Beth was a retired corporate executive who needed to simplify her finances, lower her tax bill, and create an estate plan for her family.
When we first met Beth, she already had substantial assets, but 20% were in cash. She also had three brokerage accounts and five IRAs, with multiple institutions in multiple states, and numerous allocation redundancies and tax liabilities. She was a retired corporate executive who was five years away from Medicare, and was receiving medical coverage through subsidies from her pension plan, which was about to run out. Beth had been managing her planning and investments herself as a way to save money, but after a health scare, she realized that her finances were more than she wanted to handle. Our fiduciary approach and her desire to have a trusted advisor take the wheel aligned well. After we had gone through the discovery process and got to know each other, she hired us.
Our first step was understanding how Beth wanted to spend her retirement, and what she wanted to do with the assets that would be left over. We then helped her define and set her specific goals, which were to ensure she would have income for life, lower her tax liability, and create a giving strategy for her family and favorite charities. We collected and organized the data from her accounts, and developed a step-by-step plan to consolidate her assets, structure her holdings to minimize her taxes, and provide a cash management plan that put her firmly in control.
To create a spending plan that supported her goals, we conducted a needs analysis to determine how much money her lifestyle would require when her pension ran out. We then worked with her accountant to determine her income and capital gains tax exposure, and developed a Roth conversation plan to limit her tax liability and move her traditional IRAs to tax-free Roth accounts. By converting her standard IRAs to Roths over a period of 10 years, we were able to lower her marginal tax rate in retirement, saving her over $100,000 in taxes and eliminating the headache of numerous RMDs.
To simplify her holdings and reduce her administrative fees, we consolidated her taxable investment accounts, eliminating redundant positions and replacing asset class exposure with lower cost alternatives. Through a managed approach of rebalancing and tax-loss harvesting, we were able to maintain the monthly deposits she lived off when her pension ended while avoiding capital gains. We also worked with Beth to create an estate plan that would benefit her children, nieces, and nephews, and the charities she wished to support. After reviewing her estate documents with her, we worked with her attorney to update her beneficiaries and her will to reflect her current wishes. We also helped her set up a donor advised fund to ensure the charities that meant so much to her would be supported as part of her legacy.
Today, Beth’s idle cash has been put to work converting IRA accounts to tax-free Roth IRAs, and funding her grandchildren’s 529 plans and her donor advised fund. And by consolidating and coordinating her investment assets, she was relieved to learn that she didn’t have to take as much stock market risk as she thought. Best of all, she is worry free. With monthly deposits going straight into Beth’s bank account, it’s like her paychecks never ended, and she has peace of mind knowing her estate plan will support the family members and charitable causes she loves.