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Presented by Wes Botto

Jude (63) and Martha (62) Hunt were on the path to retirement. They wanted to retire in 6 months – but had concerns. They were asking each other:

Can we actually afford to retire right now?

Martha had a pension from her career as a public school teacher. She’d also been diligently saving in an IRA for the past several years and had grown her balance to $300,000.

Jude had approximately $1.2 million saved in his current company 401(k) with company stock. He also had $400,000 in an old 401(k) that he never rolled over. Additionally, he opened a brokerage account early in his career and had saved close to $800,000.

Together, the two had just over $100,000 saved in cash. After the 2008 market crash, Jude became focused on having a cash safety net to ensure they were both protected against any future job losses.

Their home in Cincinnati, Ohio, was almost paid off, but they weren’t sure they wanted to live there forever because the landscaping will require a significant amount of upkeep that can be challenging – especially as they age.

Jude was focused on their total savings, but Martha was equally focused on their insurance options. They did not have Long Term Care insurance, and both of their term life insurance policies were expiring. Martha knew that Medicare would be available to both of them, but did not know what she should expect to pay for their premiums and deductibles.

With so many questions, the Hunts decided to reach out to Botto Financial for guidance.

Making a Retirement Lifestyle Plan

When the Botto Financial team took a closer look at the Hunt’s concerns, it was clear that they weren’t sure what type of retirement lifestyle they wanted.

The truth is that there is no “magic” retirement savings number that ensures you’ll have enough money. Everyone’s “number” needs to reflect the type of lifestyle they want to have, their life expectancy, potential medical expenses, and so many other factors.

The Botto Financial Team encouraged the Hunts to take a deep dive into what their ideal retirement would look like.

They discovered that Martha was passionate about travel, and wanted to spend time with her local family. Jude was interested in travel, as well, but also wanted to start thinking about building a multigenerational family legacy with their wealth. Neither of them were interested in staying in their current house long-term, and selling it could have helped them pay cash for a smaller, more manageable home.

Having these ideas helped the Botto Financial team reverse engineer the Hunt’s savings goals. Once it was clear what their retirement spending might be, the Botto Financial team were able to perform an analysis to determine where the Hunt’s retirement cash flow would come from during retirement.

Key questions to answer:

  • Can we retire now or in the near future?

  • How can we optimize our savings that we have worked so hard to earn?

  • Are there any tools or strategies that we don’t know about that will help our savings last longer?

  • Can we minimize our taxes in retirement?

  • Which accounts should we pull from first when we retire?

  • How do we know that we have enough saved to fund our lifestyle?

Social Security

The Botto Financial team brought in a Social Security expert to look at what the Hunts could expect from their Social Security benefits both now and throughout retirement. Together, they reviewed alternative options and looked at how taking Social Security at different points during Jude and Martha’s retirement journey would impact their overall cash flow.

To get their full benefit, Jude and Martha would each need to wait until their full retirement age. Because they were born after 1954, that is 67 years old. They can each claim their benefits at age 62, but the monthly benefit they receive would be reduced for the length of their retirement.

Knowing this, the Botto Financial team and the Social Security expert they partner with, were able to determine how Jude and Martha could create a sustainable retirement income and maximize their Social Security benefit to increase their cash flow.

Key questions to answer:

  • When should we start our Social Security benefits?

  • How can we maximize our Social Security benefits?

Reviewing Pension Benefits

It can be challenging to know what pension benefit plan you should select. Martha had a fantastic pension as a result of being an Ohio educator. She had a few options that determine how much her benefit amounts to each month:

  • Lump-sum

  • Single-life

  • 50% joint-and-survivor

  • 100% joint-and-survivor

A lump sum would have given Martha her full pension benefit upfront. Many people prefer this option because it gives them the flexibility to invest those funds as they see fit to supplement their retirement income. However, it also puts the full risk of maintaining or growing those funds on you.

If Martha chose the single-life annuity option, she would receive the largest monthly payments. However, once Martha passed away, Jude would cease receiving any payments from her pension.

50% and 100% joint-and-survivor options would decrease Martha’s monthly payments, but offer ongoing support for Jude if she were to pass away. A 50% joint-and-survivor option decreases your payments while you’re alive, and offers 50% of what those payments were to your surviving spouse. A 100% joint-and-survivor option decreases your monthly payments even further but ensures that your surviving spouse would continue to receive 100% of your payments.

With pension options, it’s critical to take your spouse into account. Martha wanted to choose an option that protects Jude in the event that she passes away, while still maximizing her total monthly benefit.

Key questions to answer:

  • Given our goals, which pension payout should we choose?

  • Which pension payout will provide protection for my spouse, without giving up a significant portion of the benefit?

  • Are there any other strategies that we should be thinking about related to the pension that can maximize the benefit?

401(k) Analysis

For Jude’s 401(k) review, the Botto Financial team performed an NUA (Net Unrealized Appreciation) analysis. This type of analysis helped the Botto Financial team understand the difference between the cost basis and the market value of the funds in Jude’s two 401(k) accounts. Using this strategy would allow Jude to pay only capital gains taxes on a portion of his stock rather than ordinary income taxes -which can be notably higher.

The Botto Financial team also took a closer look at how Jude and Martha’s investments were allocated across all of their retirement savings and brokerage accounts. Because they are close to retirement, the goal was to determine the minimum amount of risk needed to achieve their objectives

There’s always a balance between taking on risk in a 401(k), IRA, or brokerage account, and protecting your financial future against a potential market crash during retirement. The Botto Financial team was able to guide Martha and Jude through reallocating some of their investments to minimize risk while keeping them on track to achieve their goals.

Key questions to answer:

  • Should we use the NUA strategy?

  • Are our investment accounts properly allocated, given that we are nearing retirement?

  • How should we manage our funds as we move into retirement?

Insurance Coverage

As Martha and Jude neared retirement, reviewing Long Term Care (LTC) insurance options was a critical component of protecting their wealth. A long term care event can be a significant financial hit for any retiree, regardless of the amount they have saved. LTC insurance can help you to mitigate the risk of a health emergency that requires extended care without overspending on unnecessary coverage.

The Botto Financial team also helped Martha and Jude review their expiring term life insurance policies. Martha revealed that she only had hers so that her income would be replaced if she passed away before Jude, and vice versa. Without kids in the house, and with the additional benefits of having Social Security and a pension, term life insurance may not be necessary for Martha and Jude as they enter retirement.

Key questions to answer:

  • Does Long Term Care insurance make sense for us?

  • Do we need any life insurance heading into retirement?

Retire with Confidence

Retirement represents one of the biggest life changes that you will go through. Beyond the financial ramifications, there are emotional and psychological factors that affect this monumental transformation in your life. Our job as your advisor is to give you confidence knowing that we are thinking multiple steps ahead.

We have already thought through where you will pull your income for the next few years, and how you can minimize your tax burden, so you don’t have to think about it. We will stay by your side to show you that through the ups and downs of the market you will be prepared to help alleviate worry or anxiety.


The preceding case study is provided for illustrative purposes only and may not be representative of the experience of other clients. Every situation is different and actual performance and results will vary. This case study does not constitute a recommendation as to the suitability of any investment for any person or persons having circumstances similar to those portrayed. Please consult a financial advisor regarding your individual situation. Past performance does not guarantee future results. 

Wesley Botto is a financial consultant located at Botto Financial, 4565 East Galbraith Road, Suite B, Cincinnati, OH 45236. He offers advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, a Registered Investment Adviser. He can be reached at 513.924.3350 or at