Jake and Sarah Green have a plan. They want to retire early so they can spend as much time as possible with their two children and enjoy their home in the suburbs of Pittsburgh. Before that happens, they’d like to have enough resources to chuck their high-stress jobs and do what makes them happy, no matter the salary. Sarah, 43, recently took a step back from her executive position at a large telecommunications firm to devote more time to her kids. She worries that relying on Jake’s income alone may not meet their needs or allow Jake, 46, to retire early.
Jake, a senior vice president at an international energy company, earns an income affected by market fluctuations and augmented by a generous performance-based bonus scheme. Sarah and Jake are both concerned that a down market could take a bite out of his income and derail their plans. They’re also worried about what would happen to their family if Jake became ill, lost his job, or died prematurely.
The stress of their situation combined with an unusually large work bonus led the Greens to Sensible for a financial plan. Though the couple were in a better than average position financially, they wanted enough security to be able to stop depending on Jake’s earned income.
To retire early, they’d need a plan
The couple’s Sensible Financial Advisors analyzed their portfolio, taking Jake’s variable income into account. They also spent time with Jake and Sarah, listening to their goals and plans for the future. Jake already held $3 million in life insurance, but the plan Sensible built showed he needed more coverage for the short term. As their savings and earnings grew, they’d need less life insurance. It was also essential that Jake get additional long-term disability insurance to keep his family living in their current style if he were unable to work.
Since Jake’s income depends on the stock market to some extent, and the couple have stock investments, a downturn could affect them doubly. Sensible encouraged Jake and Sarah to transfer some assets in their portfolio from stocks to bonds. If their income continued to rise, they could always increase their market exposure. The Greens’ Sensible Financial Advisors also presented the couple with examples of how their stock/bond allocation might shift over the next 10 years depending on how their savings develop.
By analyzing Jake and Sarah’s financial situation and listening to their goals, the Sensible Financial Advisors created a plan involving additional life and long-term disability insurance, and a switch from stocks to bonds, at least for the short term. Following this plan would enable them to continue living as they liked and for Jake to retire early and be with his family.
The Greens are secure in the knowledge that they’ve protected their family. Now, they can relax.
The article listed above summarizes a hypothetical scenario developed to illustrate the kind of people we help and the problems we solve.