Is this couple ready for retirement?

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Adam, 60, and Sherri, 59, are filled with retirement-related questions.

“Do I have enough money for retirement? Am I diversified enough to ride out the ups and downs of the future market? Where should I invest future dollars until I retire?” Adam asked.

The couple plan to move out-of-state when they retire, but they’re not sure if they should buy a home or rent.

The couple, who have two grown children, have saved $299,200 in 401(k) plans, $600 in an IRA, $910,500 in two annuities, $225,000 in a brokerage account, $654,500 in mutual funds, $116,000 in savings and $7,600 in checking.

Jerry Lynch, a certified financial planner with JFL Total Wealth Management in Boonton, reviewed the couple’s finances for


After reviewing Adam’s and Sherri’s complete financial picture, Lynch said it’s obvious they’ve been good savers and they’ve stayed away from bad debt. But now it’s time for them to change their mindset when it comes to money.

“It is very difficult to jump into retirement as it is like jumping out of an airplane for the first time,” Lynch said. “Even if everything seems perfect, it can be very scary.”

Now after 40 years of saving, it’s going to be time to start spending that money, which can be emotionally hard to do.

Lynch said their core for retirement — a pension and an annuity — will pay out more than the couple expects to spend. That’s a huge plus. But other than that, he said, the couple’s finances need some work.

“When you first retire, you have the good health and opportunity to do everything that you have always wanted to do,” he said. “I would prefer that they spend more especially in the first 10 years, when they can really enjoy themselves and the retirement time that they have.”

The key, he said, is knowing how much they can spend without reasonably running out of money, protecting their cash flow and allowing their money to be able to go through market cycles without having to sell at a loss.

He says it’s a paradigm shift. The investment skills that made them financially successful are “virtually useless when you head into retirement.”

Now, the most important items are simple. They need — and will have — a consistent cash flow, which will mean they won’t have to worry about market volatility as much as if they were counting on their investments to pay everyday bills. Then, they need to minimize risk, especially if there is no benefit. And then they have to protect, making sure that an episode like a long-term care need doesn’t take all their money, leaving the surviving spouse in a bad place.


Adam and Sherri are financially successful in that their passive income — money they will get without working — is greater than expenses.

They estimate their retirement expenses will be $72,000 a year, and they will be over that amount by $25,000 with their pension and annuity income. They will also have Social Security benefits, and the ability to take money from their investments.

Lynch said they can reasonably spend $50,000 a year more than they planned without worries.

There are still items they can do better, he said, noting the difference between a retirement plan and a good retirement plan is the details, which can add up to a substantial amount of money over a period of time.

Given their positive situation, Lynch said there is no upside for them to take additional risk with their investments, especially given that the couple was clear that losing money in a market downturn would really upset them.

” Their portfolio is around 72 percent stocks, and in 2008 it lost 38 percent of its value,” Lynch said. “They should not be in investments that have that potential for that type of loss.”

He recommends they pare back on the stock allocation.

The couple said they’d like to be able to leave money to their kids someday, but Lynch said rather than investing riskily to potentially earn more, they should buy an insurance policy and shift the risk to the insurance company.

Lynch also looked at their two annuities, which he said are invested in exactly the same funds.

“They should have different investments so that they work differently,” he said. “The way it is currently set up, they do not even need to look at both statements.”

He recommends they be as aggressive as they can in the annuities because the risk in performance in on the insurance company.

“If the market collapses and all their investment decisions were terrible, they’d still get $51,000 annually for life,” Lynch said.

He also saw some questionable areas of their other investments.

He said they have a decent stake in taxable bonds, but Lynch recommends they use New Jersey municipal bonds instead.

“They lose over 6 percent of their gain by being in non-New Jersey muni bonds,” he said.


Lynch said everyone needs estate planning, but given that Adam and Sherri have a sizeable estate, they really need a plan.

He recommends they make sure to have wills and they should meet with an estate planning attorney to consider trusts that could help minimize estate taxes.

The couple is also at the right age to look at long-term care insurance, he said.

“Long-term care has radically changed in the past 10 years and will continue to do so,” he said. “Guaranteed issue products are great if you are uninsurable. If you are healthy, you can often get a better plan at a lower price by going through the underwriting process.”

Lynch said prices on long-term care contracts are not guaranteed, and there are also some tax benefits for using a non-qualified annuity to pay for these programs.

It’s time for a little research for Adam and Sherri, it seems.

This story was first posted in November 2014.

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Net Worth:


  • Checking: $7,600
  • Savings: $116,000
  • IRAs: $600
  • 401(k): $299,200
  • Annuities: $910,500
  • Brokerage Account: $225,000
  • Mutual Funds: $654,500
  • Primary Home: $515,000
  • Personal Property: $15,000
  • Autos: $25,000
Total Assets: $2,768,400


  • Home Equity Loan: $16,000
  • Credit Cards: $750
Total Liabilities: $16,750
Total Net Worth: $2,751,650


Annual Income:

  • Adam Salary: $285,000
  • Adam Pension: $48,000

Monthly Expenses:

  • Income Taxes: $6,250
  • Housing: $1,291
  • Utilities: $873
  • Food: $1,200
  • Personal Care: $825
  • Transportation: $1,365
  • Medical: $1,166
  • Entertainment: $25
  • Vacations: $166
  • Charity: $100
  • Gifts: $166
  • Pet Care: $100
  • Misc.: $750