Case Studies

Case Study for Business Owners: ABC Import and Export Inc.

Henry, age 59, is the CEO and President of ABC Import and Export, Inc.   His Wife, Maria, age 52, is the office and HR manager. They have owned their successful import and export business for 15 years. Currently, the business is generating $1.5 million. Henry’s salary is $200,000, and Maria’s salary is $95,000. They have nine (9) full time employees. They are currently saving into a traditional IRA – $6000 each per year. There are currently no employee benefits. Henry and Maria are also supporting their children, Andrew and Jessica; freshman and sophomore in college, respectively.

Their concerns:

1)      Employee Recruiting and Retention

2)      Saving Taxes

3)      Retirement Saving

 

Solution:

After meeting with Samson Chan and going through a financial planning process, the company decides to put together a safe harbor 401(k)/profit sharing and Defined Benefit Plan.

Recommendation for Concern #1: The Company will provide a 3% match as well as a profit sharing plan, which is approximately 7% of each employee’s salary. The 3% match is a great additional benefit to their employee package, which is 100% vested once the employee qualifies to enroll in the 401(k) plan. The profit sharing plan rewards each long term employee. The company will provide an additional 4% contribution per year, when the company is profitable. The profit sharing plan has a 6-year vesting schedule to help with employee retention.

Recommendation for Concern #2 and #3: Since Henry and Maria have the capacity to save for their retirement, in addition to the 401(k), Samson recommended and set up a Defined Benefit Plan for the owners. Henry and Maria set aside an additional $238,336 for their retirement. Between the 401(k), profit sharing, and Defined Benefit, the owners have saved $137,007.45 in their 45% tax bracket.

Recommendation: Samson also recommends they put their two (2) children on payroll. The children can take advantage of the 401(k) and start saving for retirement early. Henry and Maria will also save additional taxes because the children’s tax rates are lower than Henry and Maria’s tax rate.

Summary:  By working with Samson, Henry and Maria are now saving more money for their retirement. They have provided approximately $20,000 of employee benefits to help increase the company’s morale. Moreover, they now have tax deductions that they would have loved to have taken advantage of years ago.



ABC Import and Export Inc.

Retirement Plan Summary

This case study is based on a hypothetical, yet common client scenario, and is intended only to show the types of services Samson Chan can provide. Please talk to your attorney or accountant for legal and tax advice.  Samson Chan, Investment Advisor Representative. Securities and Investment advisory services are offered solely through Ameritas Investment Corp (AIC). Member FINRA/SIPC. AIC and David White & Associates are not affiliated. Additional products and services may be available through Samson Chan or David White & Associates that are not offered through AIC.



Case Study: The Michael and Julie Jones Family

Michael, age 40, is a senior manager at a high tech company making $200,000.00 annually.   Julie, 38, is a senior accountant making $150,000 annually. They have two (2) children, Matthew, 6 years old and Jennifer, 2 years old. Currently, Michael and Julie own a home in Sunnyvale, California.

They were referred to Samson Chan, CFP® by their friend to learn more about college planning.

After the initial meeting and getting to know Michael and Julie’s goals and concerns, Samson discovered the following financial issues and concerns:

  1. Michael and Julie would like a financial/savings plan that will incorporate their various investments (investing, retirement, college saving)
  2. The couple would like to start saving for Matthew and Jennifer’s college years
  3. They want to consolidate their previous 401(k)s
  4. Provide a contingent plan so the family is protected

Through Samson’s IGNITE: FIRE planning process, he provided the following recommendations:

Financial Planning:

  • Based on Michael and Julie’s retirement projections, Michael and Julie will need to max out their 401k from $12,000 to $17,500 in order to have a comfortable retirement.
  • With a goal to fund 50% of the college tuition, Michael and Julie will be saving $200 per month for each child in a 529 savings account.  The family will gradually increase the savings after Jenny starts kindergarten.
  • Samson also recommended reviewing the current mortgage to eliminate the PMI and increase the family’s cash flow.

 Investment Management:

  • With consolidating Michael’s two 401(k)s and Julie’s 403(b) and 401(k) into their Rollover IRA, Samson also recommended a moderate portfolio, based on their risk tolerance, and time horizon.
  • To help eliminate some market risk, Samson also recommended individual muni bonds to protect the principal with better tax advantage and provide higher yields on part of the portfolio.

