Case Studies

Developing Your Investment Strategy

Fred and Wilma are both retiring from their jobs within 6 months. Fred says his portfolio has gotten too large to handle on his own and doesn’t feel comfortable with the responsibility anymore. Additionally, Fred wants to protect Wilma in the event of his death. Since Fred has always handled the money and investments, he wants to develop a relationship with an advisor that Wilma feels comfortable working with. Read case study>>

Pre-Retirement Planning

Marsha is divorced. She would like to stop working full-time by age 60 and perhaps do some per-diem work until age 65. She doesn’t have a pension and will have to rely solely on her savings and Social Security to support herself. She is a novice when it comes to managing her investments and needs a lot of education and direction. Read case study>>

Losing a Beloved Spouse

Betty’s husband, Barney, died 2 weeks ago from a heart attack. They were married for 38 years. Read case study>>

Nervous Investors

Jack and Diane receive pensions but are too young to collect Social Security. They never want to work again. They are concerned about market volatility and have been sitting primarily in cash since 2003 while the markets recovered.

Read case study>>

Retiring With No Pensions

Homer and Marge, retired college professors, are collecting Social Security and withdrawing money from a savings account now to live on. They are unsure how best to create predictable, sustainable and increasing income from their investments. They saw Bill’s personal finance article in The Chronicle of Higher Education and requested a meeting. Read case study>>

Busy Professionals: Building a Solid Foundation

Jack is a pediatrician and a partner in a thriving community medical practice. Jill dabbles in real estate part-time but is currently on maternity leave. Recognizing that another child and job changes bring new financial decisions, Jack and Jill wanted some objective advice in formulating financial and investment strategies for their future. On the horizon were building their dream home, having another child, funding their children’s college education, and investing smart for their own retirement. Read case study>>

Managing an Inheritance

Mariah’s mom passed away two years ago from cancer and left her an investment account worth $150,000. Additionally, Mariah’s mom left a house in upstate New York to Mariah worth $150,000 that is paid for free and clear. Mariah does not feel she is being listened to by her mom’s stockbroker who manages the account. The broker rarely returns Mariah’s calls and when he does, she feels he always cuts her off when she talks. Read case study>>

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Losing a Beloved Spouse*

Client: Betty, age 62

Job: Part-time work for County agency

Earnings: $20,000/year

Net Worth: $925,000

Children: All children are grown and not living at home; Betty is not responsible for them

Situation: Betty’s husband, Barney, died 2 weeks ago from a heart attack. They were married for 38 years.

When Betty came to see us her entire life had recently been turned upside down. Barney, who had been the primary wage earner and family bill payer, was suddenly gone. Betty was completely overwhelmed with the loss of her husband and the avalanche of paperwork that would follow from Barney’s employer. She didn’t understand her personal finances, but was forced into a situation where she had to become a fast learner.

Betty’s first objective was to make sure she would be able to maintain her current standard of living and pay her bills on time. She was concerned about her utilities being shut off. We verified her checking account balance ($5,000) and immediately had her transfer another $10,000 to it from her bank savings account. She felt that this would be enough to cover her bills for the next few months. We organized her outstanding bills and developed a schedule of recurring payments she would need to make, and we offered to help her pay her bills and balance her check book for as long as she needed.

Our next objective as Betty’s advisory team was to assure her that she would be okay. Betty provided us with copies of her tax returns, and then provided us with information from Barney’s employer including benefits paperwork for the: NYS Deferred Compensation Plan, NYS Local Retirement System plan, Public Employees Federation Union life insurance, Social Security Administration, Fringe Benefits Management Company, and Empire Health Plan.

We had Betty contact the different departments and Barney’s employer to authorize our firm to ask questions and make inquiries on Betty’s behalf. It was a huge relief to Betty that we would coordinate and complete the necessary paperwork. After doing our due diligence, we were able to complete the forms necessary to have $120,000 in life insurance proceeds mailed to Betty within 2 weeks. Additionally, we were able to complete the paperwork to rollover the $190,000 taxable portion of Barney’s retirement plan into an IRA for Betty thereby maintaining the tax-free status. We also instructed the former employer to have a $50,000 non-taxable group term life insurance benefit paid directly to Betty. Additionally, we arranged for Betty to pick up a check for $5,000 for Barney’s unpaid earnings, unused vacation time, and the balance from his flexible spending account. We were able to help Betty decide how best to continue and pay for health insurance coverage. Finally, we had Betty initiate contact with the Social Security Administration to begin her monthly payout to help generate recurring monthly income.

Betty recognized that she didn’t have the time, talent or temperament to handle her own financial affairs and hired BLRS on a retainer basis to provide ongoing perspective, direction and fee-based investment management services. It is our pleasure assisting her.

