Helping you create a retirement income plan
Case Client: David & Lisa
• Age: 55 & 54
• Occupation: Consultant at Lockheed Martin (Atlanta, GA) & Government Employee with Pension
• Primary goals: Retire by age 60, pay off their mortgage before retirement, coordinate pension and 401(k) income, plan for healthcare costs before Medicare, and optimize tax-efficient withdrawal strategies.
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Overview
David & Lisa had been diligent savers, consistently contributing 15%–20% of their income to retirement plans, but they had never built a coordinated retirement income strategy. With a combined income of $280,000, they enjoyed their lifestyle but wanted clarity on how to blend Lisa’s pension with their 401(k) and IRA savings. They also needed guidance on tax-efficient savings, healthcare planning before Medicare, and aligning investments with their retirement goals.
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Our Approach
Optimizing Retirement Contributions & Investment Allocations
- David, working as a Lockheed consultant, was contributing heavily to his Roth 401(k) without fully understanding the tax impact. We transitioned him to pre-tax contributions to lower taxable income today.
- Lisa’s government plan allowed after-tax contributions with in-plan Roth conversions. Instead of saving extra in cash, we redirected $10,000 annually into her plan to grow more Roth dollars.
- Their retirement accounts were shifted from higher-cost target date funds into lower-cost portfolios tailored to their timeline.
Expense & Cash Flow Planning
- We reviewed their current spending and built a retirement budget, identifying where costs will fall (commuting, payroll taxes) and where they may rise (healthcare).
- Rather than chasing one savings goal, we set target balances across pre-tax, Roth, taxable, and cash accounts to allow for flexible withdrawals.
Tax-Efficient Withdrawal & Healthcare Planning
- Before Medicare, their income strategy will rely on taxable and Roth assets to keep taxable income low.
- This helps them qualify for ACA Premium Tax Credits, reducing healthcare premiums.
- Each year, we’ll review their tax return and convert additional amounts into Roth IRAs up to their tax-efficient threshold.
Employer Benefit Optimization
- David had an HSA available through his consulting role but wasn’t maximizing contributions. We increased savings to capture the tax deduction and future tax-free healthcare funds.
- We also set up HSA investments to grow beyond a cash balance.
- Lisa’s employer provided free estate planning resources, which they used to update their wills and healthcare directives.
Education, Mortgage & Phased Retirement Planning
- With their youngest child in college, we structured 529 contributions to capture state tax credits while funding tuition.
- Lisa’s deferred compensation benefits were incorporated into their plan to ensure their mortgage would be fully paid before retirement.
- To ease the transition, David plans to continue consulting part-time for the first few years of retirement. This provides supplemental income, reduces the need for large early withdrawals, and keeps healthcare subsidy eligibility intact.
Social Security, Pension & Long-Term Care Planning
- We modeled Lisa’s pension options, weighing single life vs. survivor benefits, and aligned these with David’s Social Security claiming strategy.
- Delaying David’s Social Security until 70 maximizes survivor benefits for Lisa while reducing taxable income early in retirement.
- We reviewed long-term care funding options, giving them clarity on how potential healthcare needs could impact their income plan.
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The Results
By creating a comprehensive, tax-smart retirement income plan, David & Lisa now have a clear roadmap to retire at 60 with confidence. Their mix of pension income, phased consulting work, tax-diversified savings, and Roth conversions allows them to manage taxes, control healthcare costs, and maintain their lifestyle well into retirement. With annual reviews, their plan continues to adapt as life evolves.