Introduction

Captain Navarro, a dedicated naval officer with over three decades of service, is preparing for his retirement. As he looks ahead to this new phase of life, Capt. Navarro is keen on achieving specific financial and lifestyle goals. His primary objectives include reducing stress in retirement, minimizing tax liabilities, safeguarding his assets from market losses, and securing a prosperous financial future for his wife and children. This case study follows the DOS Analysis approach, which systematically evaluates Dangers, Opportunities, and Solutions to address his retirement challenges.

Background

Capt. Navarro, aged 61, has decided to retire from his military career. His years of hard work and diligent saving have resulted in a substantial nest egg. His two financially independent children, now in their late 30s, stand to benefit from an inheritance that ensures their long-term financial security.

Dangers

1. Reducing Stress in Retirement: Capt. Navarro faces the challenge of transitioning into retirement without the stress of financial uncertainty. The potential dangers include outliving his savings or experiencing market downturns that could disrupt his retirement plans.

2. Minimizing Tax Liabilities: High tax obligations during retirement could erode his savings and hinder his ability to provide for his family. It's essential to mitigate this danger while ensuring his financial stability.

3. Safeguarding Assets from Market Losses: Market volatility poses a significant danger, potentially jeopardizing Capt. Navarro’s retirement nest egg and impacting his desired lifestyle.

4. Planning for the Children's Financial Future: Capt. Navarro wants to enjoy a financially stress free retirement but would also like to leave his children a substantial inheritance. The danger lies in inefficient wealth transfer that could result in hefty income and estate taxes.

Solutions

1. Leveraging Retirement Assets: Capt. Navarro possesses valuable retirement assets, including a TSP with $900,000, a non-qualified portfolio of $1,100,000, and a fully owned home, as well as a paid-off rental property. These resources can be effectively utilized to address the dangers and challenges he faces.


2. Utilizing Retirement Savings: Capt. Navarro’s substantial TSP and non-qualified portfolio present opportunities to create a well-structured tax smart retirement income plan. By strategically managing these assets, incorporating well timed Roth conversions, embracing charitable tax strategies and more, he can ensure a stable and stress-free retirement, minimizing the danger of outliving his savings, and provide for his children when he is gone.

3. Real Estate Assets: : The ownership of his primary residence and a paid-off rental property can be leveraged as valuable financial resources and as a source of security against inflationary pressures. These properties can serve as additional income streams, a source of potential downsizing or rental income, and can contribute to reducing tax liabilities and market risk exposure.

4. Military Retirement Pension: Upon retirement, Capt. Navarro will receive a pension of $8,500 monthly. The taxable nature of this payment creates some unique challenges but with proper tax planning, these challenges can be minimized and this asset can be harnessed to further his goals. This payout can be carefully integrated into his retirement strategy, contributing to his financial security and serving as a buffer against potential dangers in the early years of retirement.

By thoughtfully harnessing these available resources, Capt. Navarro can effectively overcome the identified dangers and secure his retirement with confidence. These opportunities provide him with the means to create a tailored plan that aligns with his goals and objectives, ensuring a successful retirement journey.

Outcome

By systematically addressing Dangers, leveraging Opportunities, and implementing Solutions, Capt. Navarro and his wife, will now enjoy a retirement that is financially secure and free from stress. His children are poised to inherit a substantial legacy that minimizes tax burdens and ensures their financial well-being. Capt. Navarro’s retirement journey serves as a testament to the effectiveness of the DOS Analysis approach in achieving retirement dreams.

NOTE: The preceding case study is hypothetical in nature and does not pertain to any real WE Alliance Wealth Advisors’ client. None of the information presented should be interpreted by a client or potential client as a guarantee that they will achieve similar results or satisfaction levels if they engage WE Alliance’s investment advisory services.