Ed and Jan Wilson worked at a teaching hospital in a small Midwestern city where he was a cardiologist and she was a nurse practitioner. Retirement was staring them in the face but they couldn’t decide if they could or should retire. They had no retirement planning and were concerned they would not have enough money to do all the things they wanted to do.
At our first meeting, I sensed that both Jan and Ed felt uncomfortable about how they would handle retirement. They wanted to remain engaged in life and feel like they had a purpose − and they wanted their kids to become financially independent. Now that the Wilsons had made the decision to plan for the future, they wanted their children, who had entered the working world, to learn about personal finance too.
At this stage of their lives, the Wilsons did not have the earning power to make up losses in their portfolio like they did when they were younger. In addition, interest rates were so low that they could not live off the interest of their investments. They’d thought about buying bonds but were concerned about locking in low rates for an extended period of time. Years ago, they had bought a 10 unit apartment building but didn’t know if they would be able to keep the property, or if they would have to sell it to fund their retirement.
After taking the Wilsons through the Krane Financial Life Planning Program™, I learned that one of their major goals was to take their children and extended family on a cruise every year. Spending quality time with their family was very important to them. They did not want to limit the things they loved or compromise their lifestyle in retirement.
I created a financial plan that gave both Ed and Jan a sense of purpose and the flexibility to do the things they wanted to do for their retirement planning. I asked Ed if he’d be willing to work two days a week for a few years, and he said yes. That income funded their mortgage payment and let the Wilsons keep their rental property, which would be paid off in eight years. Jan volunteered at a senior day care center – something she’d always wanted to do − which turned into a part-time paying job as well. The increased cash flow made it possible for the Wilsons to live comfortably in retirement.
For asset protection purposes, I advised the Wilsons to hold their rental property in an LLC and referred them to an attorney who could set that up and explain all the details. I also advised them to put two years of living expenses in a money market savings account and created a laddered portfolio of tax free municipal bonds. Now, every year the Wilsons have bonds maturing, so that if interest rates rose, they can reinvest their money at higher rates. I also invested a small part of their portfolio in other areas, including stocks, commodities and real estate, as a hedge against inflation.
To ease Ed and Jan’s concern about their children’s financial future, I planned a one-day “personal finance retreat” for the Wilson family. I taught their kids key financial concepts, such as diversification, compounding of interest, and developing a spending and savings plan. We also discussed the importance of goal setting, and I showed everyone how developing a personal financial plan would help each of them reach their goals.
