REAL CASES

BUSINESS OWNER

RETIRED COUPLE

TEACHER

GENERATIONS OF A FAMILY

SUCCESSFUL SALESMAN
Rod and Maggie May* were referred to us by a good friend and local CPA in town. They are a great couple that had made good-solid incomes during their working years, but they were not big, six-figure earners. Instead, they were magnificent savers. They had just retired in their late 60's and they had over $1.4 million dollars in a mix of retirement and brokerage accounts. 

They wanted to know what their retirement income could be....and how to create it. Oh, and Rod had just been diagnosed with Alzheimer's.

What We Did

Retirement is challenging because, outside of Social Security, investment returns are usually the only source of income. Because of that reality, it is incredibly important to understand how well your income needs from a portfolio impact the portfolio's ability to create an income over the length of your life, particularly given the very real possibility of bear markets and medical expenses. In the May's case, they were worried about their ability to pay for Rod's Alzheimer's costs, given that nursing homes charge approximately $70,000 per year for care. 
  • Insurance - Because of Donald's Alzheimer's diagnosis, purchasing long-term care insurance was not an option. He did have life insurance though, and because many of today's life insurance products have long-term care insurance-like riders, we reviewed his life insurance policies to see if those benefits were available. Unfortunately, they were not. At that point, we had a health insurance expert evaluate the coverage the May's had through Medicare and a Medicare Supplement to verify that it was appropriate to their needs, even though long-term care insurance benefits are only narrowly available in health insurance policies. Weaknesses were found and changes were made to the Medicare Supplement policy to improve their coverage. 
  • Cash Flow & Investments - We then modeled their need for income against their then current investment structure. We immediately saw inefficiencies in the way the portfolios of the different accounts were constructed (e.g. tax-free bonds in tax deferred accounts; low-yield bonds in long-term Roth IRA accounts; actively managed investments in taxable accounts). We also stress-tested the cash-flow model in different scenarios. It's one thing to look into the future and assume that everything is going to be rosy. It is quite another when looking at a situation and asking, "What happens if one of the proverbial wheels comes off?" When we modeled the May's need for income, combined with a $70,000 per year uninsured medical expense - further combined with a few years of bear market returns - the situation looked dire. As a result of those issues, we restructured their investments to create better tax benefits, to generate a better risk-adjusted return on their investments, and to create a cushion in down market periods. We also explained, because long-term care expenses are deductible when their costs exceed a certain threshold of income, that using IRA money to create income when Rod does incur those long-term care expenses is the best financial approach to employ. That approach saved them a lot of money in taxes. 
  • Estate Planning - We organized a meeting with an attorney skilled in estate planning and had Rod and Maggie execute their Wills, a general power of attorney (gives broad power over financial affairs to someone else), and a medical power of attorney (giving someone else authority to make medical decisions for you if you cannot do it for yourself). We also updated beneficiaries on their life insurance policies, retirement accounts, and their taxable accounts. 

Contact us if we can be of help. 

* Ron and Maggie May are fictional names for real clients.  ​
Strategic Wealth, LLC | 5957 Shiloh Rd, Suite 114 | Alpharetta, GA 30005 | (678) 456-5060