Case Study #1
Make Work Optional
Tim & Sarah
Age: 61 and 58
Main Goal:
Build a retirement plan to maintain their lifestyle and reduce taxes so they can stop working on their own terms and enjoy more time with their grandkids.
The Situation:
Tim and Sarah don’t know when they want to or even when they may be able to retire.
Tim is a hard-working corporate executive, and Sarah is a respected physician. Their careers bring meaning to their lives, and they aren’t quite ready to fully retire, just because they’ve reached traditional “retirement age.” However, when they do retire, they want to make sure they can replace the income from their jobs and maintain their lifestyle later in life.
They have saved their entire careers into their retirement accounts, and they want to make sure they make smart decisions with their investments and eventual withdrawals. They want to understand how their tax situation may change in the future and take steps to leave behind a legacy to their kids and grandkids.
Meanwhile, Tim’s parents have recently passed away, and he was left with a meaningful inheritance. Tim and Sarah want to honor Tim’s parents’ legacy while also incorporating their inheritance into their own financial plan.
The Approach:
Tim and Sarah aren’t sure where to begin, so they hire a financial planner to build a comprehensive financial plan. They “don’t know what they don’t know,” and they want to make sure they are taking advantage of every opportunity to maximize what they’ve saved.
The Outcome:
Tim and Sarah have a financial plan that addresses all aspects of their financial lives and, just as importantly, an accountability partner to help them stay on course and educate them along the way.
Their plan includes:
A tax-aware retirement income strategy to maintain their lifestyle through the end of their plan and leave assets to their kids and chosen charitable organizations
A diversified investment portfolio tailored to their financial goals and personal values
Incorporation of their inheritance in their own financial plan with retirement income and tax mitigation at the forefront
Annual review of their tax return to summarize their tax situation and find ways to reduces taxes in the future
Reduced investment costs
Retirement forecasts based on current situation and various hypothetical scenarios
Funding strategies for major purchases including helping grandkids with college and a new home purchase
A strategic, ongoing rebalancing strategy
Analysis of their optimal Social Security timing
Advice on tax-efficient charitable giving including Qualified Charitable Contributions (QCDs) and Donor Advised Funds
Incorporation of Required Minimum Distribution (RMDs) in their retirement-income plan
Lower tax liabilities through strategic Roth conversions
A reduction in portfolio taxation through tax loss harvesting and asset location
A tax-efficient IRA-funding strategy until retirement
Insurance analysis on their life, disability income, health, homeowners, auto and umbrella coverages to fit their needs now and in retirement
Estate planning recommendations to incorporate now and considerations for the future
An introduction to trusted, specialized professionals in our network, as needed, such as a CPA, estate planning attorney, insurance agent, etc.
Case Study #2
Enjoy Life Today and in the Future
John & Lindsay
Age: 41 and 36
Main Goal:
Make smart financial decisions through the many exciting life events on their plate including: having kids, funding college, starting a new job, relocating, buying a home, etc.
The Situation:
John and Lindsay have a lot going on. They’ve been married for nine years, they have three kids and they’re looking for a new home that will meet their growing family’s needs. They would like to renovate their current home before they sell it, and they’re unsure how to pay for it.
John is a software engineer at a tech startup, and Lindsay works in marketing at a Fortune 500 company. They’ve started college savings plans for their young kids, but they’re not sure if they’re doing enough to help cover their entire tuition.
John has a small amount of student loans that they need to pay off and stock options through his employer. They are diligently saving into their retirement accounts, but they don’t know if they are picking the right investments or balancing between tax-deferred and after-tax accounts in the optimal way. As they save, they also want to continue funding annual family vacations.
Finally, Lindsay and John want to make sure they are taking advantage of the right insurance benefits through their employer plan as their family needs change. They also want to make sure they have enough money in their emergency savings.
The Approach:
John and Lindsay are both interested in and knowledgeable of personal finance and investing, but they have busy lives, and they prefer to outsource their financial plan and investment strategy to a professional. They need someone to factor in all of their important priorities—both now and in their future—to ensure they’re making smart decisions as their family and careers grow.
The Outcome:
John and Lindsay have a financial planner that understands the demanding needs involved with busy careers and a growing family. Their financial plan accounts for the tradeoff between spending money on things that make life comfortable today while also planning for the future, with college education and retirement saving top of mind.
Their plan includes:
A close look at their budget and cash flow to ensure they are spending money on things that are important to them while saving the surplus each month in the right places
Analysis of their home-purchase budget and the impact of different price points, down payment, mortgage terms, etc. on their financial plan
Advice on funding options for their home renovations
Recommendations for efficient debt pay down
An objective cash-reserve range based on their particular needs
Annual review of their tax return to summarize their tax situation and find ways to reduces taxes in the future
Advice on how they should save between their Traditional and Roth 401(k)s, IRAs, 529 Plans and Taxable Investment Accounts
A second opinion on their employee benefits to ensure they are taking advantage of the most cost-effective options
College-funding analysis and forecasts based on different levels of saving
A customized investment portfolio tailored to their financial goals and personal values
Reduced investment costs
A strategic, ongoing rebalancing strategy
Lower tax liabilities through strategic retirement contributions and Roth conversions
A reduction in portfolio taxation through tax loss harvesting and asset location
A tax-efficient retirement-funding strategy between 401(k)s, IRAs and Taxable Investment Accounts
An introduction to trusted, specialized professionals in our network, as needed, such as a CPA, estate planning attorney, insurance agent, etc.
Note: The case studies above are hypothetical and do not involve actual Cove Financial Planning clients. No portion of the contents should be construed by a client or prospective client as a guarantee that he/she will experience the same or certain level of results or satisfaction if Cove Financial Planning is engaged to provide financial planning and/or investment advisory services.