Overcoming financial fears: One couple’s journey

Balancing your lifetime needs, legacy and retirement goals starts with a step-by-step plan.

To an outside observer, a couple in their 60s might appear to have no financial worries at all. One couple that comes to mind were both educated professionals with good incomes, and between them they had inherited several million dollars in trust. What financial fear could they experience?

However, doubts crept in, sometimes keeping them up at night. They wanted to pass down much of their inheritance as a financial legacy to their children and grandchildren and were deeply committed to supporting charities. But what if their generosity left them with less than they needed for their own future? Would they be able to cover major health expenses as they aged? How might a downturn in the financial markets affect their goals?

For all of its advantages, wealth offers little immunity from such concerns. If anything, people’s concerns are growing, because we’re living longer, and getting older is more expensive than it used to be. Even for those with substantial resources, it’s often the unknown that drives the fear of running out of money. In fact, on average, Americans believe there is a 45% chance they will outlive their savings^†.

Will our retirement planning cover our spending?

For this couple, the path to peace of mind started by working with us to gain a clearer picture of their personal expenses. We took a step-by-step look at the total amount they were spending each month and how those needs might change in retirement.

We matched that spending picture against a detailed analysis of the couple’s projected post-work income from all sources, including retirement accounts, Social Security, cash, and investments, as well as the taxes they’d owe. They were not leading a lavish lifestyle, but seeing the hard numbers gave them reassurance.

There may be some expenses that will no longer be necessary when they retire, such as commuting, professional clothing and home office materials and equipment. But many clients prefer to move those previously earmarked funds to gifts for family, vacations, healthcare, or other discretionary spending.

Next, we looked at a variety of worst-case scenarios. For example, how would an illness requiring around-the-clock care affect their savings? Even then, they would have ample resources, the analysis showed.

Could our investments withstand a setback?

Even though the stock market has annually averaged a 10% return for the last 100 years^§, memories of the Great Recession were still fresh in the couple’s minds. The team conducted a thorough analysis of their entire investment portfolio, showing how various market conditions might affect their assets. Could a downturn jeopardize their goals?

The couple’s asset allocation—a balanced mixture of stocks, bonds, and other investments—was likely to withstand even a serious setback, the analysis showed. Yet because the couple didn’t require significant growth in their portfolio, they could gain additional peace of mind by shifting some of their stock holdings to lower-risk, income-producing bonds. I think that both of them felt a lot better having discussed this option.

How can we transfer money in a tax-efficient way?

With a clear picture of their spending needs, income, and investments, the couple turned next to one of their most important goals—leaving a sizable legacy for their heirs. We conducted a detailed forecast of the potential size of their estate, revealing a possible risk.

Although they were unlikely to surpass the lifetime gift and estate tax exemption currently provided for under federal law ($12,920,000 per person and $25,840,000 joint in 2023)^‡, if lawmakers lower the exemption before the couple dies, taxes could consume a sizable portion of the money they intended for family.

As a possible solution, we suggested the couple consider setting up an irrevocable trust. By putting the money in a trust now, they could move substantial assets out of their federally taxable estate using the currently high lifetime gift tax exemption.

Will our legacy be protected?

But how could they be sure their legacy planning would protect from reckless spending or from creditors? We described how trusts can be created so that wealth passes seamlessly from one generation to the next, but with the flexibility to meet heirs’ educational or other needs along the way. Moreover, a trust can help provide protection from creditors, should an heir run into difficulties.

How can we give more to charity?

Finally, the couple looked at various ways of structuring their philanthropy to maximize the impact their gifts might have while minimizing taxes. For example, setting up a donor-advised fund could enable them to make a large tax-deductible donation up front, and then make gifts to individual charities over the ensuing years.

The couple’s plans, like life itself, are still a work in progress. But I think that both of them felt a lot better knowing they have good options. They didn’t feel alone in facing these questions. They have a team, with resources, to help them make educated decisions.

Getting the advice you may need

Regardless of how solid your portfolio is, managing your legacy and retirement goals starts with a step-by-step plan. With so many options and variables, a team of experts can be a valuable resource. To learn more, please contact your Huntington Private Bank team to see how we can help or find a Huntington Private Bank Office near you.