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4 Case Studies Using Keen Wealth’s Comprehensive Planning Thumbnail

4 Case Studies Using Keen Wealth’s Comprehensive Planning

In a recent survey, non-retired adults told investment firm Schroders that they will need approximately $5,000 per month "to enjoy a comfortable retirement."

But is that really enough?


Studies and surveys like these make for eye-catching headlines, but they skimp on the details. For example, where are these retirees planning on living? $5,000 per month is going to go a lot further in, say, Kansas City than it will on the coasts.

When are these folks planning to retire? If it's before 65, are they factoring health care premiums into that $5,000?

What about Social Security? Mortgage payments? Long-term care insurance? An annual travel budget to have a little fun?

These are the kinds of conversations and details that help my team at Keen Wealth arrive at something more reliable and personalized than a number: a comprehensive financial plan. The four case studies we discuss on today's show will give you a better idea of how that process could help you improve your plan for retirement.

1. "Jack" is 10 years older than his wife "Jill." They want to figure out the best strategy for passing on their wealth to their two daughters. Jack has $3 million in an IRA. Jill has pensions and Social Security. They've been very good savers, and they live within their means, so they're only living off their fixed income. If something happens to Jack, Jill will inherit the $3 million IRA, but because of her low spending and other assets, Jill doesn't really need that money.

Under current law, when a non-spouse beneficiary inherits an IRA, they have a 10-year window to take distributions and empty the IRA. Also, If the IRA owner started taking required minimum distributions at the time of their passing, the inheritors must continue those minimum distributions and exhaust the IRA by the 10th year.

Since Jill doesn’t need the IRA to cover her expenses, my team saw an opportunity to create two windows for the kids to eventually take those distributions.

First, we helped Jack make his wife a 50% beneficiary on the IRA and his daughters each a 25% beneficiary. Assuming Jack passes before Jill, his daughters will have 10 years to take distributions from each of their 25%, and once Jill inherits her 50%, she will make her daughters equal beneficiaries. Then, when Jill passes, the clock will start on another 10 years for her daughters to take distributions from that half of the original IRA. So rather than having to withdraw $3 million in 10 years, their daughters could potentially have more time to make the most of that money.

2. Married couple "Sue" and "Joe" are the same age. Sue has a pension that will pay either $6,000 per month with no survivor benefit, or $4,500 with a 50% survivor benefit. Should Sue take the $4,500 per month so Joe will get $3,000 should she die first? Or, since they're the same age, are they better off taking the full $6,000?

Like most financial planning decisions, this choice would be easier if we knew one key piece of information: when will Sue and Joe die. Instead, we must weigh the cost to the couple for securing that survivor's benefit against some other options.

In this case, my team crunched the numbers and determined that taking out a term life insurance policy for Sue would cost them less than sacrificing $1,500 per month in pension benefits, and it would take better care of Joe should Sue pass first.

3. "Michelle" is financially secure, and she is planning to leave a substantial inheritance of after-tax assets to her children. She's considering helping her son by cosigning a mortgage so that he will receive a lower interest rate. But she also wants to fairly distribute her wealth to her other children and encourage them to manage the money responsibly. What are her best options?

Some folks with Michelle's wealth might just choose to cosign the loan or write them a check up to $17,000 per year, which can be gifted tax-free.

But, because Michelle wanted to add that extra layer of accountability to her legacy, we helped her set up a self-funded family loan for her son. The IRS requires these loans to be set at the applicable federal interest rate, currently 4.2%. We calculated that paying back mom and deducting interest payments at tax time would save her son around $600 per month over the life of the 30-year payment plan versus cosigning on a mortgage at around 7%.

4. "Mike" and "Mary" are married, 60, non-smokers, and getting ready to retire early. They have after-tax assets of $500,000 and tax-deferred assets of $2 million. They need about $8,000 per month to live on. They can get COBRA health insurance through their employer until they're eligible for Medicare at 65, but that would cost $24,000 per year. Buying coverage from the Health Insurance Marketplace would cost them about $23,250 per year, but they don't know if they're eligible for subsidies that would bring down the cost of their monthly premiums. Should they just pay for COBRA?

To be eligible for health insurance subsidies, you must have some taxable income. If Mike and Mary were managing their money solo, they might just pay for COBRA because they aren't earning any money and the cost is about the same as the marketplace anyway.

But with the personal goal of early retirement and reducing health care costs front and center, my team at Keen Wealth came up with a better plan. By performing Roth IRA conversions while living on their after-tax assets and delaying their Social Security benefits, this couple started generating the right amount of taxable income to make them eligible for subsidies. That brought the cost of their monthly healthcare premiums down to ... almost zero! And that's for a good insurance plan, which will cover their needs until it's time to switch to Medicare.

As important as your numbers are, your specific needs and goals will determine the best course for your financial plan. Make an appointment to visit Keen Wealth and let’s talk about your life, your money, and our process. 

About Bill

Bill Keen is a financial advisor with nearly 30 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he focuses on providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to Forbes, U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.

KWMG, LLC’s dba Keen Wealth Advisors (“company”) is an SEC Registered Investment Advisor located in Overland Park, KS. The company and its representatives may only conduct business in those states where registered or where excluded/exempt or from licensure. For registration information please contact the SEC or the state securities regulators for the states where the company is notice filed. A copy of the company ADV is available upon request. Advisory services are only offered to clients or prospective clients where the company and its representatives are properly licensed or exempt from licensure. No advice may be rendered by the company unless a client service agreement is in place. This information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy and is for illustrative purposes only. Clients and prospective clients must consider all relevant risk factors involved with each strategy, including costs or fees, and their own personal financial situations before trading.

The views outlined in the book, Keen on Retirement Engineering the Second Half of Your Life, are those of the author and should not be construed as individualized or personalized investment advice. Any economic and/or performance information cited is historical and not indicative of future results. Economic forecasts set forth may not develop as predicted.

The Amazon Best Seller ranking listed on marketing materials is specifically referring to Best Seller rankings for the Kindle Top 100 Paid Lists under the subcategories of: Budgeting and Financial Risk Management, based on data as of September 5, 2019 and the second edition under Financial Risk Management on October 26, 2022. Amazon rankings although relevant on how a product is selling overall doesn’t necessarily indicate how well an item is selling among other similar items or similar item categories. Amazon may choose the most popular categories or subcategories within which an item has a high ranking to determine its best seller rankings. These rankings are updated hourly and as a result, should be expected to fluctuate as such. Keen Wealth Advisors and Amazon are not affiliated entities. 

The Steve Sanduski Advisor Network, Belay Advisor, LLC and other third-party contributors to our blogs and podcasts are not affiliated with Keen Wealth Advisors.

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