*Names and some details have been changed to protect client confidentiality.

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Developing Your

Investment Strategy*

Client: Fred and Wilma, age 64 and 60

Job: Engineer and Elementary School Teacher

Earnings: $125,000/year combined

Net Worth: $1,375,000

Children: All children are grown, married, self-supporting, and not living at home

Situation: Fred and Wilma are both retiring from their jobs within 6 months. Fred says his portfolio has gotten too large to handle on his own and doesn’t feel comfortable with the responsibility anymore. Additionally, Fred wants to protect Wilma in the event of his death. Since Fred has always handled the money and investments, he wants to develop a relationship with an advisor that Wilma feels comfortable working with.

When Fred and Wilma met with us to discuss an investment strategy for their $1 million portfolio, we began by asking them questions about their dreams, concerns, goals, desires and attitude for risk. Fred had accumulated a cornucopia of investments at 6 different custodians resulting in too much paperwork, confusion and duplication of investments. Additionally, his strategy, or lack of one, had led him in a very risky direction.

One hundred percent of their money was invested in the stock market. This was an excessive amount given their more conservative responses to a detailed behavioral finance questionnaire. In order to reduce risk, balance the portfolio between stocks and bonds, and potentially improve performance, we suggested they broadly diversify away from their large-cap only orientation. We suggested they incorporate mid-cap, small-cap, international and emerging market equity in their stock portfolio. Additionally, we recommended their fixed income allocation include government bonds, corporate bonds, muni-bonds, international bonds and emerging market debt bonds. We also reviewed how our core, active and alpha portfolios were developed and how fees were correlated with the ability of the managers to add value. This strategy alone could save them in excess of $2,500 per year in fees and expenses.

Another area affected by poor diversification and coordination is taxes. After all, it’s not what you make – but what you get to keep. Consequently, we suggested and they agreed to bring their accountant in on our discussions about tax-free, tax-deferred and tax reduction strategies. In this way, all of their advisors could be on the same page working together toward one common goal.

We agreed to help Fred and Wilma structure an appropriate total portfolio that would eliminate duplication, reduce paperwork, consolidate accounts and simplify their lives. We manage a large portion of their assets internally and play a quarterbacking role overseeing other components of their portfolio. Fred, in particular, feels his stress level is down now that he has delegated the management responsibility to us. They are both happy with their cost savings and risk reduction, and Wilma feels comfortable enough with us that she now talks with us regularly. It is our pleasure assisting them.

*Names and some details have been changed to protect client confidentiality.

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Managing an Inheritance*

Client: Mariah, age 23

Job: Executive Assistant for music distribution company

Earnings: $35,000/year

Net Worth: $300,000

Children: None

Situation: Mariah’s mom passed away two years ago from cancer and left her an investment account worth $150,000. Additionally, Mariah’s mom left a house in upstate New York to Mariah worth $150,000 that is paid for free and clear. Mariah does not feel she is being listened to by her mom’s stockbroker who manages the account. The broker rarely returns Mariah’s calls and when he does, she feels he always cuts her off when she talks.

When I met Mariah she had just started her first full-time job after graduating from college. Mariah was frustrated by her inability to get her mom’s stockbrokers attention and confused by the legal papers and details surrounding the impending sale of her mom’s home. Mariah was being given advice from insurance people, numerous lawyers, home inspectors, family and friends, and was overwhelmed by all the choices and decisions to be made.

Since Mariah was a recent grad and had no prior investment or personal finance knowledge outside of her bank savings and checking account, we started at square one. First, we began educating Mariah about personal finance issues, everything from establishing an emergency fund to understanding her employer benefits to investment planning and estate settlement issues. Next, we discussed and she agreed to let us communicate and coordinate with her attorneys, insurance professionals and home inspectors. Mariah experienced an immediate sense of relief that we could act as her point person.

Mariah’s other objective was to transfer her inherited account away from her mom’s stockbroker. We reviewed her statement and noticed that she only had one large stock fund comprising the entire account. This fund was an under-achiever and she was paying high internal expenses for an investment that was not providing value. Additionally, she had an unrealized loss in the investment and we counseled her that she could use the loss on her tax return to offset her income and lower her tax liability.

While the account transfer process was underway we reviewed her goals, dreams, cash-flow needs, and tolerance for risk and agreed on an overall strategy. This solution would reduce her risk level, provide broad diversification, the potential for enhanced performance and lower expenses. Additionally, the investment account we suggested offered Mariah check-writing privileges to help supplement her salary.

