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Retirees and PRE-RETIREes

Retiree / Pre-Retiree Client Profile

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Focus on Pre-Retired Accumulation and In-Retirement Income Distribution and Legacy Planning Positions High-Earners for Successful Retirement 

In this ‘high-earner’ client scenario, you’ll learn how Braun-Bostich & Associates' (BBA) Investment approach and focus on Advanced Planning needs helped position Jack and Marilyn* for retirement.

As a high earning pre-retiree, and main source of household income, we focused on two phases of planning for Jack and Marilyn Smith: pre-retired accumulation and retired distribution and legacy planning. In the accumulation phase, we identify the appropriate strategies to achieve their goal of a comfortable lifestyle in retirement. In the distribution phase, we ensure that Jack and Marilyn can have a tax efficient cash flow to successfully achieve retirement goals. Once achieved, we concentrate on legacy planning. The legacy planning allows Jack and Marilyn to provide for continuity of decision making if they become incapacitated and distribute wealth in a tax efficient manner to their family members and charitable causes that they care deeply about.

Retiree & Pre-Retiree Couple

Note: This BBA strategy is used for a variety of clients in many different personal and financial situations, including people like Jack and Marilyn. BBA’s role is to help identify what their retirement goals are and to establish a practical pathway for them to achieve those goals.

*Names have been changed for privacy.

Case Introduction

Jack is in his mid-fifties and working for a Fortune 500 company. He is looking to retire within the next 5 to 7 years. Relevant details about Jack’s financial situation include:

  • A Deferred Compensation Plan with his existing employer
  • All insurance coverage through his employer
  • 401(k) contribution equaling 5 percent of Jack’s salary
  • Company match and Deferred Compensation match totaling approximately $28,000 annually
  • Combined income of $400,000
  • Jack and Marilyn have two children, Mark age 28 and Joan age 26

Marilyn is age 50. She has only been working full time for 5 years. She worked part-time when the children were younger. Consequently, she has an inconsistent work record and lower Social Security, retirement savings, and income than her peers do.

Jack and Marilyn are both in good health. Their children are both out of school, working and living independently.

Situation Analysis

Throughout the accumulation phase, cash flow analysis becomes a helpful tool. The accumulation phase focuses on insurance planning and options, investment options, tax planning and estate planning. Their goals seemed simple on the surface but proved much more complicated during and after thorough analysis - they wanted to retire together within the next 5-7 years, preferably sooner. Afterwards, they plan to remain in their current home for 3 to 5 years before downsizing to another location. To accomplish this, BBA explored a few specific scenarios to help them determine the best strategy:

  • Their retirement outlook, according to Jack’s current path, looking at Jack’s age at 60, 62, and 65.
  • Potential living arrangements that included allowing them to remain in Pennsylvania while downsizing into a smaller home or remain in Pennsylvania while purchasing a second home in another state
  • Possible medical expenses and costs should they retire before the age of 65, when they would qualify for Medicare
  • Maximizing Social Security income for them as a couple and for Marilynn should Jack predecease her
  • Estimating the impact of taxes in retirement and planning for required minimum distributions at age 73
  • Evaluating tools such as high deductible insurance plans with an HSA (health savings account)
  • Examining the use of Roth conversions
  • Calculating the impact of a Net Unrealized Appreciation (NUA) strategy on company stock in his retirement plan
  • Determining how much if any Marilyn should be investing in her 401(k)
  • Evaluating which medical plan is best for them as a couple or as individuals
Assessing insurance needs both now and in the future. Looking at auto and homeowners’ insurance.

BBA follows a specific technique for helping clients like the Smiths not only to find a path to financial success and effective wealth management, but also to educate and guide them in the process so they can make wise decisions about purchases outside the scope of their current financial plans.

It begins with developing an understanding of the Smiths’ overall financial picture (assets, liabilities, insurance, and cash for shorter term goals); the plans they have for the future, which include where they might like to live and what they plan on spending for a second home or a downsized home.

  • When can they contentedly retire? What kind of lifestyle are they hoping to achieve?
  • How quickly can they accomplish their financial goals?
  • Will Marilyn need to continue to work?
  • What is their risk tolerance on investments?
  • Do they support their children financially? Will their parents need help financially?
So, our first step in the financial planning process is to create a cash flow summary that identifies where their income is allocated – Living expenses, medical expenses, savings, taxes, and discretionary additional spending.

