Case Study: Retirees

Case Study: Retirees

Joseph and Nancy

Preparing for Retirement

Case Study: Joseph and Nancy are 63 and 62 respectively, with three children that are now independent and starting families of their own. Joseph works for a local utility company, and Nancy would like to quit her career as a scientist to launch an art studio.

Their Goals

Joseph and Nancy are considering retiring in 18 months. Their priority is 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 Joseph’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.

Case Study: Retirees

Resources & Facts

  • Joseph and Nancy have a combined 401(k)/403(b) balance of $1.1MM and several brokerage accounts with a combined balance of $840K located at five different investment firms.
  • They have no discernable investment strategy. Their primary home is worth $735K, with a mortgage balance of $265K.
  • Joseph’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 (Joseph) and $3,100 (Nancy).
  • 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 six primary scenarios that explored different retirement dates, whether or not to annuitize Joseph’s pension, and when Joseph and Nancy should file for Social Security

In the end, we recommended that Joseph and Nancy can safely retire on schedule, where Nancy can establish her art studio. We also determined that Joseph should keep the annuity than opt for the tax-deferred cash balance. We recommended that he annuitize the pension at the age of 66 with the single-life option. Joseph and Nancy should also file for Social Security at the age of 66 (FRA) to relieve their liquid assets’ projected withdrawal rate strain.

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 lower portfolio withdrawals rate allows for a larger legacy that they can leave for their children, one of their key goals.

Joseph and Nancy should:

  • consolidate their assets at Bull Oak Capital and invest in our Moderate Strategy
  • annuitize Joseph’s pension with the single-life option once he turns 66
  • file for Social Security at 66
  • keep primary home to keep costs lower during retirement