We recently had the opportunity to start working with a new family. This couple has three children and a goal to retire in 17 years. They have done well in saving for retirement, but were concerned that their current portfolio wasn’t positioned to meet their goals not was a comprehensive financial plan ever completed.
After completing our deep discovery of this family, we developed a Financial Life Plan to meet their goals. The financial life plan allowed us to plan for additional goals such as a wedding in 2020, travel and vacations, a second home in the southern states, and healthcare in retirement.
In development of their financial life plan we learned they have a higher risk tolerance and longer time horizon than how their funds were invested. We also learned that the current portfolio was overweight in various sectors of the market and also overweight in international investments and needed to be adjusted.
As we continued the plan, we learned that their current advisor had them invested in a non-resident 529 education savings plan instead of the client’s state of residency 529 plan. This was important in that contributions to the 529 plan sponsored by the client’s state of residence are state tax deductible.
We also noted that their pension account was invested in a conservative investment allocation rather than a variable allocation that has more growth potential.
As we reviewed their tax return, we noted that they were in a higher tax bracket and through the Financial Life Plan we were able to determine their tax rate would reduce in retirement. They were contributing after-tax investments into Roth IRA accounts when it would have been more beneficial to invest in a pre-tax IRA or 401(k) plan.
Our final discovery was that both the husband and wife were underinsured and at risk if there was an unexpected death.
By addressing all these concerns, we were able to develop a Financial Life Plan that provided a high probability of success in retirement.
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The above example is provided for illustrative purposes only. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Investing involves risk and you may incur a profit or loss regardless of strategy selected.
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