Risk Management:

  • Currently, Michael has $200,000 of life insurance at work and Julie has $100,000 of life insurance. Since both incomes are needed to sustain their current life style, Samson recommended $1,000,000 of life insurance for Michael and $1,000,000 for Julie, which will protect the family income if one of the parents dies prematurely.

Estate Planning:

  • Samson also recommended that the family obtain a living trust and referred them to a few attorneys to help assist them.

Summary:

Michael and Julie now have a financial plan by design and are working with a team of financial professionals. They continue to save in their 401(k)s and their kids’ 529 accounts. They also feel secure, knowing that the family is sheltered with the proper life insurance and a family living trust. They are saving towards an investment property to diversify their overall portfolio and to obtain better tax deductions.

  Retirement Projections                                           Investments Allocation Review

                      

This case study is based on a hypothetical, yet common client scenario, and is intended only to show the types of services Samson Chan can provide. Please talk to your attorney or accountant for legal and tax advice. Samson Chan, Investment Advisor Representative. Securities and Investment advisory services are offered solely through Ameritas Investment Corp (AIC). Member FINRA/SIPC. AIC and David White & Associates are not affiliated. Additional products and services may be available through Samson Chan or David White & Associates that are not offered through AIC. CA Insurance License: 0C40679



Case Study: RETIRE•ment Income Optimization Planning

Ron and Isabella Perez live in Pleasanton, CA. Ron, 55 years old; owns a manufacturing company overseas and Isabella, 53 years old, works as a software engineer in Silicon Valley. They are earning more money and have better cash flow because their three (3) children have graduated from college. Ron and Isabella would like to start saving more into their retirement as they feel they are behind in retirement savings. Ron has been saving into his IRA while Isabella is contributing into her company 401(k) and company pension. They were referred to Samson Chan, CFP® by their accountant to explore retirement savings plans and tax deduction options.

During the initial meeting, Samson explored the various sections of a well-design retirement income plan. These sections include:

Required Lifetime Income: Samson performed income projections for Ron and Isabella to make sure that the money will last 30 plus years after they retired. The projection calculated different contribution inputs into a 401(k); when to elect social security income, Isabella’s pension options and different retirement ages. The income plan also matched investments to cover different expenses at retirement.

Expenses and Cash Flow Management:   Ron and Isabella were educated on the difference between essential, planned discretionary, and unplanned discretionary expenses. These planned discretionary expenses included a vacation to a new country every year and helping the kids with wedding expenses.

Tax Allocation: Since taxes are the biggest expense before and after retirement, Samson created different investments to minimize tax exposure when distributing retirement income to cover the different expense levels.

Investment Management: Samson educated Ron and Isabella on how investment strategies at retirement are different since money is coming out of the accounts.  These investment strategies include:  Strategic and Tactical Allocations, Alternative Investment and Proper Risk Management (S.T.A.R. Portfolio).

Risk Management: In addition to properly managing the investment risk, Samson also explained the importance of Long-Term Care insurance to protect their assets at retirement. The premiums are also deductions since Ron is self employed. Samson also recommended a Pension Max strategy for Isabella when she elects her pension options.

Estate Legacy Planning: Samson recommended a buy-sell agreement to Ron and his business partner, George, so that Ron can get the most value when he sells the business. In addition, Ron and Isabella updated her trust since it was last updated seven (7) years ago when their children were in college.

Summary: By working with Samson, Ron and Isabella now have a RETIRE•ment by design.  With this retirement plan, they know exactly what they need to save, what investment average returns are needed to reach their retirement income goals, and the possible risks they will be facing in retirement years. Ron also has a plan to sell his business while Isabella understands her pension options.  They have a better understanding of how to allocate their savings toward various investments to minimize tax implication and to maximize cash flow at retirement.  They are on track to have approximately $240,000 per year at retirement and growing with inflation.

 

This case study is based on a hypothetical, yet common client scenario, and is intended only to show the types of services Samson Chan can provide. Please talk to your attorney or accountant for legal and tax advice. Samson Chan, Investment Advisor Representative. Securities and Investment advisory services are offered solely through Ameritas Investment Corp (AIC). Member FINRA/SIPC. AIC and David White & Associates are not affiliated. Additional products and services may be available through Samson Chan or David White & Associates that are not offered through AIC. CA Insurance License: 0C40679