Preparing for Retirement

Case Study Investments

The Situation

Preparing your finances for retirement can be an ever-changing process throughout your professional career. As circumstances and retirement goals change, the means through which you achieve your goals may also change. When structuring retirement plan contributions, many people plan with a very important date in mind — their 65th birthday. This is when you may begin receiving Social Security benefits. Individuals nearing retirement want to make sure that their 401(k) and personal retirement accounts accommodate for Social Security benefits, so they can maximize the value of the combined savings and create a steady income stream throughout retirement, while minimizing taxes. While Summit’s Retirement Planning division advises many clients on their company’s employer-sponsored 401(k) plans, we also assist individuals with their personal retirement portfolios.

The Case

A partner at a law firm was nearing her 65th birthday and wanted to make sure her savings were set up to pay a steady income of approximately $75,000 per year throughout retirement for both her and her husband. Having been introduced to Summit through her company’s 401(k) plan, she reached out to one of Summit’s Retirement Plan Specialists to explore her options. She had roughly $750,000 in her 401(k), so she would need to distribute those savings in a way that ensured she could cover the annual payments from any annuities when combined with the money she would receive from Social Security.

Summit’s Solution

Following initial discovery meetings with the client, Summit conducted a thorough Social Security analysis to determine the optimal time for her to begin receiving Social Security benefits. The combined Social Security benefits for her and her husband would pay $40,000 per year in income, so the gap between her Social Security income and her target total income of $75,000 would need to be achieved through additional investment strategies.

Ultimately, Summit ended up dividing her total saved assets and putting half into an annuity that was guaranteed to pay a minimum of $14,000 a year for the rest of both her and her husband’s lives. The annuity could pay more depending on market conditions, but it would never pay less. The remaining assets were placed into a brokerage account. While this allocation did not have the same minimum guarantees of the annuity, Summit could help monitor the fluctuations in market conditions and the performance of the funds on an ongoing basis. After exhausting the combined $54,000 minimum received from Social Security and the annuity payments, the rest of the desired annual income could be drawn from this portfolio. This would mean she would need to withdraw no more than $19,000 per year from the brokerage account.

The client received her first distribution in January of this year and has expressed incredible appreciation to the Summit team for their attentiveness and dedication to helping her achieve her retirement goals.

Want to discuss further? Contact our Investments team at (800) 475-0991