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Overview
Ron & Tammy had been diligent savers, consistently contributing 15%–20% of their income to their 401(k)s, but they had never built a comprehensive plan. With a combined income of $300,000, they enjoyed their current lifestyle but wanted to ensure they could retire comfortably at 60 without financial stress. They also needed guidance on tax-efficient saving strategies, managing healthcare costs before Medicare, and aligning their investments with their retirement goals.
Our Approach
Optimizing Retirement Contributions & Investment Allocations:
Ron & Tammy were contributing to Roth 401(k)s without understanding the long-term tax impact. We transitioned them to pre-tax deferrals to maximize current tax savings.
Tammy’s 401(k) allowed after-tax contributions with in-plan Roth conversions. Instead of saving $12,000 annually in cash, we redirected those funds into her 401(k) to build more tax-free Roth dollars.
We adjusted their 401(k) investments from high-fee target date funds to lower-cost, more tailored allocations aligned with their retirement timeline.
Expense & Cash Flow Planning:
We analyzed their current expenses and projected changes in retirement, identifying areas where costs would decrease and where they might increase (such as healthcare).
Rather than focusing on a single retirement savings number, we established specific target balances for pre-tax, Roth, taxable, and cash accounts to allow for flexible tax management in retirement.
Tax-Efficient Withdrawal & Healthcare Planning:
We developed a tax-efficient withdrawal strategy, using cash and their brokerage account to keep taxable income low between retirement and Medicare age. This strategy qualified them for significant Premium Tax Credits on a Healthcare.gov plan, making healthcare costs minimal.
Each year, we will review their tax return and implement Roth conversions up to the threshold where they can still maximize Premium Tax Credits, further building tax-free retirement savings.
Employer Benefit Optimization:
Ron had not been maximizing his HSA. We helped him increase contributions, providing tax savings now while building a tax-free fund for future healthcare expenses.
They were unaware that HSA contributions could be invested. We set up a conservative investment strategy to ensure long-term growth.
Tammy’s employer offered free legal services, which they used to update their outdated estate plan.
Education & Mortgage Planning:
We helped them contribute strategically to their state’s 529 plan for their youngest child, maximizing state tax credits while funding tuition costs.
Tammy had Restricted Stock Units (RSUs) vesting over the next five years. We developed a tax plan to manage the impact, determine when to sell, and use proceeds to ensure their mortgage would be paid off by retirement.
Social Security & Long-Term Care Planning:
We created a Social Security optimization strategy that aligned with their retirement timeline and tax plan, ensuring they maximized benefits while minimizing tax liabilities.
Tammy was concerned about long-term care needs. We modeled different scenarios to help them understand potential costs and plan for various outcomes.
The Results
By implementing a comprehensive, tax-efficient strategy, Ron & Tammy now have a clear path to retiring at 60 with confidence. Their optimized savings, investment, and tax strategies allow them to maintain their lifestyle while ensuring long-term financial security. With ongoing annual reviews, they continue to refine their plan and stay on track for a successful retirement.
Overview
Ralph had not yet started his Social Security benefits, and Joan was still working with a government pension. They wanted to ensure they were making the right decisions for their long-term financial security while also prioritizing tax efficiency and their charitable giving goals.
Our Approach
Social Security & Pension Optimization: We analyzed different scenarios for when Ralph should begin his benefits, ensuring that his claiming strategy also complemented Joan’s pension. We also provided Joan with an in-depth comparison of taking her pension as a lump sum versus monthly payments.
Tax Planning for Retirement: We reviewed their current tax return and projected their tax situation at three key stages: now, when Ralph’s RMDs begin, and when Joan’s RMDs begin. This allowed us to build a proactive tax strategy tailored to their future income needs.
Roth Conversion Strategy: Understanding their evolving tax picture, we developed a Roth conversion plan that will be implemented when Joan retires to help manage future tax liabilities.
Charitable Giving Strategies: We explored different ways for them to contribute to their church, including donor-advised funds (DAFs) now and qualified charitable distributions (QCDs) once Ralph turns 70.5, helping them choose the most tax-efficient approach.
Investment Management & Risk Strategy: Ralph & Joan previously had a set it and forget it approach. While believe in long-term, low-cost investments we optimized their investments through the following:
Bucket Strategy: We structured their portfolio into short-term (cash & bonds for immediate needs), mid-term, and long-term (growth-oriented assets) buckets to align with their withdrawal timeline.
Tax Location Optimization: We ensured tax-inefficient investments (bonds & other income producing investments) were placed in tax-advantaged accounts and tax-efficient investments (index funds) were held in taxable accounts to reduce unnecessary taxes. We further ensured pre-tax IRA vs Roth IRA investments were optimized for their specific goals.
Rebalancing Plan: We set a regular rebalancing schedule to manage risk and keep their portfolio aligned with their evolving retirement needs. When possible, we look for opportunities to tax-loss or tax-gain harvest investments to enhance their tax strategy.
Implemented a retirement income guardrails strategy so Ralph & Joan always know their withdrawals are sustainable and can adjust if needed.
Estate Planning Review: Ralph and Joan hadn’t updated their estate plan since their children were young. We worked with a qualified estate attorney to ensure their plan reflected their current wishes and that their loved ones would know exactly what to do if something happened to them.
Survivorship Analysis: With Ralph being seven years older, he was especially concerned about Joan’s financial security if he passed away first. We built several what-if scenarios to show how their income, assets, and expenses would shift, giving them a clear plan for long-term stability.
Vacation Planning: During our discovery conversation, Ralph and Joan shared that a trip to Paris was on their bucket list. We helped them plan for this trip, considering how it would be funded, whether it would impact their long-term retirement plan, and even connecting them with resources to save a few dollars on airfare.
The Results
By integrating tax planning, Social Security optimization, and a thoughtful approach to charitable giving, Ralph and Joan gained clarity and confidence in their financial future. They now have a structured plan in place to maximize their income, minimize taxes, and give to their church in a way that aligns with their values.
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