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*Disclaimer: All scenarios are entirely hypothetical and the individuals/families described are not real clients. Nothing in these case studies should be construed as a guarantee of results/outcomes.
The Situation
Ryan graduated from school two years ago and immediately got a great job as a software engineer with a tech company. As time carried on, his salary grew, expenses stayed the same, and he was now consistently saving money each month in his checking account. Growing up, his family was terrible with money, and he did not want to follow the same path.
He engaged a financial planner with the hopes of constructing a financial plan that would help him stay proactive with his money, learn more about investing and personal finance, and keep him accountable to save and invest.
The Action
-Discussed and implemented a monthly cash flow plan that will help him fund all his goals through automated contributions.
-Got enrolled in his companies ESPP to take advantage of the 15% discount on shares offered to employees. We reinvested the dividends to maximize compounding and can use this account to pay for any future goals.
-Refinanced his loans to a lower rate and increased the amount that he was paying towards them. These moves cut his payback period by five years and interest paid by thousands of dollars. He’s now on track to pay off his student loans by age 30.
-Increased the amount that he was putting into his 401k account and reallocated his investments into a more aggressive model to take advantage of his long time horizon.
-Saved the rest of the excess cash flow for travel.
The Results
Ryan now has a plan that will act as his guide to funding all his goals. Every interaction that he has with his advisor, he gains more knowledge about personal finance and the markets, as well as the confidence that he is on the right track setting himself up for the future. When his goals change, so will our approach, but for now he’s happy getting a head start on retirement savings and traveling to his favorite places.
The Situation
Jenn and Austin had been together for seven years and married for two. He has had a steady job as an engineer with a local company, and after moving around to a couple of different jobs, Jen had found a home as a pharmacist in town. They were able to save money while renting an apartment, but they had dreams of buying a home where they could start a family very soon. They never integrated finances after getting married, and found their financial lives were scattered across multiple accounts in multiple places.
They received a large cash inheritance from Jenn’s grandmother. After sitting down together one day to look at their finances, they quickly realized they had about $200,000 sitting in cash! Nothing else was invested outside of Austin’s 401k and Jenn’s retirement plans.
They engaged a financial planner to help understand how much house they could comfortably afford, invest the rest of the cash they had left over, and to help them organize their finances.
The Action
-Focused on consolidating checking and savings accounts that they had scattered across multiple institutions into one place.
-Allocated the cash we needed for a house downpayment and house related expenses after discussing what they could comfortably afford, even with added childcare expenses and a sudden reduction in income.
-The rest of it was split between an emergency fund, a professionally managed brokerage account, and we even had enough to start a college fund for Austin’s newborn nephew.
-We consolidated all of Jenn’s 401k’s and developed a low cost, highly diversified investment strategy for both of their workplace retirement plans.
-Switched to roth 401k contributions to diversify future retirement income streams and to take advantage of their low effective tax rate.
The Results
Jenn and Austin now feel more like a team that’s working towards their financial goals after consolidating accounts and developing a plan that automatically fund their goals each month. They feel less overwhelmed by their finances and are at ease knowing they have planner they can talk to at any time that always puts their interests first. Not soon after moving into the new house, they scheduled a meeting on their planner’s calendar to tell them the news that they are expecting their first child!
The Situation
Justin started his home inspection business five years ago and crushes it. He’s been busy with the explosion of new homes going up in his area and was making more money than he ever dreamed of. He always wanted to retire early and would take big chances in the past with crypto and penny stocks, with little luck. He also realized taxes were taking a big chunk out of his paycheck and he needed to develop a strategy that would minimize his tax bill.
He engaged with a financial planner to reduce taxes and formulate an investment plan that would help his FIRE dreams come true.
The Action
-We discussed the structure of the business and determined he would be better off electing another strategy that would reduce his tax bill.
-Started a workplace retirement plan that he can leverage as the only employee to defer income and taxes, while proactively investing for retirement.
-Constructed an aggressive investment plan that will be professionally managed for him and aligns with his FIRE goals.
-Leveraged a relationship with a CPA to put a proactive tax strategy in place.
-Protected his income and business with an insurance policy that would cover his expenses and business operations if he were ever hurt on the job.
The Results
Justin is as busy as ever, but with a proactive tax plan and an investment plan where all of his money is working in unison towards his ultimate goal of retiring early, he’s never felt better about the future. The quarterly check-ins that he receives from his planner help him stay on track and engaged. Justin is well on his way to FIRE!
The Situation
Lauren and James made great salaries at their jobs, but were so busy with their jobs, the house, and the kids, they rarely were proactive with their finances. With their oldest child entering high school next year and Lauren’s 40th just passing, they wanted to get serious about saving for college and retirement. They had some life insurance but wasn’t sure it was enough, and never updated their wills after the kids were born.
They engaged a financial planner to help them put a number to their college savings goal, proactively save for retirement, and protect their assets for their growing family.
The Action
-Developed a plan to pay a portion of their kids college expenses through tax advantaged accounts
-Helped them understand how much they needed to save and invest every month to one day live the lifestyle they want to live in retirement
-Established a tax efficient investing strategy that included all of their accounts
-Discovered they had legal benefits through their employer which they can leverage to get their estate planning documents updated for no cost
-Ran a life insurance needs analysis to determine a shortfall in life insurance for each of them. Because we do not sell products, I referred them to a trusted partner where they were able to add a low-cost insurance policy
The Results
Lauren and James now feel protected and confident. They are on track to hit their college savings goals without sacrificing their retirement. They can rest easy at night knowing if something were to happen to either one of them, their family would be taken care of. They now meet twice a year to adjust their plan for any changes that may occur in their lives or with their goals.
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The Situation
Susan and Allen love their jobs, but with their first grandchild on the way, they are growing increasingly excited about the thought of spending more time with their family and friends in retirement. They have always saved diligently, however they have put little thought into how they will juggle their investment and retirement accounts, Susan’s pension, and social security benefits.
They engaged a financial planner to help them create a retirement spending plan, a pension and social security strategy, and retirement tax strategy.
The Action
-Discussed the changes that may occur in their future retirement spending plan and how much they will need at the beginning, middle, and end of their retirement.
-Examined their current investment and retirement account allocations, and how their approach may need to change before and during retirement to support their desired retirement spending.
-Discussed the pros and cons of various pension payout options, settling on a lump sum payment upfront with a smaller survivor benefit due to differences in age and life expectancy.
-Constructed a proactive tax plan that will minimize the amount of taxes paid over their lifetimes
-Ran social security break even scenarios to estimate how long it would take for their cumulative benefits begun at a later age to equal or break even with cumulative benefits begun at an earlier age
The Results
Susan and Allen now feel more confident and at ease about their future retirement, knowing they have a solid plan in place. With a clear investment and tax strategy, a withdrawal schedule that fits their short term and long term needs, and a plan for their social security and pension benefits, their worries have been replaced with peace of mind, knowing their financial future is secure.