How We Helped a Client Prepare for Retirement

By Net Worth Advisory Group

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If you’ve never worked with a financial advisor before, you may be wondering what they can do to improve your financial life and your chances for a worry-free retirement. Every once in a while, we like to profile actual clients whom we’ve helped through our retirement planning process. We hope you’ll find value in seeing the details of a client of ours who’s just like you—planning ahead for retirement—and how we worked together for a better future. 

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John Jones (1) was ready to start getting serious about his retirement planning when he came to Net Worth Advisory Group about eight years ago, at the age of 54. A successful professional, he knew the value of saving money throughout his career and was lucky enough to have solid employer benefits. Now retired for three years, Mr. Jones and his wife are empty nesters with four adult children. Let’s dive deep into their situation and how we were able to help them enjoy the retirement of their dreams. 

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The Joneses’ Challenges in Preparing for Retirement

When we began working with the Jones family, they had a retirement nest egg of over $1 million mostly in pre-tax money. They came to our firm hoping to be able to retire before the age of 60. What they didn’t know, though, was how much money they’d be able to withdraw each year during retirement. Although in a good spot financially, with retirement drawing closer, they faced the challenge of their tax obligation being higher than necessary. 

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With a portion of their retirement savings in taxable investment vehicles, they were paying a lot in capital gains taxes each year, some of which were short-term gains being taxed at a high rate. They had well over six figures in cash in the bank, which meant they were losing a big opportunity to grow their wealth through an investment that could bring them a higher rate of return. 

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They were also wondering what their Social Security strategy should be, knowing there were ways to make their withdrawals more optimal but unsure which option to take. Along those same lines, they were seeking guidance on how to fund their health insurance during the time period between retirement beginning and age 65 when they would begin receiving Medicare. In addition, they wanted to know if they should continue their current life insurance policy or not during retirement. 

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How Net Worth Advisory Group Responded

We could see the Jones family was not taking the best advantage of tax strategies regarding their retirement savings. We began helping them calculate and facilitate Roth conversions so they’ll owe taxes on the converted amount but not on qualified withdrawals from the Roth during retirement. This conversion also reduces future required minimum distributions (RMDs). 

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If the Jones family initially lived off their taxable retirement assets in retirement, they would be in a lower tax bracket, which is a money saver, and they’ll be able to convert pre-tax retirement money at a low tax rate. 

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As we took over the management of their investment portfolio, we helped transition their taxable accounts into more tax-efficient investments to reduce their capital gains tax. We also began to implement tax-loss harvesting for these accounts every year to reduce their capital gains. 

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Currently living on $120,000 a year, we ran multiple scenarios in order to plan for how much money the Joneses would be able to safely withdraw each year to live on during retirement. Yearly we evaluate their spending and make any necessary tweaks. 

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Since the Jones family had too much cash in the bank, we suggested putting a good portion of that money in another direction. Instead of having their money sit earning almost no return, we invested it; in the past eight years their money has increased at a healthy average rate of return. 

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Regarding the question of when to take Social Security benefits, we conducted several evaluations. We concluded it would be best to defer their benefits so they could obtain higher benefits later. This tactic allowed them to implement tax strategies, like the Roth conversions, earlier in their retirement. 

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Budgeting for the Joneses’ health insurance between their current age and age 65 (when Medicare would begin), we were able to reassure them there would be no surprises along the way, and they were fully prepared with healthcare coverage during that gap period.

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Together, we concluded, after running various models, that they no longer needed to carry life insurance. Eliminating this expense also decreased their expenses during retirement; instead, they could invest the premium amounts and watch their money grow.

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We Can Help You Too

After reading this case study, you can probably see (if you weren’t already aware) that planning for retirement is a complex process. We strongly believe that bringing a professional financial advisor on board in the years leading up to retirement is an investment in your future. 

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Net Worth Advisory Group has helped many families just like we helped the Joneses, and we’re here to help you pursue the retirement of your dreams as well. Call us at 801-566-6639 or schedule a complimentary, no-obligation consultation to see if we are a good fit to partner on your financial journey.

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About Net Worth Advisory Group

Founded in 2003, Net Worth Advisory is an independent, fee-only, CERTIFIED FINANCIAL PLANNER™ and investment advisory firm located in Salt Lake City, Utah. We specialize in helping people transition from the workplace into retirement, and ensuring that those who are already retired will not outlive their nest egg. Our top priority is to have clients experience a greater sense of ease with diligent, personalized wealth care and the implementation of customized financial plans and ongoing personalized asset management. We equip all clients with a comprehensive financial plan, meeting every six months to update as needed and review investment performance. Our team is passionate about providing comprehensive financial planning with the fee-only model, and we love feeling like we’re making a difference in our clients’ financial lives. 

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As a NAPFA-registered fee-only advisory firm, our recommendations are untainted by a hidden agenda to sell financial products paying large commissions. Unlike our competitors at brokerage firms, insurance companies, and banks, we are compensated solely by our clients, so we are financially motivated to provide objective advice that is always in our clients’ best interests. Anyone can call himself or herself a financial planner, but only an advisor with the CERTIFIED FINANCIAL PLANNER™ (CFP®) designation has met the education, examination, experience, and ethical requirements mandated by the CFP® board. Of the estimated 800,000 financial advisors in the U.S., only 55,000 have earned the CFP® designation. All Net Worth advisors are either CFP® professionals or CFP® professionals in training.

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Net Worth Advisory’s mission is to significantly improve the lives of our clients by delivering exemplary financial planning and wealth management advice that enables them to live the lives they have imagined.

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(1) Name changed for confidentiality purposes