Piedmont, CA; East Bay: Customizing a Financial Plan for Specific Income Needs

Managing a sizable taxable account requires special expertise:

This became clear when a recently divorced client, age 48, came to our firm seeking assistance with developing a plan to meet his annual living expenses (which included a new home purchase in the following 6-12 months) as well as his future retirement goals.  As the divorce was finalized a couple months before our meeting, his financial situation was significantly different than it had been in the past.  This new undefined future was a cause for concern.  Going forward, additional income would need to be generated from a taxable account that was partially funded as part of the divorce agreement.  In addition to future savings goals, this account would also be used to help cover annual living expenses and ongoing child support for his two daughters (ages 11 and 12).

After meeting and gathering financial details over the course of a couple of weeks, we were able to accurately project future living expenses.  Drilling down to line item details and arriving at an annual living expense amount was critical in order to determine how much income he would need from his taxable funds going forward.  T

here was concern that accessing this money now, would cause a shortfall down the road in retirement.  We reviewed all sources of income which included a future pension amount as well as social security benefits.  After a thorough review of the financial information, the details were entered into our financial planning software for further analysis.  We reviewed his overall situation by projecting annual cash flows throughout his lifetime as well as creating scenarios indicating the type of home to buy, how much to save for retirement and education, different life expectancies, and the effects of different growth rates on investments.

We eventually settled on a comfortable amount to put towards a new home and provided guidance to get the best possible financing.  We described how to approach the taxable portfolio from an investment management perspective and provided guidance on how the taxable funds could be allocated to generate income while keeping taxes in check; and also continue to grow at a reasonable rate.  A thorough review of his existing positions was performed and certain positions were sold and others kept unchanged (primarily based on how this would impact his tax situation).  A gradual approach to creating additional diversification was recommended, so that within a couple years his portfolio would be at the targeted allocation and diversification levels.  Incorporating higher quality, income-generating, tax-efficient investments within the account was a priority.  A significant amount of work was done to create a customized portfolio to meet our client’s needs for income and growth.  The recommended changes allowed for approximately $35k of additional income to be used annually to help with expenses, while still allowing the portfolio to grow over time.  A primary concern for our client was the complexity associated with this activity and also having the time to devote to it and continue managing it going forward.

Today he is in a path to success.  There is now confidence that he can meet his financial goals with additional flexibility built into his plan to account for whatever life brings his way.  We are looking forward to continuing our relationship and assisting with the home purchase and other major financial decisions as they happen.  We will meet periodically to make sure we stay on track.

If you are looking for financial guidance, whether it be for a one-time financial plan or continuing advice on your investments, we invite you meet with the First and Main Financial for a free consultation.  We would be more than happy to sit down with you, assess your current financial situation and review with you our services to help you navigate your own financial future.