A Financial Success Story

by Michael Waterhouse

Earlier this year, I began working with a new client, a 61-year-old male who just lost his wife to a long battle with cancer. He was emotionally distraught in addition to confused and frustrated with thinking through what to do financially. He spent weeks sorting through documents, updating records, and speaking with pension and retirement plan specialists at her former employer, her life insurance provider, and bank representatives, all while planning a funeral. We finally had the opportunity to get together three months after her passing, and he came prepared with the following information: bank and credit union statements, his IRA statement, her lump-sum pension quote, and retirement plan statement, and his permanent life insurance policy statement.

His request was simple and common, “I want to be sure I have enough to live on in retirement, and I want to leave a legacy for the children.” They were adults now; he had two kids of his own, and she had one. He wanted her child to inherit most of her retirement plan and pension, however, he also knew he needed to use these assets when he retired in a few years. He already had taken care of his children by making them 50/50 beneficiaries on his life insurance and IRA. The two issues he wanted me to help with were his retirement income and taking care of her son financially.

This client is very conservative with no desire of account values decreasing, outside of pulling income, so investing into a growth-oriented portfolio was out of the question. My recommendation for the client began with shifting some of the inherited retirement assets into an annuity that guarantees him a minimum $1,200 per month income when he retires. The remainder we invested into a very conservative bond portfolio with half in government-backed bonds. I also recommended applying for a permanent life insurance policy because if he can get approved, we fund the premium using the bond portfolio and name her son as the beneficiary. He did get approved, and we put a permanent death benefit in place which grows each year as premiums are paid. Meanwhile, we are only putting about 4.5% of the bond portfolio toward the premium each year. The premium is low enough as to not deplete the bond portfolio, yet the tax-free death benefit is enough that it will be worth almost as much as the wife’s inherited retirement assets. From the cash in the bank and credit union accounts, we used half to purchase a fixed annuity which matures just before retirement and guarantees a steady interest rate each year. We also added a portion of his IRA to the annuity we bought with part of the wife’s retirement assets, which guarantees at least another $2,800 per month to the client.

The client has now secured $48,000 annually of guaranteed1 retirement income in addition to Social Security and a pension. He also has secured a death benefit to pass to her child upon his death, while his kids are already taken care of. Lastly, he will have significant liquid assets to use in retirement as needed, not including what he is still able to save over the next few years while working. I share this story for two reasons; the first being to encourage everyone to always prepare for the unexpected. Life always brings challenges and throws us curve balls; the best we can do is be as prepared as possible. Second, create a financial plan early and review often. Work with a financial professional to establish goals and to guide you through changes in life, the ups and downs, and the financial impact of losing loved ones.

This client I wrote about now has clarity of his financial plan and is very confident moving forward. It has been extremely rewarding to assist him and see the weight being lifted off his shoulders. Working with clients every day to improve their situation is my “why” and if I can help a few people take some initiatives or seek a second opinion on what they are currently doing, then I consider that a big win.

1 Guarantees are based on the claims-paying ability of the issuing insurance company.
References to specific securities, asset classes, or portfolio models are for illustrative purposes only and do not constitute a solicitation, offer, or recommendation to purchase or sell a security. Material discussed is meant for general informational purposes only and is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice. This material contains the current opinions of the author but not necessarily those of Guardian or its subsidiaries, and such opinions are subject to change without notice.

All investments contain risk and may lose value. Investing in the bond market is subject to certain risks including market, interest rate, issuer, credit, and inflation risk. Equities may decline in value due to both real and perceived general market, economic, and industry conditions. Past performance is not a guarantee of future results.

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