As advisors, once in a while we are introduced to a savvy investor who seems to have everything in order. This was the case with Dr. and Mrs. Moneyworthy. However, in using the SIPS Retirement Planning System, we discovered a few holes in their plan that would have ended up causing the couple to hit their fiscal cliff.

Dr. and Mrs. Moneyworthy are intelligent people. He had been a doctor for several decades and had enjoyed great success in business. He also was an avid saver and investor. His moderate choices lead to an account of more than $2.5 million. The good doctor was extremely proud of the account he had built up and did not see the need in meeting with a financial advisor. His wife, Julie, on the other hand, saw things a little differently. The two, in their early 60’s, were on the verge of retirement. She was much more conservative than her husband and insisted the two of them sit down with an advisor to make sure all of their bases were covered.

After speaking to Dr. Moneyworthy, we determined he had in fact made excellent choices in his investment accounts. I congratulated him on his ability to build such a noteworthy portfolio. We discussed the distributions they would like to take each year from their accounts during retirement. The couple had done their homework and knew they would need $140,000 to maintain their accustomed lifestyle.
“I know what I’m doing when it comes to investing, so I don’t need a financial planner.”
Using the SIPS Retirement Planning System, we found they were right on track. But then, I asked if they had considered inflation and taxes? Their look of happiness shifted to confusion. They had not.

We agreed on a general inflation rate of 3% and a marginal tax rate of 20%. The SIPS Retirement Planning System clearly showed they would be out of money in a matter of 20 years. By that time my clients would be in their early 80’s. This caused the couple some distress.

After creating several scenarios we came to a mutual solution where the Moneyworrys would be able to hit their target income and not run out of money within their lifetime.

Dr. Moneyworry was a professional in his field and an intelligent investor. However, when it came to retirement planning, he lacked the knowledge, experience and the tools necessary. The Retirement Engineer, using the SIPS Retirement Planning System was able to communicate with the couple and explain where the holes were in their plan and develop a solution that addressed and fixed their concerns.