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Financial Planning for Early Retirement
Mike & Brenda | Ages 57 &56
Mike and Brenda have spent alifetime building careers and raising a family in Southern California. After 32years of marriage, they share not only a deep bond but also a shared dream forthe future. Mike, a project manager who has devoted over three decades to theconstruction industry, and Brenda, a registered nurse of 28 years, have workedtirelessly to provide stability and opportunities for their threechildren—Holly, Grant, and Samantha.
Their Goals
Now, after years of hard work and commitment, they’re beginning to see their retirement on the horizon. In a perfect world, they’d like to retire in the next six years and spend their days enjoying the fruits of their labor. But Mike and Brenda’s vision of retirement comes with some heavy questions—and fears. Rising costs of elder care loom large in their minds, especially with Brenda’s mom currently in assisted living, an expense they help offset. Both have witnessed firsthand how healthcare costs can impact a family, and they wonder how they’ll manage if either of them faces health challenges down the road. They’re equally concerned with maintaining a lifestyle they love and even hope to assist their children with purchasing their first homes.
Then came a shift. Mike recently received a $500,000 inheritance following his father’s passing—a bittersweet gain that reminded him of life’s unexpected turns. With this sum, they knew they had to make the most of the opportunity, especially if they were to protect their family’s future.
Unsure of where to begin, they looked to trusted friends, Tony and Elsa, who shared how Willett Wealth Planning had guided them through similar uncertainties. Armed with a recommendation and the realization that they needed a seasoned guide, Mike and Brenda decided to reach out.
Financial House Components
As Mike and Brenda stand on the threshold of retirement, their financial world tells a story of years of hard work, steady growth, and a few untended corners waiting for careful planning.
They’ve built up a sturdy foundation in their bank savings, totaling $520,000—a reserve that gives them peace of mind as they imagine their future. Over the years, Mike has contributed faithfully to his 401(k), with a current balance of $100,000. He’s making the most of his employer’s matching program, setting aside 5% of his salary while his company meets him halfway. However, in the busyness of life, three older 401(k) accounts remain untouched, holding a combined $400,000—funds that have yet to be actively managed toward their retirement goals.
Brenda, with her dedication to patient care, has been growing her own nest egg through her hospital’s 403(b) plan, which now has a balance of $200,000. Like Mike, she contributes 5% of her salary, preparing for a retirement she hopes will include not only relaxation but also giving back to her family. Additionally, both Mike and Brenda have modest Roth IRAs—Mike with $25,000 and Brenda with $15,000—symbolizing years of saving, even with the ups and downs of life.
Their home, a cozy Southern California residence they purchased in 1998, reflects their journey and the love they’ve poured into it over the years. What once was a $350,000 investment is now a $1.9 million haven, a testament to how far they’ve come. Alongside it, their vacation cabin, bought in 2015 for $300,000 and now valued at $725,000, provides an escape to the mountains and a modest source of extra income when rented out on Airbnb.
Life’s costs are ever-present, though. They carry a $380,000 mortgage on their primary home and $320,000 on the cabin, both with 27 years remaining. But the vehicles they drive—the 2018 Toyota 4Runner and the 2021 Ford Explorer—are paid off, symbols of a lifetime of wise decisions.
With all these pieces, they now look to the future, hoping to transition from a life of earning to one of meaningful spending, family support, and memories made together. This is where their journey needs careful guidance to align their resources, their hopes, and a sustainable, secure retirement.
They’ve built up a sturdy foundation in their bank savings, totaling $520,000—a reserve that gives them peace of mind as they imagine their future. Over the years, Mike has contributed faithfully to his 401(k), with a current balance of $100,000. He’s making the most of his employer’s matching program, setting aside 5% of his salary while his company meets him halfway. However, in the busyness of life, three older 401(k) accounts remain untouched, holding a combined $400,000—funds that have yet to be actively managed toward their retirement goals.
Brenda, with her dedication to patient care, has been growing her own nest egg through her hospital’s 403(b) plan, which now has a balance of $200,000. Like Mike, she contributes 5% of her salary, preparing for a retirement she hopes will include not only relaxation but also giving back to her family. Additionally, both Mike and Brenda have modest Roth IRAs—Mike with $25,000 and Brenda with $15,000—symbolizing years of saving, even with the ups and downs of life.
