Case Study: Charles and Maxine – Nearing Retirement

While each family’s financial situation is unique, you likely share many of the same challenges as others we’ve helped. The following case study illustrates how we help clients develop and implement solutions unique to their situation.

Ready to retire soon, but do they have enough?

Photo by justinbaederBackground

Charles (60) and Maxine (59) have been married over 30 years and have three grown children and four grandchildren.  Charles is a geologist for an oil company, where he spent most of his career.  After playing the role of homemaker during their child-rearing years, Maxine worked at a child-care center for 15 years and now volunteers her time at a number of local charities.  They have over $1 million of investment assets spread over multiple accounts, Charles will be eligible for a pension, and both will be eligible for Social Security.  Charles would like to retire next year and they would like to move away from the city and build a large retirement home on a piece of land they own near Hocking Hills, Ohio.  Their questions for us were:

  • Can they afford to have Charles retire in next year?
  • Can they afford to build their dream retirement home?
  • Should Charles opt for the full pension or take the optional lump-sum payout?
  • Is their portfolio appropriate for their situation?
  • When should they begin Social Security?

How did they go about hiring Accountable Financial Planning LLC?

After discussing their unique situation and goals with Andy Kerns, CFP ® during a free initial consultation, it was agreed that a one-year retainer service agreement with Accountable Financial Planning LLC would provide them with the best value.  Soon after the initial consultation, Andy followed up by sending them a retainer contract to review and a list of information for them to gather.  A week later, they had signed the contract, gathered the requested information, paid a portion of the retainer fee, and scheduled the first of a series of meetings with Andy.

How did Accountable Financial Planning Help?

  • Increased Financial Awareness
    • We developed a balance sheet, listing their assets, liabilities, and net worth.  Since Charles had been in charge of the investments and other financial matters, it was enlightening for Maxine to see the numbers summarized on paper.
    • With Charles and Maxine’s input, we developed a cash-flow statement, showing how their income was being consumed and saved.
  • Prioritized Goals
    • Through discussions with Charles and Maxine, it was determined that building the retirement home was their most important goal, followed by living a comfortable lifestyle during retirement (with increased travel), retiring as soon as possible, and, lastly, leaving an inheritance to their children and/or grandchildren.
  • Developed a Plan for Achieving Short and Long-term Financial Goals
    • We prepared a retirement cash-flow projection to determine what their basic living expenses would be like in retirement.We prepared several retirement projections using goal-based financial planning software to determine how all the variables that were in play (including retirement date, cost of new home, retirement living expenses, future health care costs, etc) would impact their ability to achieve their goals.
    • After reviewing the projections and having a lengthy discussion, we agreed that it would be best for Charles to plan to continue working for another three years.
    • We put a plan in place to have sufficient cash available for the construction of their new home in Hocking Hills, expected to begin in less than 2 years.
    • We has them set aside cash for a badly needed replacement vehicle for Maxine.
  • Optimized Pension and Social Security Benefits
    • We analyzed their Social Security benefit situation and discussed the pros and cons of the various options.  We recommended a strategy for when and how they should begin receiving their benefits.
    • We reviewed the lump sum payout option for Charles’s pension and obtained highly competitive immediate annuity quotes in the private market for comparison purposes.  Based on our findings, we concluded that (currently) Charles could increase his lifetime monthly income by over 10% by taking the lump-sum payout and purchasing an immediate annuity in the private market vs. taking the pension payout offered by his company.  We will plan to revisit this issue when Charles gets closer to retirement.
  • Reduced Investment Eexpenses
    • We reviewed Charles’s 401k plan investment options and determined that he could improve diversification and lower his investment costs if he utilized the brokerage option that was available inside his 401k.
    • Charles and Maxine were persuaded into investing several hundred thousand dollars into three different variable annuity contracts.  The contracts all had very high internal costs (total fees ranging from 2.5% – 3.5%).  We helped them analyze the pros and cons of surrendering the policies and eventually helped them get out of the contracts and move forward with much lower-cost, tax-efficient investment vehicles.
  • Optimized Portfolio Strategies
    • We created a snapshot of their overall investment portfolio and determined that they had very little diversification even though they owned numerous funds between their various accounts.
    • Based on their risk tolerance and retirement time horizon, we agreed that they should begin to move towards a more conservative portfolio.
    • We developed a highly diversified target portfolio based on their unique situation and made specific investment recommendations for their various accounts, improving their overall diversification and income tax efficiency.
  • Eliminated Unnecessary Insurance Costs
    • We conducted an analysis and agreed that they no longer needed the term life insurance policy that they had in place on Charles, so they dropped the policy and saved the premium expense.
    • We reviewed their home, auto, and liability policies and made recommendations for modifications to their current coverage.  We obtained quotes from other quality carriers to compare costs.  In the end, they switched carriers because they could obtain better coverage for significantly less cost than they were currently paying.
  • Helped Plan for the Unexpected
    • We reviewed their current estate planning documents and, through discussions with Charles and Maxine, determined that they were out-dated and no longer reflected their current wishes.
    • We helped them engage a local estate planning attorney who was able to help them execute new documents that would allow their wishes to be carried out and would create less of a burden on those tasked with settling their estate when they pass.
    • We reviewed their beneficiary designations and helped make the changes necessary to properly coordinate with their new estate planning documents.

How is Accountable Financial Planning LLC helping now?

Charles and Maxine have renewed their retainer agreement each year with Accountable Financial Planning LLC.  They realize the value that this relationship provides and appreciate having an advisor they know they can trust and who can offer insight and guidance on all kinds of financial issues that arise during the course of life.  We have a scheduled financial plan review meeting once per year and conduct scheduled portfolio reviews twice per year.  During tax season, we help gather financial information required for the preparation of their income tax returns and are available to help review the return if needed.  We are available at any-time during the year to help with other financial issues that arise.


This Case Study is hypothetical in nature and is not intended to be a testimonial or endorsement of Accountable Financial Planning LLC. The scenario presented is intended to illustrate services available at Accountable Financial Planning LLC, but does not necessarily represent the results or experience of actual clients. The strategies discussed are not appropriate for everyone and should not be considered investment or tax advice. Clients should review their unique situation and financial needs with a qualified advisor and inquire about the various benefits and risks involved with specific services and strategies.