Case Study

Almost Retired

This is a real world case study of a Guide Wealth Management relationship.  Every situation is unique, requiring tailored services.  To learn more about how we could work together, please contact us for an initial conversation.

Executive Summary of Planning Techniques


Social Security Timing Analysis


Donor Advised Funds


Capital Loss Harvesting


Pension Analysis


Windfall Elimination Provision


Retirement Cash Flow Analysis

Establishing the Client Relationship and Initial Actions​

Our clients came to us in Q4 with​ ​the​ ​goal of retiring within two years.  Peter has a job with the city, and his wife Lisa is a home-maker.  Like many long term savers, they had assets in various 401(k), 403(b), IRA and brokerage accounts.  Full retirement age for Social Security was coming soon, as was a decision about how to collect a pension provided by the city.

As is often the case, our clients had accounts with several different​ ​financial​​ ​institutions.  What they noticed ​immediately was that Guide takes in the whole picture, whereas in the past advisors from their banks and brokerage firms had been very focused viewing movement and allocation solely within in-house accounts. This change in paradigm is hugely important for the clients​.  For example, we found that all financial plans previously created had ignored the cash flow from Social Security and the private pension.  By excluding these cash flows, the plans’ projected returns from the assets was a lot higher than was truly necessary, with the proposed investments exposing the clients to more risk than was needed.

As the clients​​ ​joined us in Q4, with December drawing close, we looked through tax projections for the year based upon income and capital gains.  It was clear that due to certain capital gain transactions within the year taxes would be high, and we took the opportunity to analyze appreciated assets to determine what best to donate to a Donor Advised Fund. These funds allow fund owners to take a large charitable deduction in the present year, and then to elect, in future years, where to designate monies from that donation.  Guide implemented tax lot selecting to elect the most highly appreciated assets for the donation, maximizing the value of the technique.

In addition to identifying the best assets to donate​​ ​we found several funds that were suitable for tax loss harvesting, which not only reduced the overall client exposure to high cost funds, but also allowed us to further reduce the taxes due for the clients. We’re off to a great start, having already saved our clients more than their fee before even getting into the big picture items


Retirement Cash Flow Analysis

Our next task was to explore how much income in retirement would be needed to meet desired goals.  To do this we took data from a budget as expenses, added on taxes from income, dividends and capital gains, and matched that up to future cash flows.

The first element to explore was the​ ​p​rivate ​p​ension, which came with 14 different possible ​annnuitization elections, from taking a lump sum payment to sole life, survivorship, and various period-certain choices. Using account authorization, we spoke with the pension company on behalf of Peter and​ established the value of each option, modeled this into a presentation and explained the choices available.  It turned out that the value of this pension was considerably larger than what the clients​ had first thought, and with proper annnuitization would take​ care of a large amount of future needs.

Pension analysis complete, we moved on to examine Social Security.  This task was complicated because it required an additional exploration of potential Windfall Elimination Provision (WEP) impact which may come into play when an individual has a private pension via a ​city or state.  In order to explore potential WEP exposure we examined Social Security contribution statements and Medicare payments for any indication that it might come into play.  After determining that Peter would not be subjected to WEP, we moved onto a Social Security timing analysis. Due to recent changes in file and suspend strategies it was determined that an earlier than full retirement age application for Lisa, coupled with a restricted application for Peter, who would defer his own payments until age 70 for maximum gain, was the best financial strategy for the couple.


Next Steps

Moving forward​,​ we will be using the knowledge gained to date to implement tax efficient savings and wealth transfers.  Key considerations will be migrating from high cost mutual funds to low cost, and more efficient ETFs, and asset location decisions to reduce income tax.  Estate planning strategies​ to​ be explored during ​the next quarter​ include asset titling to bypass state tax limitations as well as implementing Stretch IRAs. The clients have recommended Guide to colleagues and, at our last meeting, they advised us that they look forward to a long-term relationship with our firm.

Let’s Talk

Guide Wealth Management is a Fee Only Wealth Management firm.  We focus on helping individuals achieve their unique goals from life, and would love to talk with you about your financial questions.  An initial conversation to discuss fit and share ideas is free, and without obligation. So let’s talk.