Our work with Mariah began with concerns about an account and a home sale but took us down a path that ultimately enhanced her overall financial picture and self-confidence. Mariah has been so impressed with our availability, impeccable service, and attention to detail, that she has referred two friends to us. It is our pleasure assisting them.

*Names and some details have been changed to protect client confidentiality.

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Retiring With No Pension*

Client: Homer and Marge, age 65

Job: Retired College Professors

Earnings: N/A

Net Worth: $2,750,000

Children: All children are grown, married, self-supporting, and not living at home

Situation: Homer and Marge are collecting Social Security and withdrawing money from a savings account now to live on. They are unsure how best to create predictable, sustainable and increasing income from their investments. They saw Bill’s personal finance article in The Chronicle of Higher Education and requested a meeting.

After a 30+ year career in academe, Homer and Marge retired within a year of each other. They needed advice on managing this transition, including implications on their income, taxes, accounts, and asset protection strategies.

Homer had accumulated over $1 million in his numerous 403(b) plans (the nonprofit version of a corporate 401k), while Marge had accumulated almost $1 million in her plans. Both were receiving Social Security for over one year.

We made arrangements to consolidate and roll over Homer’s and Marge’s various 403(b) plans into IRAs so we could reduce the number of accounts (from 8 to 2), eliminate paperwork, simplify their portfolio, and achieve economies of scales thereby reducing their fee structure.

We broadly diversified their portfolio and educated them about the risks and potential rewards of their holdings. Additionally, we developed an income strategy based upon the latest research to increase the likelihood they will never run out of money.

To create a predictable stream of income, their portfolio transfers interest/dividends to a cash account every month. Then on a biweekly basis, a payment is sent electronically to their checking account to supplement their Social Security income. This strategy replicates their former biweekly paycheck from the college. Their portfolio, their income strategy and the amount of their withdrawals are monitored every month to ensure they stay on track.

Turning to asset protection, we invited Homer and Marge to a local workshop sponsored by a trusted colleague who is a long term care strategist. After attending, we coordinated with their attorney and accountant, and implemented a cost-effective strategy that will allow them to preserve their assets, dignity and control if or when a medical, nursing or home care episode develops.

A commitment to save and invest from an early age put Homer and Marge on the path to retirement success way before we met them. Retiring with no pension is not an easy feat, but it can be done. All it takes is some proper planning, guidance, and discipline. It is our pleasure assisting them.

*Names and some details have been changed to protect client confidentiality.

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Nervous Investors*

Client: Jack and Diane, both age 55

Job: Retired Executive and High School Teacher

Earnings: N/A

Net Worth: $1,650,000

Children: All children are grown, married, self-supporting, and not living at home

Situation: Jack and Diane receive pensions but are too young to collect Social Security. Their intention is to never work again. They are concerned about market volatility and have been sitting primarily in cash since 2003 while the markets recovered.

After a 25+ year career in the public school system, Diane, a history teacher, decided to take early retirement. She and her husband Jack, who retired from his corporate job at the same time, needed advice on managing this transition and getting back into the stock and bond markets.

Diane was entitled to a pension that paid nearly 80% of her final year’s salary. In addition to her pension, Diane accumulated $150,000 in her tax-sheltered annuity 403b program. Jack also collects a pension and had saved nearly $350,000 in his tax-deferred 401k plan. Jack and Diane are both eligible for Social Security at age 62.

Their pension income provided for all their living expenses. We made arrangements to roll over Jack’s 401k and Diane’s 403b into IRAs and developed a long-term investment strategy for them. As part of that strategy we suggested that Jack and Diane start an account and use part of their pension income to save for expenses such as a new car or to fund a dream vacation to the American heartland.

Since the majority of their retirement money was in cash, they recognized they would need to invest more aggressively and grow their portfolio to offset inflation. We had numerous meetings with Jack and Diane over the next few months. During this time we explored their goals, concerns and feelings toward risk. Additionally, we had them complete a unique behavioral finance risk profile. Because of the way they answered these questions, and our deep understanding of their concerns and wishes, we came back with multiple options to present to get them reinvested.

Jack and Diane were grateful that there were no high pressure sales tactics. They were surprised that we were so patient with them while educating them over a few months. They have remained fully invested now and are at ease with the risk/reward trade-off of their current portfolio. They have commented numerous times how they feel more confident in their decision-making ability and are comfortable knowing someone else is looking out for their best interests. It is our pleasure assisting them.

*Names and some details have been changed to protect client confidentiality.

