Sample Client: Soon-to-Retire (5 - 10 Years)

PLANNING TO RETIRE IN 5 – 10 YEARS

The Question: How am I going to retire in a few years?  What do I need to have in place then that I don’t have today?

Answer:

1. Investments
Build an investment plan that will happen at retirement that “fills the buckets,” identifying how much you need allocated to an income strategy to YIELD the income you need in retirement so you are not basing the success of your retirement plan on the outcome of equity returns and the stock market’s success. The income portion of the portfolio is built with assets that are highlighted HERE (Investing for INCOME). The assets that are not needed to fill the income bucket are rolled to the “Growth Bucket.” These assets are invested with a long time horizon in mind with the ultimate goal of capital appreciation. These assets will be invested in a fashion noted in “Investing for Growth.” The goal is for these assets to grow over time in a tax-efficient and strategic manner so that as inflation occurs, clients can move some appreciated assets to the Income Bucket to account for inflation and growing needs. Even before the INCOME bucket is filled, we must determine what amount of cash you need to cover emergency needs, short-term cash funding needs and SWAN (Sleep Well at Night) cash.

Once you know what your buckets need to look like, we can begin planning for allocations of assets leading up to that point. Nobody wants to be in the situation where you have to shift an allocation at retirement in one day. You must plan for this day and slowly shift your allocation to meet your needs by the time you retire.

2. Cash Flow Management
The basic question to all investment planning is, “How much is coming IN vs. how much is going OUT?” Matching your income needs with your current income cash flow, including Social Security, pensions, etc., is crucial to understanding how your investments will meet your income goals. This is more than a budget, it’s an understanding of how you are going to match your income needs with your cash flow sources.

As you are preparing for retirement, we need to make sure that you are saving and diverting your excess cash to the right places (Roth vs. 401(k) vs. 529 plans vs. gifting to children).

3. Tax Planning
CIA will work with your tax professionals (and ours) to ensure that all investment strategies are being used in the most tax-efficient manner. Municipal bonds vs. taxable bonds, individual MLPs vs. ETFs with 1099s, dividend stocks or interest-bearing bonds – these are just some of the considerations that should be discussed to maximize a plan’s effectiveness. Other tax strategies need to be understood as part of a total wealth management plan including:

• Stock options and planning for those leading into retirement
• Defined benefit plan withdrawals
• State tax exemptions
• Withdrawal strategies (IRAs or taxable accounts)
• Tax deduction strategies
• Roth conversion decisions
• Gifting/lifetime giving planning

4. Estate Planning
CIA works with our own network of estate planning attorneys or our client’s own trusted team to make sure that account structure and plans are married properly with the estate plan. Decisions such as what types of accounts to hold assets in (trusts, JT tenancy, individual, etc.), as well as proper beneficiary designations are crucial to carrying an estate plan out from a will through passing assets on to heirs. If a plan has not been put in place, we will work with our clients and help them communicate their larger goals and wishes to a professional when the drafting a document process begins.

5. Insurance Analysis and Planning
It should be noted that CIA does not sell insurance nor is compensated for recommending you purchase some. We analyze and help our clients make decisions regarding insurance objectively with regards to their entire financial picture, without concern or thought of compensation.

• New Policies – Are you under-insured because of liabilities that could be outstanding because of one or both spouse’s death? This could be from a pension that was taken without survivorship options or a large mortgage on the primary or second home or a child’s education that has yet to be accounted, saved or planned for. Another reason for a new policy could be for estate planning purposes. Do you need to pay a large tax bill at the time of death? This could be taken care of with proper insurance planning.

• Existing Policies – Do you really understand why you have those insurance policies from 30 years ago? Do you still need to be paying the premiums on the policies even though you have accumulated enough cash value to pay for themselves? Could the cash value in the policies be used in other ways that may make more sense for your overall wealth plan? These questions should be reviewed and answered.

• Long-Term Care Planning – Long-term care should be considered and understood in the context of your overall plan and situation before you can make a decision as to whether it is right for you and your family.

6. Retirement Plan Management

Making sure that the allocation of your retirement plan assets are correct based on the investment plan above is crucial to claiming success on the official retirement date. 

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Sample Client: Business Seller

SELLING A BUSINESS AND NEEDS INCOME FROM PROCEEDS

The Question: I have worked hard growing my business, but now I have a lump sum that I need to last through my lifetime and provide for my family.

