By: 15 December 2020

Dan and Amy, both 45, came to PrairieView at a critical time in their financial lives. Dan was a professional at a local Fortune 500 company and Amy worked for a small consulting firm. They had 3 kids, ages 14, 12, and 10 for whom they were managing various school and extra-curricular schedules. Dan had just received a promotion at work and now had excess income to start saving in addition to their designated retirement accounts.

Their biggest questions involved how best to save and invest the excess income, how much and where they should save for college for their kids, and how to best set themselves up for an earlier retirement – around age 55-60. They just didn’t have the time or energy to figure out how everything fit together anymore (because they had a lot going on!).  Dan also had two retirement accounts from previous employers that he hadn’t touched since he worked at the respective companies.

We met with Dan and Amy and had some intentional conversations around their goals and values before diving into an analysis of their financial resources and putting together a plan. Our conversations and analysis identified a few key areas for improvement.    

  1. Our conversations around college helped Dan and Amy identify how much they would like to contribute to their kids’ college education. They realized that while they didn’t want to fund the whole education cost, they did want to contribute 50% of a 4-year private school for each child and have their kids have some “skin in the game.” Once they had agreed how much they wanted to fund, we helped calculate what savings rate they would need to reach this goal. We then helped Dan and Amy open 529 plans for each of their kids, the most tax-advantaged way to save for this goal, and set up automatic contributions from their bank account.

  2. Dan’s previous retirement plans provided an opportunity to consolidate investments into one IRA and invest in low-cost index funds. This saved them the administrative fees associated with each 401k plan provider, lowered the overall investment cost of the funds he was invested in, and simplified the number of accounts they were tracking.

  3. Dan’s increased income allowed them to allocate more to their specific goals. Some went to fund the 529 Plans for their kids, most of the rest was allocated to an after-tax brokerage account for retirement (since they were already maximizing contributions to the retirement accounts they were eligible for), and the rest went to an online savings account with higher interest than their regular bank. This savings strategy allowed them to get on track for their specified retirement date and confidently weather additional demands on their cash they may encounter along the way.

  4. During all this discussion and analysis, Dan and Amy identified that their home mortgage interest rate was on the higher side. We had a mortgage broker run a refinance option, which showed that they could save 1% of interest and lower their monthly mortgage payment. Dan and Amy weighed their options and decided to move forward with the refinance. This freed up more cash flow to allocate to retirement.

By digging into an analysis of their financial situation and putting together a financial plan, Dan and Amy were able to fit the pieces together to create and understand their whole financial picture. They were able to coordinate the various savings goals to set their kids up for college as well as to get them on the right track for an early retirement. By looking at the whole picture, they were also able to ensure that their accounts were set up in accordance with their estate plan and how they wanted their assets to pass to their kids.

Author Image

Matt Weier, CFA, CFP®

Director of Investments
Chartered Financial Analyst
Certified Financial Planner®

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