The Situation
Adam and Beth, introduced to us by their CPA, felt they were entering an important threshold in their lives when they reached five years from the start of their retirement. Although they had accumulated a sizable nest egg, were continuing to fund their retirement accounts, and had done some basic calculations, they weren’t certain if they could achieve the retirement of their dreams. Travel was important to them and they wished to take annual, active vacations to exotic places in their early retirement years. Also, Adam and Beth hoped to purchase a Florida residence, valued at around $500,000, to be able to enjoy winter months in a warmer climate.
The Solution
First, using our state-of-the-art retirement planning software, we evaluated one scenario which included a budget of $20,000 per year for travel during the first ten years of their retirement. We concluded that, with a 90% confidence level, this scenario would be adequately funded. However, the second scenario, which included the Florida home purchase, showed an income deficit with potential future impairment to their retirement nest egg.
We went back to the drawing board, made some adjustments, and developed a revised plan designed to achieve all of Adam and Beth’s retirement goals. First, we modified their investment portfolio with the objective of improving performance. We developed a comprehensive investment strategy built on an asset allocation that more closely aligned with their objectives. We reduced their investment costs and made their portfolio more tax efficient, all of which enhanced their potential return. We helped them to get a better understanding of Adam’s 401(k) plan resulting in enhanced investment choices. We also guided Adam and Beth in tweaking their current budget and spending patterns. This allowed them to increase their 401(k) and 403(b) contributions resulting in a larger projected retirement nest egg and lessened current taxes.
Follow-Up
Adam and Beth now had peace of mind, knowing they had a viable plan and that the actions they are taking today will allow them to retire in five years with the income necessary to live out their retirement dreams. Based on the plan, we also produced a timeline or “roadmap” which projects what Adam and Beth’s financial picture should look like each year going forward. This allows us to evaluate their progress and, if necessary, make adjustments in the future to keep them on track.