The Answer:

1. Investments
Build an investment plan that “fills the buckets,” identifying how much you need allocated to an income strategy to YIELD the income you need in retirement so you are not basing the success of your retirement plan on the outcome of equity returns and the stock market’s success. The income portion of the portfolio is built with assets that are highlighted HERE (Investing for INCOME). The assets that are not needed to fill the income bucket are rolled to the “Growth Bucket.” These assets are invested with a long time horizon in mind with the ultimate goal of capital appreciation. These assets will be invested in a fashion noted in “Investing for Growth.” The goal is for these assets to grow over time in a tax-efficient and strategic manner so that as inflation occurs, clients can move some appreciated assets to the Income Bucket to account for inflation and growing needs. Even before the INCOME bucket is filled, we must determine what amount of cash you need to cover emergency needs, short-term cash funding needs and SWAN (Sleep Well at Night) cash.

2. Cash Flow Management
If you are like most business owners, you have always lived significantly below your means, but you are not 100% sure how much your real day-to-day needs are since much of your costs were run through or inside the business. The first few months after a sale will likely need to be funded with a cash allocation until a true NEED number is determined. The basic question to all investment planning is “How much is coming IN vs. how much is going OUT?” Matching your income needs with your current income cash flow, including Social Security, pensions, etc., is crucial to understanding how your investments will meet your income goals. This is more than a budget, it’s an understanding of how you are going to match your income needs with your cash flow sources.

3. Tax Planning
Capital Investment Advisors (CIA) will work with your tax professionals (and ours) to ensure that all investment strategies are being used in the most tax-efficient manner. Municipal bonds vs. taxable bonds, individual MLPs vs. ETFs with 1099s, dividend stocks or interest-bearing bonds – these are just some of the considerations that should be discussed to maximize a plan’s effectiveness. Other tax strategies need to be understood as part of a total wealth management plan including:

• State tax exemptions
• Withdrawal strategies (IRAs or taxable accounts)
• Tax deduction strategies
• Roth conversion decisions
• Gifting/lifetime giving planning

4. Estate Planning
Many times, the sale of a business will completely change an estate plan as it previously existed. It is important to work with an estate planning attorney along with your advisor to ensure that assets are sold and processed to the proper entities that make sense for your family though multiple generations.

CIA works with our own network of estate planning attorneys or our client’s own trusted team to make sure that account structure and plans are married properly with the estate plan. Decisions such as what types of accounts to hold assets in (trusts, JT tenancy, individual, etc.), as well as proper beneficiary designations are crucial to carrying an estate plan out from a will through passing assets on to heirs. If a plan has not been put in place, we will work with our clients and help them communicate their larger goals and wishes to a professional when the drafting a document process begins.

5. Insurance Analysis and Planning
It should be noted that CIA does not sell insurance nor is compensated for recommending you purchase some. We analyze and help our clients make decisions regarding insurance objectively with regards to their entire financial picture, without concern or thought of compensation.

• New Policies – Depending on the size of the sale, you could be completely self-insured, but what exactly does that mean? Another reason for a new policy could be for estate planning purposes. Do you need to pay a large tax bill at the time of death? This could be taken care of with proper insurance planning. 

• Existing Policies –Assuming you had insurance on you for business purposes, are these policies still relevant? Do you really understand why you have those insurance policies from 30 years ago? Do you still need to be paying the premiums on the policies even though you have accumulated enough cash value to pay for themselves? Could the cash value in the policies be used in other ways that may make more sense for your overall wealth plan? These questions should be reviewed and answered.

• Long-Term Care Planning – Long-term care should be considered and understood in the context of your overall plan and situation before you can make a decision as to whether it is right for you and your family.

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Sample Client: Business Owner

ENTREPRENEUR/BUSINESS OWNER NEEDS CASH MANAGEMENT ADVICE

Question:  As I continue my business and personal success, how do I manage the consistent cash flow that I am generating?  Where do I put the next $20,000 of cash that I make from my business?  529 plan for kids?  Second home?  Retirement account?  Pay down my mortgage?

The Answer:

1. Investments
Our primary focus is on managing your investments, and the only way that we generate our fees is on the value of the assets that you hire us to manage. Determine what your ultimate savings and investment goals are, including retirement, college funding, charitable giving, etc. Once we know what these goals are, we can identify how much of your savings you need to be allocating towards each of these goals. Knowing these goals will also allow us to identify your ideal investment allocation mix. In all likelihood, you will be looking for more of a “Growth” objective, looking to grow the value of your assets over time (as opposed to yielding you current income today). Although it is your ultimate goal for retirement assets to YIELD you an income that is sufficient for your lifestyle. We must save and strive to achieve an investable net worth that will achieve this income goal.

