Hypothetical Case Study: Married Atrium Physicians Close to Retiring

Background

John and Mary Sample are married physicians who have been with Atrium Health for more than 20 years and who are both 62 years old. They want to retire but aren’t sure whether they have sufficient savings to support the standard of living they want during the next phase of their lives.

Purpose

John and Mary’s goals are to determine whether they are financially independent and how to transition from full-time work into retirement. They raised these questions during their initial conversations with their Buckingham advisor:

• How do we successfully sever from Atrium given the employee benefits we currently receive and the amount of retirement savings we’ve accumulated there (e.g., should we take the Atrium pension as a lump-sum or a lifetime income stream, do we use COBRA for our health insurance or obtain individual policies, etc.)?
• How do we pay for our discretionary expenses—like overseas travel, renovations to our home and gifts to family members—without jeopardizing our financial security down the road or becoming a financial burden to our children?
• How do we best position our assets so that we have the quality of life in retirement we want without taking too much risk or having to worry about running out of money?
• What tax strategies can we implement to reduce our tax burden?
• How can we be good stewards of the wealth we’ve accumulated (considering our spending needs, children, grandchildren and the charities we want to support during our lifetime)? We haven’t reviewed our estate documents (e.g., wills, trusts, healthcare powers of attorney, etc.) since we created them when our children were first born 30 years ago. We want to make sure our estate documents reflect our current wishes as well as the size of our estate.

Strategy

• Map out what the transition will look like in the months leading up to and immediately following John and Mary’s retirement from Atrium.
• Determine the optimal structure for John and Mary’s hard-earned assets including how to provide for their spending needs and how and when to pay off their mortgage.
• Come up with a plan to optimize Social Security benefits.
• Develop a philanthropic plan to fund John and Mary’s charitable giving in retirement while maximizing the tax benefits in the process.

Execution

• Buckingham created a personalized retirement timeline so John and Mary understand all of the moving parts related to their Atrium retirement accounts and benefits when they both retire.
• Buckingham created a retirement spending plan for John and Mary that provides guaranteed income to cover their basic nondiscretionary expenses (e.g., groceries, utilities, insurance, etc.) each month as well as a separate, sizeable amount to cover their discretionary spending for the year.
• Buckingham’s financial planning team worked with its in-house tax team to develop a charitable giving strategy that included helping John and Mary open a charitable gift fund, recommending how much to pre-fund it while in a high tax bracket, and then deciding which appreciated investment securities to use to fund it. Using appreciated securities (instead of cash) to contribute to their charitable gift fund allowed John and Mary to avoid paying capital gains taxes on the sale of those investments.
• Buckingham’s financial planning team (and its in-house CPA) developed a plan to maximize Social Security benefits and minimize the tax hit from future required minimum distributions from John and Mary’s sizeable IRAs at age 72.
• Buckingham helped John and Mary consolidate all retirement accounts from their previous employers into an IRA for each of them. Buckingham then developed a strategy to invest their portfolio (including their Atrium retirement accounts) as one global portfolio in order to maximize diversification and provide for better portfolio tax efficiency.
• Buckingham will work closely with John and Mary when they retire from Atrium to help them understand and manage all of the moving pieces including distributions from their 401(k)s, ADVANTAGE accounts, CHSMG plans, pensions, HSAs, Frozen Severance/SRP, and Retirement Restoration accounts in a manner that minimizes their tax costs and increases their odds of having enough money in retirement. This will include a review of whether to continue the Atrium individual long-term disability policy, which could then be converted to a long-term care policy without medical underwriting.
• Buckingham coordinated with John and Mary’s estate attorney to ensure that the new estate plan designed together is consistent with the framework we developed to address John and Mary’s goals and concerns in the estate planning process.

This hypothetical case study is provided for illustrative purposes only and does not represent work we’ve done on any client nor is it intended to be representative of any client experience. Instead it is meant to provide an illustration of our approach to planning and tax strategies we believe would be appropriate given the facts and circumstances of the hypothetical case presented.

An individual’s real-world experience may vary significantly from the results portrayed in the hypothetical case based on the unique facts and circumstances of each individual. There is no assurance that we would be able to achieve similar results as those portrayed in similar situations. This hypothetical case is not to be interpreted as a testimonial or endorsement of Buckingham nor the advice or services we provide.

This hypothetical case study is distributed for informational purposes only. The opinions expressed may contain certain forward-looking statements and should not be viewed as recommendations or personal investment advice nor should it be considered an offer to buy or sell specific securities. All information contained in this hypothetical case are obtained from what we believe to be reliable sources.

Past performance is not an indication of future returns. Any legal, tax, and/or insurance related information contained herein is general in nature and is provided for informational purposes only. Always consult an attorney, tax, or insurance professional regarding your specific situation.

Our statements and opinions are subject to change at any time without notice. © 2022 Buckingham Strategic Wealth. R-22-4643