Goal
Harry has had a long and distinguished career. He was hoping to retire the year he turned 62 – a year from now. He greatly enjoyed his position, his colleagues, and the career, but both he and his wife Sally felt that it was time for new adventures. They wanted to explore if retirement and the new life they hoped for was financially feasible in the next year.
As part of their plan they had a comprehensive asset allocation and diversification plan for their overall investment portfolio, which they planned to implement and have managed by the DKGB Financial Team.
Their Financial Lives
Harry and Sally had been money-wise and their nest egg is.
- Donna 401k valued at $500,000
- Dennis 401k valued at $500,000
- Donna Qualified Stock Grants, $250,000
- Joint savings $750,000
Their Questions and Concerns
After completing a comprehensive retirement plan they needed help with their investments in the following area’s:
- They want their investments managed by a professional.
- How do they move their accounts.
- Will the investments earn enough to keep pace with our spending.
- What are the tax consequences of our stock grants.
- Should we keep a large amount in our bank savings.
The Outcome
The DKGB Financial Team took Harry and Sally through comprehensive risk tolerance analytics. Determined that their risk tolerance was Moderate and came up with the following investment and cash management plan.
- Open 2 managed IRA’s, one for Harry’s 401K and one for Sally’s 401K. Invested in a moderate risk diversified portfolio that would produce investment income of 3% to meet their income needs. The portfolio is also designed to grow above inflation over the long term.
- Sally’s stock grants are subject to capital gains tax from the price of the grant to the value it sold at. Having $250,000 in one company is too concentrated and risky for a retirement investment. We came up with a plan to sell the stock over time so not to incur the capital gains tax all at once and to coordinate with their other income sources in retirement.
- Opened a Joint account to invest $500,000 of their savings into a low risk fixed income portfolio with government bonds, CD’s, and alternative income investments. This portfolio is designed to produce income of 5% annually to supplement their income needs.
- Suggested they keep $250,000 in their bank savings and to ladder CD’s to improve the return over the savings rate offered by their bank
This example is hypothetical only, and does not represent the actual performance of any particular investments. Investments in securities do not offer a fixed rate of return. Principal, yield and/or share price will fluctuate with changes in market conditions and when sold or redeemed, you may receive more or less than originally invested.