Moira & Johnny
45 & 43
David (12) & Alexis (15)
Determine if we’re on track to pay for college, weddings, retirement, etc.
Figure out if there are things we should be doing differently to reduce taxes and accelerate the process
Find a better balance between enjoying life now and saving for the future.
Johnny and Moira have had their savings and investments on auto-pilot for several years now while raising their young kids and managing busy careers. Johnny works for a technology company and Moira works for a large pharmaceutical company and they both have great employee benefits to include stock based compensation. They have been doing a lot of great things to protect themselves and build wealth, such as:
Contributing to their 401(k) plans to get the full company match
Participating in the company employee stock purchase plan (ESPP)
Obtaining individual life insurance in addition to their group benefits
Funding health savings and college 529 accounts
Obtained wills with guardianship provisions, living wills, powers of attorney, etc.
They’ve amassed some sizeable balances in the 401(k), 529, and company stock accounts and they’ve taken steps to plan for the unexpected; so, what’s the problem?
The problem is that combined they make close to $300K/year and still feel as though they don’t have extra money at the end of the month. Were it not for year-end bonuses and stock awards they would struggle to make tuition payments or go on vacation.
The challenge for Johnny and Moira is they feel they’re doing everything they can but aren’t sure if it’s enough to reach their goals. They recognize they are doing well but can’t understand why they feel so much anxiety and so financially strapped month to month.
Given their super busy lives, they want an expert, experienced in working with their complex corporate benefit plans and taxes, who can help them make strategic decisions with their money and simplify what actions need to be taken.
Johnny and Moira hired a fiduciary, fee-only CERTIFIED FINANCIAL PLANNER™ professional who they knew would not be tempted to sell them high commission products, to dig into what they were doing and understand what truly mattered to them. Finding the right advisor was an important first step because, depending on various upbringings and generations, advisors could have very different opinions on how money should be managed and used.
After finding an advisor who appreciated balancing their desire to enjoy life today while simultaneously planning for the future, they worked with the advisor to organize their data and populate a personal dashboard which allowed them to see their personal finances all in one spot. This allowed them to see how they were tracking toward their goals based on their current choices and what things might look like with alternative choices.
Some of the items we discovered in the planning process were:
- A prior insurance oriented advisor had recommended over-funding an expensive variable life insurance policy without understanding the strain it was putting on their monthly cash flow.
- Prior advisor was promoting a new life policy for the purpose of future tax free income when the same goal could have been achieved, far less expensively, through reduced premiums in her current policy and increased contributions to their Roth 401(k)
- We discovered college funding was directed to high commission products when comparable lower cost alternatives were available
- There was no active plan in place to manage current and future tax liabilities.
- Dispelled several myths related to corporate pension benefits
Johnny and Moira are killing it but it just didn’t feel like it; as a result, there was a level of stress that was distracting them from being present and enjoying life as much as they could.
In the first month, their new advisor helped Johnny and Moira organize their finances and prioritize their goals. Their advisor then explored alternatives to what they were currently doing to free up cash flow and direct money to investments with lower expenses. They were able to adjust the funding of their life insurance to maintain the death benefit and redirect some savings to their Roth 401(k)s. By the end of the first year, they had updated the amount and location of their systematic investing, re-allocated their existing assets to maximize risk-adjusted return, and brought their investments in line with their plan assumptions, among other things.
Through the planning process, they were able to strip out unnecessary expenses, more effectively save and invest, and they no longer had to guess if they were on track to pay for college, retirement, or improvements to their home.
Most importantly, through the financial planning process, Johnny and Moira, were able to find a better balance between enjoying today and saving for tomorrow.
Note: The above case study is hypothetical and does not involve an actual Open Wealth Network client. No portion of the content should be construed by a client or prospective client as a guarantee that he/she will experience the same or certain level of results or satisfaction if Open Wealth Network is engaged to provide investment advisory services.