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Pre-Retirement Planning*

Client: Marsha, age 50

Job: Nurse

Earnings: $60,000

Net Worth: $250,000

Children: One child who is a sophomore in college

Situation: Marsha is divorced. She would like to stop working full-time by age 60 and perhaps do some per-diem work until age 65. She doesn’t have a pension and will have to rely solely on her savings and Social Security to support herself. She is a novice when it comes to managing her investments and needs a lot of education and direction. Currently invests 10% of her salary into her 403b plan. Marsha doesn’t live extravagantly now. In fact, she always works within her budget and pays off her credit cards every month.

We began our first meeting with Marsha by taking an inventory of her assets and liabilities. We determined where she is now and where she wanted be in the future. Marsha provided us with copies of her previous tax returns, employee benefits booklet, investment statements and estate planning documents for review. We also did a cash-flow analysis for current and future expenditures.

Since the majority of Marsha’s money is in her 403b plan at work, we discussed many ideas including but not limited to: investing more aggressively, saving more of her salary, and expanding her investment options and lowering her investment costs by completing a 90-24 transfer to another custodian.

A 90-24 transfer allows participants in 403(b) plans to directly transfer employee-contributed plan values to other 403(b) plans while continuing to fund their current programs. We explained how Marsha could do this without terminating employment, without owing taxes, and without incurring any early withdrawal penalties. This strategy increased her available investment choices dramatically and lowered her investment expenses by 50%, a cost savings of $3,500+ per year.

We prepared numerous projections for Marsha which illustrated what her portfolio could potentially grow to by certain ages. Additionally, we illustrated how much she could take out each month and showed her the probability of her never running out of money. We discussed at length how her Social Security income and portfolio income may not be enough for her to maintain her standard of living. The outcome of these talks is that Marsha will reduce her living expenses now and save the difference. She also will likely continue to work full-time to age 62 and will consider working per-diem to age 67 or age 68.

Marsha is also contemplating going back to school so when she retires she may be able to teach. Teaching has always been a dream of hers. Marsha has also updated her estate planning documents since the divorce and renamed beneficiaries and contingent beneficiaries on her 403b as a result of our counsel. Marsha has also met with our long-term care strategist and has invested in a plan that will protect her assets in the event of a medical, nursing or home care issue.

Marsha finally feels she has things under control and always comments on how her “ducks are in a row”. It is our pleasure assisting her.

*Names and some details have been changed to protect client confidentiality.

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Busy Professionals:

Building a Solid Foundation*

Client: Jack and Jill, age 42 and 36

Job: Physician & Real Estate Agent

Earnings: $160,000

Net Worth: $500,000

Children: Two children and another on the way

Situation: Jack is a pediatrician and a partner in a thriving community medical practice. Jill dabbles in real estate part-time but is currently on maternity leave. Recognizing that another child and job changes bring new financial decisions, Jack and Jill wanted some objective advice in formulating financial and investment strategies for their future. On the horizon were building their dream home, having another child, funding their children’s college education, and investing smart for their own retirement.

Jack and Jill are bright, energetic people who are serious about being financially successful. They have done a great job at accumulating money, but there is no coordination or strategy in place for them to protect or maximize their assets.

Consequently, we suggested they begin by focusing on building a solid financial foundation. Toward this end, we suggested they set aside 3-6 months worth of living expenses in a tax-free money market fund to act as their Emergency Fund. We also suggested Jack apply for and procure disability insurance coverage. A disability income policy will replace a portion of his income, generally up to 60% of his gross earnings, subject to certain limits. Since Jack’s earning potential is his biggest asset, being without this coverage could wreak financial havoc on the family if he couldn’t work.

We advised Jack to increase his life insurance coverage and advised Jill to procure life insurance coverage on her life as well. Although Jill isn’t earning any money now, she expects to in the future and provides tremendous value by taking care of the kids, running the house, and managing the family finances.

We projected the cost of a college education for the three children in 12-18 years. We suggested that Jack and Jill establish and fund a separate college account for each child. We suggested they make monthly contributions via direct deposit into a diversified portfolio of stock and bond funds. The plan we suggested would automatically decrease the proportion of stock to bonds and cash as the kids approached college age, thereby reducing risk and providing greater liquidity.

At our urging, Jack and Jill met with an estate planning attorney to have wills drawn up to provide for their children and appoint guardians. Additionally, they have had powers of attorney, living wills, and health care proxies drafted. Jack and Jill agreed to let us be present in these meetings to gain a broader understanding of their wishes and desires.

We suggested they put a 20% down payment on their dream home on the hill to avoid PMI. We also suggested Jack and his partners consider establishing a retirement plan for the medical practice and max out their annual contributions to lower their tax liability.

Jack and Jill are on their way to achieving financial independence. It is our pleasure assisting them.

*Names and some details have been changed to protect client confidentiality.

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