Once we’ve finished the cash flow summary in the accumulation phase and have a good understanding of their current income situation, we move to examining their situation from positions of strength, weakness, opportunity, and potential threats they may encounter. In the Smith’s case, the analysis looked something like this:


  • High net cash flow
  • Solid emergency fund
  • Home with substantial equity
  • Consistent saving throughout Jack’s career
  • Deferred Compensation Plan and a 401(k)
  • Low debt
  • Two income earners
  • Great workplace benefits for both


  • Portfolio is highly concentrated in company stock
  • No estate planning documents
  • No long-term care planning
  • No tax mitigation for current situation Deferred Compensation Plan payout
  • Not utilizing all the work benefits possible
  • No homeowners umbrella policy
  • Medical costs after retirement and before age 65 for each of them


  • Options are available to increase employee contributions into employer provided retirement plan
  • Ability to diversify their portfolio
  • Options to generate essential estate planning documentation
  • Ability to use technology to aggregate financial life
  • The ability to use an HSA plan to grow assets for medical benefits in retirement
  • Additional employer contribution available from Marilyn’s retirement plan
  • Marilyn’s medical benefit will include a spouse at no cost
  • Social Security claiming strategy can add an additional $250,000 over their lifetimes


  • Potential for the market to crash at retirement (sequence of return risk)
  • Lack of long-term care planning and protection
  • Premature death (especially in Jack’s situation where he was the family’s largest earner)
  • Concentration of company stock (25% of investment portfolio)
  • Cost of healthcare in retirement prior to qualifying for Medicare
  • Large tax liability due to Deferred Compensation Plan distribution at retirement

When it comes to threats, medical expenses are a larger threat than the average couple recognizes. This is especially true for those who retire before the age at which Medicare coverage is provided.

BBA believes it’s important to inform clients that even if Medicare is an immediate option, there are still medical expenses Medicare does not cover. Current estimates suggest that the average couple will spend roughly $280,000 on medical expenses not covered by Medicare between the ages of 65 and 90. That’s a huge consideration that must be addressed in the financial planning process. The expenses that are not normally covered by Medicare Part B and many supplemental insurance plans consist of things like:

  • Vision care
  • Prescription medications
  • Dental care
  • Hearing aids
  • Deductibles
  • Long-term care
If your plans include travel in your retirement years, Medicare Part B coverage also prohibits medical care received while abroad.

Results and Recommendations

Our main observation was that the Smiths have a high net cash flow and have saved significantly. The concentration of company stock in Jack’s portfolio, which represented roughly 25% of the retirement balance was a concern. Additionally, the current layout for the Deferred Compensation Payout structure proposed a significant potential tax burden at retirement. Finally, limited insurance coverage and a lack of estate planning documents posed a significant threat to their financial well-being.

In their plan, we mapped out a series of scenarios that helped them see which goals and objectives were genuine and if any modifications needed to be made to make them more easily attainable. As part of the distribution phase, we also made explicit recommendations for changes that could be made to realize certain goals and results more quickly for the Smiths including:

  • Suggested a way to achieve higher interest on their substantial emergency fund to cover unexpected expenses.
  • Changing allocations in their brokerage account to a more risk tolerant approach.
  • Presented possibilities for long-term care insurance, while educating them about the high risk of facing long-term care events in retirement.
  • Recommendations for attorney to draft will, power of attorney, and health directives/Living Will for the couple.
  • Suggesting that Jack increase his 401(k) contribution to take advantage of “catch up” contribution maximums and netting $1,500 in tax savings for the year.
  • Suggested that Marilyn start contributing to her 401(k) to capture employer contributions for an additional tax savings of $1,400.
  • Recommended they utilize a high deductible medical plan and start max funding the HSA. The HSA should not be touched but allowed to grow for tax free payments for medical expenses later.
  • Explained the use of the NUA strategy for company stock in Jack’s retirement plan.
  • Utilizing the mega back door Roth strategy with after tax retirement contributions.
  • Having Marilyn work two more years longer than Jack to cover more medical costs prior to Medicare kicking in.
  • Reviewed various distribution strategies for the deferred compensation plan to maximize tax savings resulting in an additional $200,000 in their pockets.

That’s not all BBA was able to do to help Jack and his family accumulate and distribute their assets over their lifetime. We were also able to make recommendations inside both 401(k)s to maximize return, adjust risk and lower fees.

We also reviewed insurance coverage for home insurance, auto insurance, and umbrella coverage to make sure they had sufficient coverage. We encouraged the Smiths to purchase an umbrella insurance policy.

Free Consultation

If Jack and Marilyn's situation sounds similar to your own, we would love to explore your situation and discuss how BBA could help alleviate your issues and pain points, and ultimately help you build confidence in your financial future. Please do not hesitate to reach out and schedule a free consultation with one of our advisors. We look forward to hearing from you soon!

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