Transitioning to Retirement

Case Study #2

Will & Olivia

Age

60 and 59 years old 

Occupation

Owners of a dental practice

Employer

Self-Employed

Annual Income

Currently, $500,000 – $600,000, but they plan to sell their practice soon.

Assets

401(k)s, insurance products, and future proceeds from selling their business.

Primary Goals

Will and Olivia want to retire with confidence, travel, and serve missions for their church. 

The Challenges

1

How do they organize their investments to reliably create income in retirement?

Once Olivia and Will sell their business, they’ll no longer be actively bringing home a paycheck and they will be dependent upon their investments for income. They’re not sure how to go about structuring their investments to produce the income they’ll need throughout retirement.

2

How do they handle healthcare before Medicare?

Olivia and Will won’t be eligible for Medicare for several years and they will need health coverage. But they’re unsure on how to find the right coverage at a cost-effective price prior to age 65.

3

How do they get the most from the sale of their practice?

Olivia and Will are excited about selling their practice. But they’re worried about overpaying taxes when the time comes.

4

How do they maximize the tax benefits from their charitable giving?

Olivia and Will regularly donate to their church, local charities, and other charitable causes. But they’re wondering if there’s a better way to donate to charity to minimize taxes.

The Peterson Wealth Solution

Coordination

While organizing Will and Olivia’s retirement income plan, we take into account their current, as well as their future tax brackets, their charitable giving tendencies, Social Security benefits, paying for health insurance, and the proper investing and distributing of their investments. So, there is a lot to consider, but the benefits of coordinating a plan of action are huge and worth the extra effort.

Taxes

At Peterson Wealth Advisors, we have helped a lot of professionals through the transition of selling their practices to being retired. We understand the tax consequences of selling a practice, but we always look forward to working closely with our client’s tax professionals in seeking the best possible tax outcome for our clients. In Will and Olivia’s situation the solution to mitigate taxation came in helping them coordinating the funding of their charities with the sale of their business.

Charitable Donations

Will and Olivia have a long history of supporting their charitable causes and desire to continue to support their charities throughout retirement. We help them create a plan that has them donate ten years’ worth of estimated future charitable donations in the year that they sell their business. Donating a large amount to a Donor Advised Fund can help them receive a large tax deduction in the year they sell their practice while they are in the highest tax bracket. This donation will also create an account they can draw upon in future years to fund their philanthropic goals.

Income

Through the Perennial Income Model™, we project Will and Olivia’s future income from their investments and coordinate their investment income with their Social Security benefits. We match their current investments with their future inflation-adjusted income needs. Will and Olivia own investments that will be taxed upon withdrawal (IRAs) and will also have investments thats principle has already been taxed (proceeds from the sale of their practice that will be taxed in the year they sell their practice). Through the Perennial Income Model we organize an income stream that uses the right mix of pre-tax IRA investments with their after-tax investments. This provides Will and Olivia the inflation-adjusted income they desire while keeping them in the lowest tax brackets throughout retirement.

Healthcare Pre-Medicare

We help Olivia and Will qualify for the premium tax credit. In other words, we structure their income stream so they will be eligible for the Obamacare premium subsidy until they will qualify for Medicare at age 65. This greatly reduces their monthly health insurance premiums, saving them thousands of dollars a year. Additionally, we investigate health insurance offered through their church to see what plans they’re eligible for should they serve a mission before age 65.

The Conclusion

With the assistance from their Peterson Wealth Advisors team, Will and Olivia have been able to take their disjointed retirement benefits and investments and organize them into a systematic retirement income plan. Peterson Wealth created an action plan to help them get the most out of their charitable donations, reduce healthcare expenses, and minimize tax on the sale of their business. Will and Olivia now have a plan that will help reduce taxes throughout retirement and they have an investment plan in place. The plan is designed to give them an inflation-adjusted stream of income until they both pass on. Will and Olivia can now focus their attention on serving missions for their church and put an end to the worry of outliving their investments.

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