In the first part of this series, I explained that I’d be sharing a few specific examples of how values-based financial planning can make an impact on a person’s financial future. Last time, I shared how I worked with a successful couple tackle a wide array of financial concerns and goals they had. This time, I want to focus on a single professional who sought financial independence.

Meet Michael Todd

Michael grew up in Boston in a middle-class family. By the time he was a freshman in high school he had already figured out how to make money from his computer programming skills.  A tech savant. He continued making programs while he attended the university of Cornell.  The money he made from his programming was enough to pay for his entire college tuition. 

His Values

• Spend time with the people he cares about -  A recent engagement to his long-term girlfriend “Kristy” prompted him to put family first instead of his career.
• Protect his family if he’s not around – Thinking of Kristy and his future family, Michael wanted to make sure he had enough life insurance and cash reserves.
• Minimize taxes – Over the past decade he accumulated a significant amount of company stock and was looking to diversify and minimize his tax burden.
• Make work optional – Starting a family and taking a work sabbatical for 12 months.
• Provide a lasting legacy – Set up foundation to benefit kids suffering from leukemia.Inspired by his mom’s battle with leukemia.

His Goals

Like many of my clients, Michael was a successful professional who had worked hard to make a good salary and save much of what he earned. Despite having been a good saver, he understood the value of a financial professional. He turned to me to help him create a strategy that revolves around a few big goals he had in mind:

• Diversify and maintain cash on hand for emergency purposes
• Sell his company stock while minimizing taxes
• Review his life & disability insurance coverages
• Make sure he’s on track to retire at 50
• Start a foundation to honor his mother

His Passion

Helping young kids suffering with leukemia is something Michael is extremely passionate about. He witnessed his mother suffering from leukemia and wanted to make a change for the next generation.   

How We Helped

Michael is a fitting example of how anyone can benefit from professional financial planning. On paper, this person seemed to have everything necessary for financial success. He had hundreds of thousands saved in a checking account, money invested in a portfolio, a life insurance and group disability policy, and assets in a Roth IRA, company 401(k), and company stock. Despite all this, he didn’t feel fully confident that he was on track for financial independence.

• Having an excess $100k+ of cash reserves created an idle asset for Michael since it was a sitting in a savings account earning 0.10%.  We repositioned his cash and he’s now earning 3.5% with favorable tax treatment. Annual interest income increased by over $3k per year. Now he’s confident his money is working as hard as possible while maintaining liquidity and minimal risk. “I’m glad I’m making more money than I was at the bank, and I still have access to it if I need it.” 
  
  
• Being in the technology industry for over a decade with several companies allowed Michael to receive non-qualified and incentive stock options as well as restricted stock. In the past Michael was paying ordinary income taxes on the options he cashed in.  Working with us resulted in a 30% tax savings which equated to over $50k. The difference between the options being taxed as ordinary income and long-term capital gains made the largest difference. He was patient as we executed our game plan and then exercised the options. “Wow I was so naïve and probably paid way more in taxes than I needed to in the past. Thanks for helping me save so much in taxes.”
  
  
• $1,000,000 of term life insurance seemed enough for Michael when he was in his 20’s but now being engaged he wanted to take a deeper look at his life insurance coverage. We implemented a life insurance plan that provided him with 2x the coverage at the same cost. He now has the coverage he wants and described the feeling as “Peace of mind knowing all will be taken care of financially should anything happen to me and it didn’t cost me any more money.”
  
  
• Overlooking the specifics of group benefits is very common and Michael was no different. He thought he was properly covered for disability benefits under his group insurance plan but after taking a closer look we realized he was grossly underinsured.  This is very common when it comes to disability insurance/income protection. In fact, if he was disabled his whole financial situation would have collapsed in 1 year and potentially would’ve ruined his early retirement goal. After rearranging his coverages and adding supplemental insurance, he now has 85% of his income protected as opposed to 50%. Like most people Michael never explored options to protect his income but afterward said “Not something I ever thought about purchasing but I’m glad I’m covered and don’t need to worry about it anymore”.  
  
  
• Retiring at 50 was the ideal scenario for Michael which was very ambitious. The question was “is this realistic?”. The analysis concluded the earliest age he could retire was 55 based on his current assets and savings. However, we created alternate scenarios showing him exactly what he needed to do to retire at 50. The first step towards making change is awareness. This was huge for Michael as he mentioned “55 isn’t too far off from my original goal, but now I know what I need to do to retire at 50”.
  
  
• Having experienced the daily struggle his mother goes through with leukemia ultimately inspired Michael to create The Michael Todd Foundation. He had taken the basic steps to build a solid foundation and incorporate as a non-profit 501(c)(3) (tax -exempt status). After setting up the foundation we strategized and helped set up the inaugural Michael Todd Foundation 10k race to benefit kids dealing with leukemia. We raised over $11,000 in the inaugural event and in his words “I’m so happy I get to give back and make a difference to children and honor my mother and family. What a special experience. Thank You.”

In the first 12 months of working together here’s what we accomplished:

• $3k of increased tax favorable income from his idle cash
• Tax savings of over $50,000 in year 1 from tax investment strategy
• Ongoing he’ll save at least $25k/year in taxes from proper tax planning
• Doubled his life insurance coverage at no additional cost
• Maximized his group disability insurance and supplemented to protect 85% of his income
• Rebalanced his investment portfolio, reduced his risk, increased his portfolio income all on a tax favorable basis
• Mapped out the game plan to retire at 50
• Raised over $11k for his foundation

Michael is elated and confident with his financial plan in place. He knows he’s on the right track and making great decisions with his savings and investments. He’s so happy that he’s sharing his recent planning experience with his friends and colleagues.

Helping You

Addressing your concerns or fears, and creating strategies designed to help you achieve your goals is what I aim to tackle through a proactive process that focuses on understanding your personal circumstances. I work with a diverse range of clients facing unique needs and situations.

If you’re experiencing a situation like this case study or face an entirely different need, I encourage you to reach out to me. I’d be happy to evaluate your situation and share how I can help. Contact me at (626) 529-8347 or email me directly at ricky@hbawealth.com.

About Ricky

Ricky Biel, CRPC® is a wealth manager with Haydel, Biel & Associates, an independent financial advisory firm serving individuals and families near Pasadena, California. The firm was founded in 2004 by Chris Haydel and Ricky Biel with a desire to provide unbiased, client-centered, community-based financial advice. Together, they have built a practice that has grown into a family of caring, smart professionals committed to blending proven investment methodologies with creative financial technologies that make it easier than ever to accomplish your goals. They strive to keep things simple and fun to give their clients peace of mind and alleviate financial stress. HBA Wealth takes care of their clients’ needs first and foremost and goes the extra mile to make their clients’ finances grow. To meet and see how the HBA Wealth team may be able to help, contact them today at (626) 529-8347 or email Ricky directly at ricky@hbawealth.com.