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Case Study: Pre-Retirees

If you plan to retire in approximately 5-10 years, we believe now's the time to evaluate your
finances so that you have time to prepare for retirement.

 

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At Mariaca Wealth, we know that retirement planning can be complex and may involve a long list of factors. We're here to help free you from the paralysis that can set in when you're not sure where to start or how to evaluate your options.

Meet Alexander and Eliza:

Alexander and Eliza, 54 and 53 respectively. Alexander is an executive at a regional utility holding company. Eliza is an architect who co-owns her own firm with a partner. They have three children, Angelica, Alexander, Jr., and James Alexander, who are all independent.

Pre Retirees Caseimage 2 Couple

THE FACTS

Pre-retirement Total Assets: $ 1,785,000

01

$845,000 in Alexander’s 401k, he is contributing the maximum $27,000 each year

02

$397,000 in Eliza’s Roth 401k Account

01

$27,600 in Alexander’s Roth IRA

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$275,000 in taxable savings in their brokerage accounts and bank accounts

04

Home $980,000 home in Florida, $120,000 mortgage

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Alexander and Eliza each have $500,000 term policies to age 75

06

No pensions

07

Their investment accounts are invested aggressively, with 80% in domestic equities and 20% high yield and corporate fixed income.

THE QUESTIONS

What’s Important to Alexander and Eliza?

  • How much do we need to fund our ideal retirement?
  • Will our current savings and investment strategies reach our target on time?
  • Once retired, should we change our investment strategy to protect against risk?
  • How do we create retirement income from our savings?
  • When and how should we each claim Social Security benefits?
  • Do our portfolio allocations support our retirement distributions while protecting us from unnecessary market risk?
  • In what order should we tap our retirement and savings accounts for income?
  • Do we have enough life insurance so a surviving spouse can maintain the same standard of living?
  • Should we consider long-term care insurance?
  • How will we cover health insurance expenses before Medicare begins?
  • How do we adjust our strategy if market conditions change?

We believe the first step for Alexander and Eliza is to sit down with someone who would listen to their questions and concerns. In the past they’ve had mixed experiences with financial advisors and Eliza didn’t always feel like the advisors truly heard what they said. She wanted to be heard and not sold to.

 

MARIACA'S 5-STEP PRE-RETIREMENT PROCESS

Step 1

We help Alexander and Eliza gather and document their current financial information and objectives. Then we develop a financial plan to help understand if they’re on track to afford to retire within ten years.

Step 2

Once we determine whether their projected asset level at retirement will meet their objectives, we use Monte Carlo simulations to test the plan’s resiliency over time. (This calculates the plan’s probability of meeting their income goals for the balance of their projected life, which we assume to be age 95). This step also helps us understand what the long-term portfolio growth rate needs to be to help Alexander and Eliza meet their lifetime spending goals.

Step 3

Next, we use planning software to analyze Alexander and Eliza’s work history and help them determine an optimal Social Security claiming strategy to help maximize their projected lifetime benefits. The software runs hundreds of simulations comparing alternative social security claiming strategies with portfolio distribution strategies to help potentially:

  • Extend portfolio life
  • Lower lifetime taxes
  • Increase the ultimate estate value for beneficiaries
Step 4

With an understanding of their projected asset level at retirement and their personalized Social Security strategy, we would also use planning software to analyze their accounts and determine a tax-efficient withdrawal strategy to help extend the life of their portfolio.

Step 5

We would have Alexander and Eliza complete a rigorous risk-tolerance assessment to better understand how comfortable they are taking the financial risk. With this information, and the required growth rate necessary to meet their long-term goals, we’d be better prepared to advise and educate Alexander and Eliza on any potential mismatch between their risk tolerance and required risk.

THE RESULTS

In collaboration with their estate planning attorney and tax professional, Alexander and Eliza would have a retirement plan with the goal to:

01

Help them improve their chances for retirement

08

Help maximize their savings and investments during their remaining working years

04

Coordinate Social Security, Medicare, & withdrawal sequencing

03

Help them remain long-term and disciplined investors, knowing their asset allocation protects assets that will be needed within five years from market exposure while freeing up the balance of their portfolio to be exposed to growth assets

10

Continue to be updated annually or as circumstances change

THE MARIACA PROMISE

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At Mariaca Wealth ...

We know it can be confusing to calculate all the unknowns involved in retirement planning.  In fact, we believe the inherent complexity of the process often makes people put pre-retirement planning on hold. We’re here to help you know what to do and in what order to do it so that you have step-by-step guidance and support in working towards your retirement. 

And, if you or your spouse are not not quite as well versed as you'd like to be on financial matters, you don't have to wait for something unexpected to happen. At Mariaca Wealth, we have ongoing educational programs, videos, and client educational events in place that will increase you or your spouse’s financial literacy and help prepare both of you for a less stressful, more enjoyable life together.

 

 

Important Disclosure:  The above case study is hypothetical and does not involve an actual Mariaca Wealth client. The case study is for illustration purposes only and it is not intended to provide you with any customized investment advice. Nothing in this case should be considered as a recommendation or advice to buy, sell or continue to hold securities or other investments, or take any specific action regarding any tax matters. Accordingly, certain of the securities and strategies referred to may not be suitable for all clients. No portion of the content should be construed by a client or prospective client as a guarantee that he/she will experience the same or certain level of results or satisfaction if Mariaca Wealth is engaged to provide investment advisory services.

 

 

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