Their home, a cozy Southern California residence they purchased in 1998, reflects their journey and the love they’ve poured into it over the years. What once was a $350,000 investment is now a $1.9 million haven, a testament to how far they’ve come. Alongside it, their vacation cabin, bought in 2015 for $300,000 and now valued at $725,000, provides an escape to the mountains and a modest source of extra income when rented out on Airbnb.
Life’s costs are ever-present, though. They carry a $380,000 mortgage on their primary home and $320,000 on the cabin, both with 27 years remaining. But the vehicles they drive—the 2018 Toyota 4Runner and the 2021 Ford Explorer—are paid off, symbols of a lifetime of wise decisions.
With all these pieces, they now look to the future, hoping to transition from a life of earning to one of meaningful spending, family support, and memories made together. This is where their journey needs careful guidance to align their resources, their hopes, and a sustainable, secure retirement.
Their Approach and Roadmap
Mike and Brenda sat down with our team, feeling the weight of decisions ahead. They knew they needed a roadmap but feared they might overlook something essential. Without careful planning, their dream retirement and the legacy they hoped to leave their children could be at risk. So, together, we crafted a financial forecast that laid out their hypothetical future, showing them what their current choices could yield—and where they might fall short.
We began with their bank savings. With Mike’s recent inheritance boosting their accounts to $520,000, they already had far more than the typical goal of six months’ expenses saved. We recommended keeping $100,000 on hand for immediate needs and emergencies, then investing the rest to work toward long-term goals. This move would ensure they didn’t miss out on potential growth that could carry them through retirement.
Turning to their employer retirement accounts, we discussed how their current contributions to Mike’s 401(k) and Brenda’s 403(b) might not be enough to secure the retirement they envisioned. With such a strong safety net in the bank, we recommended maximizing their contributions each year until retirement. By increasing these contributions, they could reduce their taxable income byover $50,000 annually and set the stage for even more growth within their retirement accounts.
One concern loomed large: Mike’s old 401(k)s, which sat unmanaged and fragmented. To make the most of these accounts, we suggested consolidating them into a single, professionally managed IRA. With this step, Mike could improve his overall asset allocation and prepare for a sustainable income strategy once they retired. Consolidating also meant he’d finally have a plan in place for these funds, ensuring they contributed to their future security.
Then, we examined how to invest $400,000 of Mike’s inheritance. By opening a fee-based investment account, we would create a balanced portfolio that aligned with their risk tolerance and goals. This move would build another layer of financial security, separate from their retirement accounts but ready to support their later years.
As we reviewed their tax strategy, we knew this was a critical area. Much of their current retirement savings would be taxed as ordinary income. With potential tax rate increases in the future, we discussed converting some of their funds into Roth IRAs, which would allow for tax-free distributions later on. This conversion strategy is one we’ll revisit often as they move closer to retirement.
Protection planning was another key concern. We recommended keeping their current term life insurance policies until rates increased at ages 72 and 71 for Mike and Brenda, respectively. Additionally, we advised looking into an umbrella policy to provide extra liability protection, especially with their rental cabin. Lastly, we discussed the option of purchasing a Joint Life Long-Term Care policy to help cover future elder care costs, adding yet another layer of peace of mind.
As for estate planning, we emphasized the need to act swiftly. Without a plan, they risked leaving their children and each other unprotected. We connected them with three experienced estate attorneys who could help them create a trust that preserved their legacy and respected their wishes.
Since Mike and Brenda have hopes of retiring a little early, we talked through the timing of Social Security and Medicare. Retiring before 65 would require navigating Medicare options and would impact the timing of Social Security, which we advised delaying if possible. In addition, working until age 65—or even 66 or 67—would give them more freedom to help their children with weddings and first home purchases.
By the end of our meeting, Mike and Brenda could see both the possibilities and the pitfalls that lay ahead. With guidance and a clear strategy, they felt confident they could sidestep potential mistakes and make choices that would secure the life they’ve worked so hard to build.
We began with their bank savings. With Mike’s recent inheritance boosting their accounts to $520,000, they already had far more than the typical goal of six months’ expenses saved. We recommended keeping $100,000 on hand for immediate needs and emergencies, then investing the rest to work toward long-term goals. This move would ensure they didn’t miss out on potential growth that could carry them through retirement.
