Client: Marsha, age 50
Net Worth: $250,000
Children: One child who is a sophomore in college
Situation: Marsha is divorced. She would like to stop working full-time by age 60 and perhaps do some per-diem work until age 65. She doesn’t have a pension and will have to rely solely on her savings and Social Security to support herself. She is a novice when it comes to managing her investments and needs a lot of education and direction. Currently invests 10% of her salary into her 403b plan. Marsha doesn’t live extravagantly now. In fact, she always works within her budget and pays off her credit cards every month.
We began our first meeting with Marsha by taking an inventory of her assets and liabilities. We determined where she is now and where she wanted be in the future. Marsha provided us with copies of her previous tax returns, employee benefits booklet, investment statements and estate planning documents for review. We also did a cash-flow analysis for current and future expenditures.
Since the majority of Marsha’s money is in her 403b plan at work, we discussed many ideas including but not limited to: investing more aggressively, saving more of her salary, and expanding her investment options and lowering her investment costs by completing a 90-24 transfer to another custodian.
A 90-24 transfer allows participants in 403(b) plans to directly transfer employee-contributed plan values to other 403(b) plans while continuing to fund their current programs. We explained how Marsha could do this without terminating employment, without owing taxes, and without incurring any early withdrawal penalties. This strategy increased her available investment choices dramatically and lowered her investment expenses by 50%, a cost savings of $3,500+ per year.
We prepared numerous projections for Marsha which illustrated what her portfolio could potentially grow to by certain ages. Additionally, we illustrated how much she could take out each month and showed her the probability of her never running out of money. We discussed at length how her Social Security income and portfolio income may not be enough for her to maintain her standard of living. The outcome of these talks is that Marsha will reduce her living expenses now and save the difference. She also will likely continue to work full-time to age 62 and will consider working per-diem to age 67 or age 68.
Marsha is also contemplating going back to school so when she retires she may be able to teach. Teaching has always been a dream of hers. Marsha has also updated her estate planning documents since the divorce and renamed beneficiaries and contingent beneficiaries on her 403b as a result of our counsel. Marsha has also met with our long-term care strategist and has invested in a plan that will protect her assets in the event of a medical, nursing or home care issue.
Marsha finally feels she has things under control and always comments on how her “ducks are in a row”. It is our pleasure assisting her.
*Names and some details have been changed to protect client confidentiality.