WHO WE SERVE – NEAR/AT RETIREES

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OVERVIEW & GOALS

retirees
Frank and Sara, 63 and 62 respectively, are considering retiring next year. They have three children that are now independent and starting families of their own. Frank works for a local utility company and Sara would like to quit her career as a scientist to launch her own art studio. Their primary goals are to ensure that their assets and entitlements are enough to fund a long retirement. Part of this is to determine whether or not to keep Frank’s pension and when to file for social security. Furthermore, they would like to explore the idea of downsizing their home. Finally, they would like to leave a legacy for their children.

RESOURCES & FACTS

Frank and Sara have a combined 401(k)/403(b) balance of $1.1MM and several brokerage accounts with a combined balance of $840K located at 5 different investment firms. They have no discernable investment strategy. Their primary home is worth $735K with a mortgage balance of $265K. Frank’s estimated pension benefit at the age of 65 is $5,600 per month and their estimated Social Security Income FRA benefit is estimated to be $2,900 (Frank) and $3,100 (Sara). They each have a term life insurance policy and an estate plan created 15 years ago.

OUR RECOMMENDATION

We recommended consolidating their assets here at Bull Oak Capital and to invest in the Moderate Strategy based on their risk tolerance. We ran 6 primary scenarios that explored different retirement dates, whether or not to annuitize Frank’s pension, and when Frank and Sara should file for Social Security. In the end, we recommended that Frank and Sara can safely retire in two years where Sara can establish her art studio. We also determined that it is better for Frank to keep the annuity, rather than to opt for the tax-deferred cash balance. We recommended that he annuitize the pension at the age of 66 with the single life option. Frank and Sara should also file for Social Security at the age of 66 (FRA) to help relieve the projected withdrawal rate strain on their liquid assets.
Due to the relatively low monthly cost of their primary home, we recommended that they not downsize their home as “downgrading” would result in a higher monthly out-of-pocket cost during retirement. Moreover, the smaller portfolio withdrawals rate allows for a larger legacy that they can leave for their children, one of their key goals.

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