Planning for Retirement: Frederick’s Case

Achieving the optimal financial security as far as retirement is concerned calls for strategic thinking and making the most reasonable decisions. It calls for planning and commitment to implementing the strategic plans. Generally, the ratio of the people who calculate or make plans financial plans for their retirement is way less compared to that of those that do not. There is a significant risk level since statistics, and life expectancy levels indicate that the average Americans live about 20 of their years in retirement. There are some fundamental aspects necessary for consideration by anyone making financial retirement plans.

One of them is legacy. Legacy planning comprises of four goals. Considering and accomplishing these goals is the key to successful legacy planning. Financial planning is the key to these goals. Establishing a legacy involves the provision of things (not always money) for other people. After the financial plan, it is necessary to continue with the management of the estate upon which the legacy stands. Apparently, successful legacy planning calls for the strategic implementation of succession plans such as stewardship transition. Finally, it is necessary for the legacy plan to address the tax burden associated with it, resulting to the other aspect considered in retirement planning – tax strategies appropriate for and early retirement.

In as much as many people would like to view retirement as an age in the life characterized by leisure and such relatively determiners of a real life, it too is subjected to taxes. However, with the help of good financial planners and experts in tax related issues, it is possible to reduce the tax burden to a manageable level. The basic strategies applied to reduce the tax burden include planning, large scale saving where possible, as well as selling what is not currently necessary.

In addition to the above, retirement planning calls for the consideration of investment strategies. Apparently, it is quite clear that one’s finances, affinity to save or invest, as well as personal goal all change as an individual moves through life. As a result, a sensitively selected investment plan is necessary to embrace, which is necessary for an individual to consider factors such as his forecasted expenditure per month. As a result, it becomes easy for a person to plan effectively on his or her pensions, RSP funds as well as other retirement income sources.

Finally, one of the most important aspects happens to be in relation to uncontrollable forces. Apparently, unexpected events may surprise one and end up impacting his or her retirement financial plans. However, even with the inability to predict the future, it is possible to protect ones from such through applying financial advice available from certified advisors. Such would include the establishment of cash reserves, evaluation of insurance policies, as well as the analysis of one’s beneficiaries.

Legacy Planning


  • The couple has a saving account, as well as a checking account
  • They have a 475,000-dollar house in Indiana and are looking for a lake home in the same state worth 275,000 dollars
  • They own two cars valued at 30,000 dollars
  • They have a brokerage account at Morgan Stanley and Schwab
  • They have two daughters who are both married for ten years, and each has two children meaning that they have four grandchildren
  • Sue’s Mother is still alive
  • Sue loves the local hospital and feels indebted to it for the care they took to her deceased father in his final days
  • They both have an “I love you will.”


With reference to the above situations, it is obvious that certain strategic measures with reference to legacy management are concerned. Thus, a couple of changes are necessary to arrive at the most optimal solution.

At least one of them should change their current will, or they should make a joint will instead of the current “I love you wills.”

They should change some of their current asset management such as the ownership of two houses as they approach retirement


Apparently, Bill and Sue has a relatively significant estate which means that legacy planning is necessary for the proper management of assets after the couple retires or in the case that they should die much later. The recommendations above surface from factors such as:

The terms in “I love you will” are so such that when one partner dies, the surviving can change the provisions as he or she wishes. On the contrary, a joint will cannot change, and it further stipulates who should take what asset even after the last partner dies. That way, probate cases are avoided or minimized.

Sticking to either their current home or the lake home is better that having both. Instead of acquiring the lake home, they can pay their outstanding mortgage on their current home or sell the old home after getting the new lake home and use the proceedings for the same purpose

Tax Burden


  • They have 1,470 dollars as taxable interest as well as 2,300 dollars in bond interest
  • They already have three CDs at their local bank
  • An inherited IRA of 9,842 dollars resulted in Sue having an RMD
  • They are subject to itemized deductions (comprising of interest, statutory tax, and charitable income) of 28, 500 dollars
  • Bill has until now contributed 12,500 dollars towards his 401(k) which stands whose Fidelity stands727, 000 dollars as well as an IRA that rolled over from a previous employer standing at 118,000 dollars
  • Sue has already contributed 5,000 dollars to a Roth program


For the purpose of attaining the best plan as far as reducing the tax burden is concerned, a couple of strategies are applicable in the case of Bill and Sue.

Rolling over Sue’s 5,000 dollar Roth Program Contribution into Bill’s 401(k)

If the couple purchases the lake house, it should be in Sue’s name


The above recommendations best fit the task burden case because Bill and Sue have invested heavily in making contributions to annuity programs.  The recommendations’ rationale finds basis in the following facts:

Investment in annuity contributions such as the Roth Programs allows the account holders to withdraw funds only after they attain the age of 55 and a half. Bill is six years older than Sue. Investing all under Bill, the couple will get all their invested funds early.

One way of accessing the IRA funds, such as Sue’s 9,842 dollars RMD, before attaining the minimum age or stipulation is through the purchase of a first-time home. This plan goes to as much as 10,000 dollars, which is higher than Sue’s RMD worth.

Unexpected Events (Life Happens)


  • Both are willing to save 25,000 dollars more this year
  • Bill has a term insurance of 250,000 dollars with Sue having a 100,000-dollar whole life plan
  • They are willing to provide college money for their grandchildren
  • At home, Sue has a 4,000-dollar cash slush fund
  • Both have already prepared “I love you wills.”



The inability to foretell future occurrences can be a major blow as far as retirement programs are concerned. In light of that, it is necessary to come up with suitable measures optimal for overcoming any future occurrences that may be overly unfavorable to Bill and Sue’s retirement plans.

Start a Common Education Trust for their grandchildren

Start a Special Needs Trust different from the above

Bill should subscribe to a lifetime plan as soon as his current one maturity date is due


The rationale behind the above recommendations finds roots from the following points of view which are all in consideration of the worst case scenarios that can happen in the future.

Bill and Sue are willing to fund their grandchildren’s college education. However, at the current situation, there is a challenge because that is not written down. The fact that they both have the “I love you” kind of will could be a problem if both of them died before the grandchildren joined or finished college.

The Special Needs Trust also finds basis upon the above rationale. However, an additional aspect comes from the fact that at the moment, only Sammy requires particular attention. With respect to the principle of an uncertain future, the number of grandchildren in need of special attention may increase calling for the creation of a different trust specifically dealing their needs.

Requiring Bill to have a whole life insurance policy comes as a matter of first degree protection against unexpected occurrences. Unexpected events in this case mostly refer to illness and accidents – it is not possible to determine precisely when such incidents come. Therefore, rational thinking dictates that it is better that he should do as Sue and buy a whole life policy as soon as his current one matures.

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