The Profile
Don & Peggy have been in the work force for 35+ years. They are both aged 63 and would like to retire in the next 2-3 years
The situation
Don has worked at a large financial corporation for the last 20 years of his life. Throughout his career he has reached executive status and oversee’s a team of 45 individuals accross the country. Peggy, a lifelong equestrian, has worked part time at her local stables for the last 5 years after their children moved out of their home.
Don and Peggy have reached the conclusion that they would like to retire. However they are left with the following questions
Are they currently in the situation where they can retire?
How do they transition from asset accumulation to asset consumption?
Does their asset mix reflect proper risk levels for someone at their age?
How should Don navigate his various pension options?
How can Peggy ensure her grandchildren have a jump start on tuition costs?
The Process
As with all client cases, the Clearwater team utilized the C3 Process.
Clarity - Data / Discovery
First the team had to help Don & Peggy achieve clarity around what their goals were. They had not yet articulated with each other what their idea vision of retirement looked like. Before our cash flow retirement modeling could occur we had to have extensive conversations helping them imagine all the different variations of retirement.
Conviction - Information / Analysis
After clarity was achieved and retirement lifestyle / goals were articulated, then the analysis could occur. Extensive cash flow modeling occurs during this phase. Stress testing the portfolio against consumption and evaluating all alternatives as it could relate to Don & Peggy’s fact set. During this portion our team analyzed Don’s various pension options - Lump sum, annuity, etc. After overlaying the options against their desired lifestyle / goals / estimated life span, we were able to present the various results of taking the various options.
During this phase our portfolio analysis team analyzed their current holdings - particularly in Don’s 401k to answer his question about their risk levels. It was uncovered during our analysis that Don’s holdings were still 90% equity, it was determined that this was an election he had made at a much younger age and never adjusted. Our portfolio management team showed the benefits of rolling over the 401k into an Rollover IRA, and that with open architecture his goals could be achieved with a much more Conservative risk profile.
During this phase of our process we evaluated the various college planning instruments. Peggy & Don had expressed their desire to help their grandchildren with college tuition costs. It was discovered through conversation that the grandchildren’s parents had already adequately funded 529 plans. In order to avoid overfunding of 529 plans and to increase flexibility for the grandchildren Peggy elected to open and contribute to UTMA accounts.
Commitment - Knowledge / Execution
After Clarity and Conviction, Peggy & Don moved forward confidently with the decision to retire.
Don Rolled over his 401k to an IRA account managed by Clearwater Capital Partners
Peggy, as custodian, opened UTMA accounts for her grandchildren which her and Don commit to each birthday.
Don elected to take a lump sum distribution for his pension based on the IRR solved for being much less than an expected portfolio.
The result
Don & Peggy engaged Clearwater Capital with many questions, loose ends, and a lack of true clarity regarding their retirement viability. Today, they are committed to a financial plan