Case Studies
Financial Project
Meredith
Meredith is in her late 20s and has been at her current publicly traded company since graduating college. She has been promoted a few times and has significant cash flow, since she continues to keep spending much less than her salary and bonus. Meredith is fairly confident in her ability to manage her day-to-day finances, but she had questions about the best way to allocate her extra cash flow and how to invest her company 401k. At this point, she was not looking for ongoing help but wanted to make sure everything in her financial life was set up correctly.
We set up an initial call to discuss her situation and then gave Meredith a list of documents to gather and questions to answer. Once we had collected all this information, we put together a cash flow plan, including a target for emergency savings and a balanced approach to saving for both short and long-term goals. Meredith has built-in flexibility to continue to manage her money, but also a list of triggers so that she knows when to reach back out to us if her situation changes enough to change the plan we laid out.
Additionally, we gave specific 401k investment recommendations and ETF recommendations for allocating Meredith’s investments outside her 401k. Meredith has an easy-to-use spreadsheet to make trades in her brokerage account and IRA as needed.
Meredith is equipped to manage her money for the next few years, but also knows when to contact us again for adjustments to her plan.
Wealth Planning
Tyler & Jaclyn
Tyler and Jaclyn reached out after having their first baby and looking to purchase their first home. With all the life changes coming fast, along with both working in intense jobs, they wanted someone who could streamline their finances, identify problems before they became too big and keep them on track.
We first put together a cash flow projection, to analyze the impact of buying their new home. We worked with a mortgage broker to set Tyler and Jaclyn up with the appropriate loan and then we jumped into tax projections. We discovered that they had underpaid in their withholdings and would owe significant taxes (and penalties) when they filed. We helped adjust withholdings for the next year, to avoid this surprise happening again.
We built a plan around balancing savings for retirement, home remodel projects and college savings for their new baby. Soon after developing the plan, Jaclyn received news that her company had filed to go public, which gave her an unexpected windfall via stock options. After updating the tax projections, we set aside additional money for future tax payments and then adjusted the ongoing savings plan. Tyler and Jaclyn have built a solid financial foundation and look to aggressively save towards early financial independence.
Life continues to change fast for Tyler and Jaclyn, as Tyler just started a new job and we are comparing Jaclyn’s company benefits with Tyler’s new package to determine the appropriate balance. Tyler and Jaclyn look forward confidently as they know we are available to adjust their plan, however it changes.
Wealth Planning
Jack & Sue
Jack owned a small business in the construction industry and contacted us around the time he was planning his exit. Jack was very detailed in his finances, with his hand in diverse investments, including various rental real estate properties in Florida and many different investment accounts. As Jack sold off company assets, he quickly realized that his personal planning and investment decisions had a much bigger impact on his financial well-being than ever before. We quickly helped organize his finances, calculated a Sustainable Withdrawal Amount that he and Sue could take out of their portfolio annually and began aggressive “micro-Roth Conversions” to lower the long-term tax burden of his portfolio.
Once Jack finally retired, we discussed Long-term Care Insurance and Medicare Insurance options to determine what fit their lifestyle the best. Once everything settled, we began a Charitable and Family gifting strategy, since Jack and Sue wanted to impact causes and family members they cared about during their life, rather than handle it all in their estate plan upon death.
Jack and Sue are still interested in the details of their investments and retirement plans but enjoy delegating the day-to-day management to our team while they live out their retirement.
Comprehensive Wealth Management
Michael & Lisa
Michael and Lisa have a complicated life. Lisa is an executive at a Fortune 500 company and receives substantial income, bonus and Restricted Stock Units (RSUs). Michael was an early employee at a technology company that recently went public via IPO and he has Incentive Stock Options (ISO) vesting in the next 3 years. Michael and Lisa have 4 children, the oldest of whom is now married and expecting his first child. Michael and Lisa have been diligent savers over their careers and now have a Net Worth over $7,000,000, with more on the way once their stock options and restricted stock units vest.
As Michael and Lisa look ahead to the future, they have competing goals. They want to make sure they are financially independent, want to manage their short and long-term tax burden, want to invest in a Sustainable and Socially Responsible Manner and they want to provide for their children and future grandchildren.
We started with the ISO and RSU planning, particularly trying to balance the immediate Alternative Minimum Tax (AMT) with the long-term after-tax upside of ISO treatment. This involved discussing various tax scenarios and modeling different future tax rates to determine the appropriate approach to ISO timing. We also brought in an outside national CPA firm to help coordinate the multi-state complexities and various tax strategies. Michael and Lisa only had to meet with us at Illuminate, while we coordinated with the CPA behind the scenes to move the plan forward.
For the Sustainable ESG investing, we presented a few different options. While we presented a simpler approach by purchasing Sustainable mutual funds, together we decided to go the route of using a Separately Managed Account (SMA) so that we could set up specific “rules” for the separate account manager to follow when picking individual securities. We picked the appropriate manager to focus on taxes within the portfolio in addition to Michael and Lisa’s specific ESG considerations.
Lastly, we worked with an outside estate planning attorney to begin long-term estate planning, using current Federal estate and gifting laws to eliminate future estate tax burden, as their estate inevitably grows. This involved meeting with attorneys, coordinating new accounts and asset transfers and working their CPA on the current year taxes.
Working with Michael and Lisa through their initial plans took over a year, but quickly they felt more at peace with their overall financial picture, knowing that they had delegating the coordination and complexity to their trusted advisors.
