Case Study 1: Jen & Mike

The situation:

Both are age 62 and ready to retire; it’s time to make important decisions. When should they start Social Security? Can they afford to retire right away? How will they create income from their savings? Did they save enough?

Total Assets: $1,500,000

Anticipated spending in retirement:

$107,800 annually after taxes, with 25% less after one of them passes away.

Jen & Mike's Financial Plan answered all of their questions - and more

In completing Jen and Mike’s Financial Plan, we compared two strategies side-by-side:

Strategy 1:

What if they begin taking Social Security benefits now and make up the income difference with their pre-tax 401(k) money before tapping into their taxable account?

Strategy 2:

What if they coordinate the start date of their Social Security with the distribution of their savings in a more tax-efficient manner? Each year they would withdraw their income from both of their accounts and also use partial Roth conversion strategies to minimize their lifetime taxes.

The graph below shows Jen and Mike’s income longevity given each of the two strategies we compared.

 

In Strategy 1, Jen and Mike spend their traditional 401(k) money first – a common recommendation for retirees. By spending this money first and then spending the taxable account they will exhaust their savings in about 39 years.

 

But look at Strategy 2. By optimizing the start of their Social Security, using partial Roth conversion strategies, and strategically withdrawing from all their accounts together to manage their lifetime taxes, their savings now lasts 7 years longer. These smart moves could have also translated into more income over the course of their retirement.

 

Like Jen and Mike, you’ve worked hard to accumulate savings for retirement. Whether you have saved a little or a lot, you can get the most out of your assets by developing a smart, personalized investment and withdrawal plan.

After Tax Value of Financial Portfolio:

By coordinating their Social Security with managing the location and timing of asset withdrawal, their portfolio lasted about seven years longer.

How we did it

Traditional “rules of thumb” and “conventional wisdom” used by almost every large financial services company and by advisors, are usually wrong!

 

Let us show you how maximizing your social security strategy plus smart income management and a tax-efficient withdrawal sequence can potentially add more longevity to your portfolio in retirement.

Ready to turn your savings into a reliable retirement paycheck?

The first step is to schedule an introductory call to see if our expertise is a good match for your needs.

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* For privacy reasons, the case study described above is hypothetical and the facts do not apply to an actual Baobab Wealth client. This retirement planning case study should in no way be construed as a guarantee that a current or prospective client will experience similar results or levels of satisfaction if he or she engages with Baobab Wealth for wealth management services.

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