Build an investment plan that will shift over time based on your time horizon. First, we must determine what amount of cash you need to cover emergency needs, short-term cash funding needs and SWAN (Sleep Well at Night) cash. In an accumulation phase, we will likely have a larger allocation to growth assets. These assets are invested with a long time horizon in mind with the ultimate goal of capital appreciation. These assets will be invested in a fashion noted in “Investing for Growth.” The goal is for these assets to grow over time in a tax-efficient and strategic manner so that as inflation occurs, clients can move some appreciated assets to the Income Bucket as they near retirement and the distribution phase of investing. As we get within 10 years of retirement, it is a good idea to identify how much you need allocated to an income strategy to YIELD the income you need in retirement so you are not basing the success of your retirement plan on the outcome of equity returns and the stock market’s success. The portfolio will be gradually shifted to an allocation that accomplishes your income goal by the time you actually do retire. The income portion of the portfolio is built with assets that are highlighted HERE (Investing for INCOME).

2. Cash Flow Management
This is one of the most pressing questions that business owners face. They are generating a lot of net-free cash flow and need to determine what to do with monthly, quarterly or annual lump sums of cash that need to be saved long-term and put into their overall asset allocation plan. Whether the owner has a net worth of $500,000 or $10,000,000, the new earnings/cash needs to be allocated in the right places, whether that be equities, fixed income, real estate, private equity, etc. We help our clients determine their ideal mix of assets based on time horizon, risk tolerance and goals, and then help to get the cash in the right places to fill this allocation. It can seem overwhelming to a business owner to determine where to sock away this new cash every time it hits his/her bank account. We help manage this investment process and plan.

3. Tax Planning
CIA will work with your tax professionals (and ours) to ensure that all investment strategies are being used in the most tax-efficient manner. Municipal bonds vs. taxable bonds, individual MLPs vs. ETFs with 1099s, dividend stocks or interest-bearing bonds – these are just some of the considerations that should be discussed to maximize a plan’s effectiveness. Other tax strategies need to be understood as part of a total wealth management plan including:

• Stock options and planning
• Retirement plan maximization
• State tax exemptions
• Withdrawal strategies (IRAs or taxable accounts)
• Tax deduction strategies
• Roth conversion decisions
• Gifting/lifetime giving planning

4. Estate Planning
CIA works with our own network of estate planning attorneys or our client’s own trusted team to make sure that account structure and plans are married properly with the estate plan. Decisions such as what types of accounts to hold assets in (trusts, JT tenancy, individual, etc.), as well as proper beneficiary designations are crucial to carrying an estate plan out from a will through passing assets on to heirs. If a plan has not been put in place, we will work with our clients and help them communicate their larger goals and wishes to a professional when the drafting a document process begins.

As a business owner, you have additional considerations to make, including how to hold your business assets and how to protect them properly. If you are the sole owner of a business, are you properly protected from lawsuits or creditors? Should this entity be owned by an LLC instead of you personally? These are issues that we face and discuss with our clients regularly.

5. Insurance Analysis and Planning
It should be noted that CIA does not sell insurance nor is compensated for recommending you purchase some. We analyze and help our clients make decisions regarding insurance objectively with regards to their entire financial picture, without concern or thought of compensation.

• New Policies – With a successful business, you need to be sure that you and your partners are properly insured in the event that something happens to either party. Nobody wants to be partners with an uninterested spouse, and a widowed spouse would need assets to continue living in the event that something happens to the business owner. Another reason for a new policy could be for estate planning purposes. Do you need to pay a large tax bill at the time of death? This could be taken care of with proper insurance planning. 

• Existing Policies – It may be time to review the amount of insurance you have vs. the lifestyle that your family is now enjoying due to your business success. 

• Long-Term Care Planning – Long-term care may need to be considered and understood in the context of your overall plan and situation before you can make a decision as to whether it is right for you and your family.

6. Retirement Plan Management
Setting up your company’s retirement plan to accomplish all of your goals is also important. Having the right plan to accomplish your long-term goals can be a great way to generate tax-deferred savings that can work in your benefit as much as possible, as well as serving as a benefit to your employees. We can help in identifying the best plan for you and your company and also help to make sure that we are saving in the proper ways within the account.

