Bill and Catherine Johnson live in Greensboro and were close to retirement age when they first reached out to TFA. At the time, they were working with an advisor in Virginia who provided only investment services and minimal communication throughout the year. Bill was 64 and Catherine was 61 and had recently been let go from her job. The Johnsons found themselves in a challenging position with many questions and felt as though their current advisor wasn’t the right person to find the answers.
They were ready to get serious about a plan for their retirement and needed a partner to help them get there. Their most pressing issue was to decide if they could reach their retirement goals without Catherine going back to work. We started by gathering all of their financial information to begin mapping out different scenarios in their financial plan. This process sparked a discussion and eventually a compromise that allowed Catherine to retire if Bill worked for 2 more years.
Our next step was to reallocate their investments. Over the course of their careers, the Johnsons had accumulated over $1 million dollars. Unfortunately, their portfolio consisted of mutual funds with bloated fees. By using low cost mutual funds, we were able to reduce their investment expenses by 45%. This reduced the drag on their portfolio and allowed them to “keep more money in their pocket.”
Like most retirement age investors, Bill and Catherine assumed they should take their Social Security benefit as soon as they retired. As their advisor, I worked to show them that they could greatly benefit from utilizing the spousal benefit based on Catherine’s work record and delaying Bill’s benefit until age 70. The analysis showed that over their life expectancy, this strategy could potentially increase their Social Security income by over $185k. This strategy would provide less income early in retirement but much more income later on. To alleviate their concern regarding the low-income period, I developed a plan to show how we would efficiently withdraw from their various accounts to fund their lifestyle during this period.
Throughout our early days working together, Bill and Catherine often discussed the idea of having a vacation home. With four children scattered across the country, they were open to the idea of relocating to be near them or having a second home in proximity to them. Of course, this was a dream that also brought up a lot of questions such as, “Can we afford it?” and “What will buying a second home do to our current budget?” I got to work again, running different scenarios to show them exactly how buying a vacation home would affect their other goals. We explored how it was feasible but it would require them to curb their lifestyle expenses and reduce the amount of funds available for other travel. After weighing the pros and cons, they decided that the vacation home wasn’t a priority and spending those resources in other areas would provide more value.
One of the planning scenarios that concerned the Johnsons was a potential nursing home stay. Although their assets and income sources could sustain an average stay in a nursing home, they weren’t comfortable with the amount of assets that would be depleted. To reduce this risk, we had our outside insurance expert, Tom Jordan run quotes from various insurance companies to find the most affordable policy for them. By obtaining these policies, they were able to significantly reduce their exposure to potential long term care expenses.
After their retirement concerns were addressed, our attention turned to the estate documents which hadn’t been updated in almost 10 years. We coordinated a meeting with a local estate attorney to have everything reviewed and revised. I attended the meeting with the Johnsons to help communicate their goals and provide information regarding their net worth and current beneficiary designations. Together we were able to get their estate documents updated and give Bill and Catherine true peace of mind because all of their affairs were officially in order.
When Bill retired at 67, he was surprised by a letter from Medicare explaining that due to his income, his premium would be $243.50/month instead of the usual $121.80/month premium. We helped him gather and fill out the necessary forms to inform Medicare that he retired and the premium should be based on a lower income. After appealing Medicare’s decision, we were able to secure his premium at the lower rate of $121.80.
During our first meetings with Bill and Catherine, we were able to identify their retirement goals and ultimately paint a clear picture of how they will attain them. We generated a financial plan that clearly laid out the years leading up to retirement and successfully implemented it. We also worked closely with them to give them security in knowing their estate will be handled according to their wishes. Bill and Catherine are loving retirement. They currently still live in Greensboro but are trying to decide where their retirement journey will lead them next. No matter where they end up, TFA will work to stay on top of their goals and investments so they can truly enjoy the freedom of retirement.
Names have been changed for privacy purposes.