Case Study 3 – Mid-Late Retirement
This married couple, ages 79 and 77, were referred to us by a long-time client of Pacific Investment Research. The husband had taken responsibility for managing their investments and had done reasonably well, despite riding out the bear market in 2008 and 2009. They relied on income from their investment portfolio in their revocable living trust as well their required minimum distributions from each of their personal IRA accounts to supplement their social security income and her small pension income. While they were both in reasonably good health, he wanted to make sure that his wife would be in capable hands to manage their money if something should happen to him. He still wanted to participate in how their accounts were managed, but preferred not to have to watch his portfolio daily. He was also concerned that another bear market might be coming soon and wanted to transition to a more conservative investment approach that could still earn attractive returns.
The Action Plan
Here’s the actions we took together:
- To minimize the tax ramifications in the year that we started working together, we initially retained a few of their appreciated stocks in their trust account that were still performing well.
- We reallocated the remainder of their portfolio among dividend paying stocks, low volatility stocks, and high yielding bonds.
- By changing their overall asset allocation, and by incorporating active management, we were able to drastically reduce the potential downside risk of their overall portfolio.
- We also were able to increase their current dividend income, and provide a smoother ride toward a higher expected rate of return.
Since we have been working with them, they both have noticed how their portfolio returns are much more consistent. This gives them peace of mind. They also appreciate that we watch their investments on a daily basis so they no longer have to worry about it. We see them frequently for semi-annual meetings, and they always call us when they need us.
This case study is hypothetical in nature and not specific to an actual client. The material is intended for illustrative purposes and not meant to be advice.