Are you wanting to retire within the next 5 years and wondering how you should prepare? Getting ready to do something for the first time is never easy. It takes a lot of preparation, a bit of courage, and often, someone to help you along the way. We help build your financial plan and the investment strategy to transition into the next phase of life, with continual guidance on your journey.
The Wilsons, Bill (a physician) and Mary (a non-profit volunteer), are finally empty nesters, with their three children graduated from college and in the workforce. At ages 60 and 61, Bill has always intended to work to his late 60s but sometimes, after a long day at the clinic, he wonders “Could I retire earlier?”
The APC Way
The transition into retirement is like landing an airplane. Prior to the touch-down, the pilots go through a preparation checklist. What are the weather conditions? Is the cabin secured and locked down? Is the airport tower ready for our arrival? Is the ground crew ready for the next part of the journey? We get to know you, to understand your needs, wants, and wishes. Then we can analytically compare your goals and priorities to your financial resources to arrive at a financial plan that works for you.
If Bill were to retire early, Mary is concerned about their access to health insurance. He has high blood pressure and she is a 4-year breast cancer survivor. Despite their health challenges, both Bill and Mary come from long-lived families. Mary and her sister share responsibility for their 87-year-old mother who lives in an assisted living facility.
The APC Way
Real financial planning is about real people’s needs. While our work has a keen focus on retirement and investment planning; for the Wilsons we also worked with an independent consultant to analyze their potential health insurance options. Note: we also worked with their tax adviser to improve their tax planning, and we joined meetings with their attorney to update their estate plan.
Both Wilsons think they could spend less after retirement but neither keeps track of their current spending; there’s always been enough cash flow to do what they want. Bill is ready to adjust their spending to increase their savings in a final push to build wealth.
The APC Way
We helped the Wilsons put a number on retirement independence – they were able to answer the questions: “How much will be enough?” and “How long does our wealth need to last?” APC identified the priority order to tap retirement income sources; we modeled the ideal Social Security claiming strategy and how their income taxes would change after retirement; and we helped them decide whether or not they should pay off the mortgage before retirement.
Although they have accumulated an impressive investment portfolio, it is scattered among various accounts, and several financial advisors, and still lacks overall coordination. Bill is more aggressive than Mary — the stock market’s volatility unnerves her and she would be more comfortable with a conservative strategy.
The APC Way
Approaching retirement is a logical time to review and re-assess your investment strategy, particularly your risk tolerance. In these years leading up to retirement, we helped the Wilsons gradually downshift their market risk exposure and raise their conservative assets in what we call “income buckets.” Now, we proactively monitor and manage their investment portfolio: the asset allocation in diversified asset classes, quality and cost of specific investments, and portfolio tax efficiency
Mary is excited and over-joyed in anticipation of their first grandchild’s birth next month. Bill has always wanted to travel internationally. Until his age 7, his family was missionaries in Peru. Every other year, he has returned to South America on medical missions.
The APC Way
In preparing for retirement, it is important to retire “to” something not just “from” something. We took the Wilsons through several exercises that helped them identify and prioritize how they will live during (what could be a long) retirement, including hobbies, part-time work, fitness, volunteering, travel, and simply spending more time with their family. Part of our role as financial planners is to help you use the resources you have to live the life you want!
After going through APC’s financial planning process, the Wilsons said they felt “a peace” about their finances and they felt freedom to continue working or to take a leap toward early retirement.