Turning to their employer retirement accounts, we discussed how their current contributions to Mike’s 401(k) and Brenda’s 403(b) might not be enough to secure the retirement they envisioned. With such a strong safety net in the bank, we recommended maximizing their contributions each year until retirement. By increasing these contributions, they could reduce their taxable income byover $50,000 annually and set the stage for even more growth within their retirement accounts.
One concern loomed large: Mike’s old 401(k)s, which sat unmanaged and fragmented. To make the most of these accounts, we suggested consolidating them into a single, professionally managed IRA. With this step, Mike could improve his overall asset allocation and prepare for a sustainable income strategy once they retired. Consolidating also meant he’d finally have a plan in place for these funds, ensuring they contributed to their future security.
Then, we examined how to invest $400,000 of Mike’s inheritance. By opening a fee-based investment account, we would create a balanced portfolio that aligned with their risk tolerance and goals. This move would build another layer of financial security, separate from their retirement accounts but ready to support their later years.
As we reviewed their tax strategy, we knew this was a critical area. Much of their current retirement savings would be taxed as ordinary income. With potential tax rate increases in the future, we discussed converting some of their funds into Roth IRAs, which would allow for tax-free distributions later on. This conversion strategy is one we’ll revisit often as they move closer to retirement.
Protection planning was another key concern. We recommended keeping their current term life insurance policies until rates increased at ages 72 and 71 for Mike and Brenda, respectively. Additionally, we advised looking into an umbrella policy to provide extra liability protection, especially with their rental cabin. Lastly, we discussed the option of purchasing a Joint Life Long-Term Care policy to help cover future elder care costs, adding yet another layer of peace of mind.
As for estate planning, we emphasized the need to act swiftly. Without a plan, they risked leaving their children and each other unprotected. We connected them with three experienced estate attorneys who could help them create a trust that preserved their legacy and respected their wishes.
Since Mike and Brenda have hopes of retiring a little early, we talked through the timing of Social Security and Medicare. Retiring before 65 would require navigating Medicare options and would impact the timing of Social Security, which we advised delaying if possible. In addition, working until age 65—or even 66 or 67—would give them more freedom to help their children with weddings and first home purchases.
By the end of our meeting, Mike and Brenda could see both the possibilities and the pitfalls that lay ahead. With guidance and a clear strategy, they felt confident they could sidestep potential mistakes and make choices that would secure the life they’ve worked so hard to build.
The Summary
As Mike and Brenda looked over their forecast, a sense of clarity replaced the worry they had initially felt. They now understood that working until 65 would allow them to retire with confidence, and they felt empowered with a practical understanding of their finances and spending approach. With a flexible plan in place, they knew they weren’t locked into any single decision—their future had room for adjustment, dreams, and even the unexpected.
They also realized the value of having a trusted guide on their journey. Rather than worrying over each financial question alone, they knew they had a team that could adapt their plan as life evolved. With our commitment to meet three times a year, Mike and Brenda felt assured that they’d be supported every step of the way, ready to address any change, large or small.
As they left our meeting, they expressed gratitude—not only for the planning but for the shared journey ahead. Together, we looked forward to helping them achieve the retirement of their dreams and celebrating each milestone along the way.
Note: The above case study is hypothetical and does not involve an actual Willet Wealth Planning client. No portion of the content should be construed by a client or prospective client as a guarantee that he/she will experience the same or a certain level of results or satisfaction if Willet Wealth Planning is engaged to provide investment advisory services.
They also realized the value of having a trusted guide on their journey. Rather than worrying over each financial question alone, they knew they had a team that could adapt their plan as life evolved. With our commitment to meet three times a year, Mike and Brenda felt assured that they’d be supported every step of the way, ready to address any change, large or small.
As they left our meeting, they expressed gratitude—not only for the planning but for the shared journey ahead. Together, we looked forward to helping them achieve the retirement of their dreams and celebrating each milestone along the way.
Note: The above case study is hypothetical and does not involve an actual Willet Wealth Planning client. No portion of the content should be construed by a client or prospective client as a guarantee that he/she will experience the same or a certain level of results or satisfaction if Willet Wealth Planning is engaged to provide investment advisory services.
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