WHO WE SERVE
Bob and Kathy Didn’t Realize Their
Biggest Retirement Risk Was Taxes
See how we helped identify strategies for turning
a big 401K into a smart, tax efficient retirement plan
Bob and Kathy’s Story
Mid-50s, around $2.1 million in investable assets
Bob and Kathy have lived in Ventura, California their whole lives. After each working a long and successful career, they’re now approaching 55 and sitting on some substantial savings in their 401(k)s. Overall, they have around $2.1 million between their 401(k)s and non-retirement accounts.
Bob and Kathy have a goal of retiring at 58, and they know now’s the time to get serious about planning for retirement. They’ve never worked with a financial advisor before reaching out to our team for guidance.
Can we afford to retire at 58, with our goals of traveling and helping our kids?
What’s the best way to turn our savings into income in retirement?
Aside from taxes, what else do we need to do prepare for?
The Challenge
- The majority of their assets were held in 401(k)s. Any withdrawals taken in retirement will increase their taxable income.
- They had no clear understanding of how much they could safely spend during retirement.
- They needed help bridging the gap to Social Security and Medicare.
- They’d never worked with a financial advisor before, and they weren’t sure what to expect.
- Their 401(k) was invested too heavily in stocks, which exposed them to an inadequate level of risk for this phase of life.
Once we had a detailed understanding of Bob and Kathy’s financial picture and heard their top questions and concerns, we worked to ensure they felt comfortable with the next steps. We helped them develop a clearer path towards retirement by:
- Creating a dynamic withdrawal strategy designed to help maximize their retirement income
- De-risking their portfolio to help manage volatility while supporting consistent income needs
- Identifying which goals took the highest priority in retirement (traveling, leaving a legacy, etc.)
- Exploring Roth conversions to add tax-free assets for spending later in retirement
- Reviewing options to maintain access to high-quality healthcare, whether it was through the marketplace or Medicare
- Maximizing savings in their final working years and building the amount they have in non-retirement accounts to improve flexibility to mitigate taxes through retirement
Bob and Kathy’s Results
Once they transitioned to retirement with a solid plan in place,
the planning process helped outline an approach for receiving income from their accounts each month (just like a paycheck). We meet with Bob and Kathy at least three times each year to ensure their spending is staying on track and update their financial planning projections.
Aligning their resources with their goals for an early retirement, Bob and Kathy were able to:
- Live off the retirement nest egg they built in a tax-efficient way, including withholding the right amount from their IRA for taxes each year.
- Leave a meaningful and tax-efficient legacy for their children and grandchildren.
- Optimize when to draw on their IRA or taxable accounts to both minimize taxes and fund their special expenses (including a trip to Europe!)
- Obtain quality healthcare coverage early on in retirement, before they qualified for Medicare.
This is a hypothetical case study for illustrative purposes only and should not be construed as a recommendation.
It may not be representative of your experience.