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Sample Client: Inheritance

YOU NEED HELP MANAGING THIS NEW WEALTH

Question: How do I manage this large lump sum of assets when I have never had this kind of money before?

The Answer:

1. Investments
Our primary focus is on managing your investments, and the only way that we generate our fees is on the value of the assets that you hire us to manage. Determine what your ultimate savings and investment goals are, including retirement, college funding, charitable giving, etc. Once we know what these goals are, we can identify how much of your savings you need to be allocating towards each of these goals. Knowing these goals will also allow us to identify what your ideal investment allocation mix is for these new assets.

Build an investment plan that “fills the buckets,” identifying how much you need allocated to an income strategy to YIELD the income you need in retirement so you are not basing the success of your retirement plan on the outcome of equity returns and the stock market’s success. The income portion of the portfolio is built with assets that are highlighted HERE (Investing for INCOME). The assets that are not needed to fill the income bucket are rolled to the “Growth Bucket.” These assets are invested with a long time horizon in mind with the ultimate goal of capital appreciation. These assets will be invested in a fashion noted in “Investing for Growth.” The goal is for these assets to grow over time in a tax-efficient and strategic manner so that as inflation occurs, clients can move some appreciated assets to the Income Bucket to account for inflation and growing needs. Even before the INCOME bucket is filled, we must determine what amount of cash you need to cover emergency needs, short-term cash funding needs and SWAN (Sleep Well at Night) cash.

2. Cash Flow Management
The basic question to all investment planning is, “How much is coming IN vs. how much is going OUT?” Matching your income needs with your current income cash flow, including Social Security, pensions, etc., is crucial to understanding how your investments will meet your income goals. This is more than a budget, it’s an understanding of how you are going to match your income needs with your cash flow sources.

As you are preparing for retirement, we need to make sure that you are saving and diverting your excess cash to the right places (Roth vs. 401(k) vs. 529 plans vs. gifting to children).

3. Tax Planning
CIA will work with your tax professionals (and ours) to ensure that all investment strategies are being used in the most tax-efficient manner. Municipal bonds vs. taxable bonds, individual MLPs vs. ETFs with 1099s, dividend stocks or interest-bearing bonds – these are just some of the considerations that should be discussed to maximize a plan’s effectiveness. Other tax strategies need to be understood as part of a total wealth management plan including:

• State tax exemptions
• Withdrawal strategies (IRAs or taxable accounts)
• Tax deduction strategies
• Roth conversion decisions
• Gifting/lifetime giving planning

4. Estate Planning
This new windfall could change the way you think about your savings, retirement, and ultimately your estate and forever legacy. You might need to consider changing who is responsible for handling your estate in your will and also who the beneficiaries might be of certain parts of your estate, whether it be family members, charities or organizations. CIA works with our own network of estate planning attorneys or our client’s own trusted team to make sure that account structure and plans are married properly with the estate plan. Decisions such as what types of accounts to hold assets in (trusts, JT tenancy, individual, etc.), as well as proper beneficiary designations are crucial to carrying an estate plan out from a will through passing assets on to heirs. If a plan has not been put in place, we will work with our clients and help them communicate their larger goals and wishes to a professional when the drafting a document process begins.

5. Insurance Analysis and Planning
It should be noted that CIA does not sell insurance nor is compensated for recommending you purchase some. We analyze and help our clients make decisions regarding insurance objectively with regards to their entire financial picture, without concern or thought of compensation.

• New Policies – Are you under-insured because of liabilities that could be outstanding because of one or both spouse’s death? This could be from a pension that was taken without survivorship options or a large mortgage on the primary or second home or a child’s education that has yet to be accounted, saved or planned for. Another reason for a new policy could be for estate planning purposes. Do you need to pay a large tax bill at the time of death? This could be taken care of with proper insurance planning.
• Existing Policies – Do you really understand why you have those insurance policies from 30 years ago? Do you still need to be paying the premiums on the policies even though you have accumulated enough cash value to pay for themselves? Could the cash value in the policies be used in other ways that may make more sense for your overall wealth plan? These questions should be reviewed and answered.
• Long-Term Care Planning – Long-term care should be considered and understood in the context of your overall plan and situation before you can make a decision as to whether it is right for you and your family.

6. Retirement Plan Management
Making sure that the allocation of your retirement plan assets are correct based on the investment plan above is crucial to claiming success on the official retirement date.

Back to the Top