James had been a saver for his entire adult life and was proud of the fact that he had accumulated his retirement nest egg by following the financial ‘rules of the game.’ He and his wife, Irene, had saved the $3 million their advisors said was the amount they needed to finally retire and pursue other interests.
Everything was fine… until James made a startling revelation.
He was looking over his finances and realized that soon he wasn’t going to be receiving a paycheck anymore; he would be living off his portfolio.
His $3 million nest egg was invested in two IRAs that had been rolled over from different employers’ 401(k) plans, a ROTH IRA that he had started six years ago, Irene’s IRA from when she was working as a real estate broker, and a small inherited IRA from his father-in-law’s estate. In addition, he and Irene had their own brokerage accounts and a joint account… and Irene had a special brokerage account left to her by her deceased father. How in the world had they accumulated nine different investment accounts?
James knew he needed $12,000 per month on top of his social security to sustain the retirement lifestyle that he and Irene were looking forward to. But where should the money come from? His tax situation was about to improve dramatically as he began to live off his portfolio, but his deferred comp would be taxed, as would withdrawals from his IRA accounts. Not only was he baffled by the complexity of his changing tax situation, but he began to question whether his long-time investment strategy still made sense once he retired. After all, it took years for his portfolio values to recover from past bear markets. What will happen when the next bear market hits now that they depend on those assets for their monthly income?
He felt betrayed.
After years of careful planning, they had saved the amount of money they needed to retire. Unfortunately, no one told them how difficult it was to figure out what to do next.
Having been in the financial industry for over 30 years, I’ve heard this story over and over. My response is always the same: Call us and we can help you.
You see, a Pinnacle advisor would introduce James and Irene to our onPoint retirement solution, which would give them…
- A plan for withdrawing money from their different accounts that minimizes the taxes they would pay as their tax situation changes dramatically over the next few years.
- An annual review of the tax impact of each of the securities they own so that the securities that generate the most taxable income are held in the tax deferred accounts (like their IRA accounts).
- A safe amount of cash to withdraw from their portfolio to accommodate the possibility of future market volatility.
- A choice of three different risk-managed portfolio strategies that offer different (but sensible) approaches to managing portfolio volatility in bear markets.
- A method of coordinating all of their accounts so that they can invest in the Pinnacle risk-managed portfolio without buying the same securities in different accounts. (This cross-account rebalancing could potentially reduce the number of transactions in their portfolio).
- A method for evaluating the returns and risk of their portfolio on an ongoing basis so that they can be better consumers of investment management and have more control over their financial plan.
- A strategy for maximizing social security benefits in the future that is coordinated with the rest of their financial planning concerns.
With Pinnacle, Jim and Irene would have a plan that is flexible enough to change along with their needs as they grow older. And they would have a relationship with a trusted financial advisor who is an expert in dealing with the planning and investment issues they’ll encounter once Jim actually retires.
If you are approaching your retirement or have recently retired, you might benefit from this as well. Check out Pinnacle’s onPoint “Retired” Plan services for more information.
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