How Retirees Can Benefit From Dynamic Financial Planning (with real examples!)

Dynamic financial planning can help retirees make good decisions.

In this video, we walk you through a case study of how a married couple was able to maximize their wealth while accomplishing more of the things that are important to them.

Dynamic Financial Planning

Full transcript:


Alex Okugawa & Anthony Saffer

Anthony Saffer 0:00
Dynamic financial planning can help retirees make good decisions. In this video, we’re going to walk through a case study of how a married couple, maximizes their wealth and accomplishes more of what is important to them. Stay tuned. Hey there, it’s Anthony and Alex from One Degree Advisors. And if you’re new here we are Certified Financial Planners, helping folks with all things retirement, tax, and investments. So, Alex, retirement involves many moving pieces, getting a few things right can really set you up for success. However, getting some things wrong can really set you back.

Alex Okugawa 0:32
And when people work with us, they often want answers to a few specific questions, you know, some of the basics like Am I on track? Are my investments aligned with my financial plan? When should I take Social Security? So you know, we can help answer some of those questions.

Anthony Saffer 0:50
So let’s walk folks through an example. And we’ll show the impact of different decisions here.

Alex Okugawa 0:55
Yeah, so let’s look at a recently retired couple, we’re going to in this example, we’re going to use Joe who’s age 65. And Heather, who is age 63. And when they came to us, they were just like, we just want to know, are we on the track where recently we recently retired? Are we on track, and do they need help with an investment plan to help them create income? The big question that they had initially was around social security, they had heard that delaying Social Security benefits until age 70 would give them the maximum lifetime amount, and in many ways they are correct. So let’s pull this up here. What we’re looking at is an analysis showing the difference between Joe and Heather’s annual retirement benefit and total cumulative lifetime benefit for Social Security. And it’s comparing it at when it says their fr a, that means their full retirement age, personal security versus age 70. And what you’ll see there is that the difference is pretty substantial. The difference in lifetime cumulative benefits between their full retirement age, and 70 is a difference of over 200,000. For Joe, in over $166,000. From Heather, now, just looking at these numbers alone, one might come to the conclusion that they’re correct, taking their social security benefits at age 70, which is the latest you can wait, we’ll provide them with the highest lifetime benefits.

Anthony Saffer 2:18
Now it’s good for a retiree to have a tailored plan based on their circumstances, and their objectives. And we found the best way to do that is to look at the whole picture.

Alex Okugawa 2:25
Again, let’s look at their plan based upon taking benefits at age 70. And what you’ll see here is that they do have assets that will last their lifetime, their plan looks pretty solid. But like you mentioned earlier, the true benefit of planning is not just looking at things in a vacuum, but it’s taking into consideration all the multiple components that are involved in a retirees plan, we’re looking at income expenses, the value of your different portfolios, withdrawal rates, etc. And what we’re able to show them here is after building their plan, and looking at all those different factors, if Heather were to take her benefits now, right around her full retirement age, and Joe was to delay his benefits until age 70. right a little bit different than what they initially planned, we actually see a higher cumulative lifetime benefit, and their plan looks a lot better. And why is that? There are two main factors. by Heather taking benefits, now they’re able to meet more of their current cash flow needs, and they’re guaranteed income sources. Okay, so that immediately takes some stress off the portfolio. And by taking some stress off the portfolio, which is number two in those early years, it means their withdrawals are a little bit lower. Right. And we’re seeing this so far here in 2022, with the markets being pretty turbulent and being down for the year, is that being strategic being dynamic, and being flexible can really help in a plan because you know, what markets are down, and maybe we don’t want to pull too much from the portfolio in the early years. Maybe we again, start having this benefit to help reduce those withdrawals.

Anthony Saffer 4:04
Yeah, and when to take Social Security as a common decision for retirees we actually recorded a video, should I collect social security early and invested, we’ll go ahead and post that. But there are other factors and other decisions that people are making all the time. Let’s look at some of those.

Alex Okugawa 4:19
Exactly. Now. Like Like you mentioned, I mean, we help expand people’s thinking and show them possibilities that they may not have thought thinking of before Joe and Heather, it was really important for them to give and take like gifts to their family, their family, and their grandchildren really important to them. And so what we showed them is hey, you know, if you want to we say do you’re giving while you’re living so you’re knowing where it’s going. That’s a Mitch Anthony statement. You know, if you want to do some like pre-inheritance, instead of leaving it all for the end of your lifetime, what would that look like? And in this case, we’re saying, Look, you have four grandchildren and you wanted to give 20k to each of them. Here’s the impact of your plan. You’ll see those little gray bars On the far right-hand side, that’s kind of like the loss of total portfolio value. And what we’re going we’re seeing here is that, hey, the plan still looks solid, it still looks good. Joe was like, yeah, that’s nice. But I want to I don’t want to make sure we’re not giving away all this money, and not making sure we have enough to protect ourselves and enough for ourselves, the last thing we want to do is become a burden to our children. And I said, Okay, well, that’s a fair point, let’s take a look at if we do this giving, and then we also have some things that don’t work in your favor, right? Investment rates of return are just not as high, maybe they’re a little bit lower going forward. And so we showed them that toggle to say, Okay, now here’s the benefit. And again, you’ll see the gray bars kind of the loss in total portfolio value. But again, you still see that the plans still look solid, we’re not going to make that decision for them. But we’re simply providing information and context to say, here’s what’s possible. This is a good conversation for you guys to know.

Anthony Saffer 5:52
You’re able to show them that based on these external factors growth rates just aren’t as high as we might assume. What if inflation is higher, but then you get into individual decisions that may not be given to the grandkids, maybe it’s given to charity or to church, or maybe it’s buying a second home so that your family can use that throughout the year. Maybe it’s selling a rental property, all these types of decisions can be impacted within a plan. And this is why it’s not just a plan, but it’s a planning process. It’s a dynamic process to help make good decisions. Once again, this is Anthony Saffer, from One Degree Advisors and if you are going through retirement and you have multiple decisions and you’re trying to bring all your finances into a coordinated plan, check us out at we’d love to talk with you.

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