assets and are in a position to support their grandchildren’s college educations, to give more to their charities and alma maters, and to increase their spending to include more travel.
Investments: Consolidated many of their unnecessary investment accounts that were held at various institutions. Aligned their asset allocation to their financial plan and, in doing so, reduced their overall investment risk. Saved thousands per year in fees by eliminating inefficient and expensive investments and consolidating their relationship to one firm.
Insurance: Utilized the accumulated cash value in their whole life policies to purchase a universal life contract providing a legacy for their daughter and a pool of money to cover their grandchildren’s college educations.
Estate Planning: Updated beneficiary designations to align everything to their recently updated Wills by assigning their daughter as their contingent beneficiary. Also completed a Roth conversion in an effort to start to transfer the tax burden of any distributions that’ll need to be taken by their daughter in the 10 years following their passing.
Taxes: Donated low cost basis stock to their alma maters and to their church saving thousands per year in taxes. Coordinated with their accountant every year to ensure the appropriate Federal Tax withholding was set for any IRA distributions.
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 99% (before) and 89% (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 7.53% hypothetical average rate of return with a 11.71% standard deviation, while investment assumptions in the “after” scenario includes a 7.23% average hypothetical rate of return with a 10.20% 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 Travel, and no inflation for Charitable Donations. Marginal tax rate assumptions include 22% for federal and 3.07% for state. Long-term capital gains are taxed at 15%. A federal standard deduction of $27,400 was assumed. 85% of Social Security income was included as taxable income. Social Security income was estimated to be applied for at 70 years of age for both hypothetical clients. $32,660 per year of Social Security income was assumed for Steve and $27,434 per year of Social Security income was assumed for Kathy. Social Security income assumed inflation rate was 1.25% per year.
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