This week we completed an analysis for a husband and wife
who were referred to us by one of our best clients. After checking with our references, they
hired us to help them manage their retirement portfolio, but more importantly
to help them determine if the husband could afford to retire. The wife was retired and wanted her husband
to retire from the University of Michigan where he had worked for almost thirty
years. They wanted to spend more time
each year traveling and living outside the U.S.
The bulk of their retirement assets were in the University of Michigan
Fidelity and TIAA-CREF retirement plans.
They were very diligent about saving for retirement and budgeting,
however, they did not have confidence that they could achieve their income and
travel goals if he retired, or at least not for very long. This is a very common client concern we see
over and over again. Luckily, our
analysis opened their eyes to several factors they did not consider in theirs,
such as the effect of inflation and perhaps easing into retirement over the
next several years. We were able to help
them tweak their budget and make them more comfortable with their retirement
income number and the probability of achieving their goals. It is critical that future inflation is taken
into consideration when we are doing retirement income projections. In addition, many clients are tied to this
idea of not spending any principal. In
reality, most clients will spend some principal in certain years while in
retirement. The current rule of thumb in financial planning is that a client
with a well-balanced stock and bond portfolio can safely spend approximately
4.50% of the portfolio each year without depleting principal over time. Again, this is just a rule of thumb; however,
we have personally witnessed this work for clients. When you are using an annual percentage
spending goal as opposed to a fixed amount, you are leaving more principal to work and compound during the good years and taking less in
bad years.
I hope that you are doing well! We just FINALLY completed the settlement of a case for a minor (age 17) that we were initially engaged by our plaintiff attorney client in February 2021, to provide structured settlement annuity quotes! Although the claimant was very close to the age of majority the key to the case was not giving him all of the settlement proceeds, which was over $120,000, at age 18. Having been in this business for over 20 years I cannot tell you the number of sad cases we have witnessed where the young claimant receives their settlement proceeds at age 18 only to blow through all the funds before anyone can blink and make bad decisions with the proceeds! This case involved two liability insurance carriers Liberty Mutual and Member Select. We coordinated multiple rounds of document revisions and had to have a separate set of different documents for each insurance carrier. In addition, one of the carriers would not fund the annuity until we had a fully executed court ord