Some of our clients come to us after their childrearing demands have eased but well before retirement.
When Ann first called us, her son had graduated from college and started a promising job in technology. While relieved to see him become financially independent, she knew that retirement was approaching and there was “catching up” to do on her own savings. Although Ann had worked continuously since her divorce a number of years earlier, a transition from a corporate position to self-employment had brought some challenges, specifically fluctuating income. With a hodgepodge of different investment accounts, including an old 401(k) heavily weighted with company stock, Ann sought our guidance on how to make the most of her final working years.
When we met with Ann, we asked her about her vision for her remaining years, both working and retired. She was animated in her excitement about now working for herself after so many years of dealing with company hierarchy, and controlling her own schedule. Ann envisioned a gradual retirement process by slowly cutting back her workload, and potentially doing more volunteer work as she had charitable interests. After gathering Ann’s expenses, projected pension and Social Security benefits, and information on existing savings, we created projections of different scenarios for her review, incorporating feedback for the range of assumptions. Varying these, Ann could gauge the impact of changes in spending and income on her future financial security. We also reviewed her account statements and noticed that while she held numerous mutual funds at different firms, many of the underlying holdings overlapped and there was no overall strategy in place. She admitted to discomfort dealing with her investments, as well as concern over her family’s history of longevity, so we discussed ways she could better address those with a revised investment strategy.
Benefits of Working With Clarity
The advice we provided Ann allowed her to:
- Gradually adjust her lifestyle to one that was sustainable for life, with planned adjustments for earning both more and less than expected
- Learn more about her rights to spousal Social Security benefits based on her former spouse’s earnings
- Take advantage of lower-income years through ROTH conversions and sales of positions with long-term capital gains, and higher-income years with a donor-advised fund for charitable contributions
- Open a SEP IRA and create a flexible strategy to fund it
- Consolidate most of her investments and create coherent, low-maintenance savings and investment strategies
- Learn how to save significant taxes on the old 401(k)’s employer stock through optimal timing of a rollover and use of net unrealized appreciation (NUA)
- Explore deferred annuities that would provide financial insurance against a very long lifetime at a modest upfront cost