Disclaimer: The information shared here is strictly for educational and informational purposes. It should not be interpreted as financial, investment, tax, or legal advice. Please consult a licensed financial professional before making any financial decisions.
John and Mary Thompson are a retired couple in their late sixties. John spent most of his career as an electrical engineer at a large utility company, while Mary worked as a senior nurse at a regional hospital. Over four decades, they consistently saved, invested in diversified mutual funds, and paid off their home mortgage early. By the time they both retired, they had accumulated $2.5 million in savings and investments. Their main concern now is not about earning more, but about ensuring that their existing wealth supports them for the rest of their lives without unnecessary risk.
1. Financial Objectives
The Thompsons’ primary financial goal is capital preservation with steady income generation. They want their investments to provide a predictable cash flow that covers their living expenses, healthcare costs, and occasional travel, while also maintaining enough growth to offset inflation. They expressed a strong desire for peace of mind — knowing that their lifestyle will not have to change and that they will not outlive their savings.
Their annual living expenses, including utilities, healthcare, insurance premiums, and leisure activities, average around $90,000 to $100,000. With an additional $48,000 per year from Social Security, their portfolio withdrawals can comfortably supplement their income needs.
2. Financial Snapshot
- Total Investable Assets: $2,500,000
- Annual Expenses: Approximately $95,000
- Planned Annual Withdrawals: $100,000 (4 percent withdrawal rate)
- Social Security Income: $48,000 annually (combined)
- Home: Fully paid off, valued at $850,000
- Health Status: Good overall health but planning for long-term medical contingencies
- Legacy Goal: Leave $500,000 to their two children and continue supporting a local community charity
3. Investment Philosophy and Portfolio Allocation
After several in-depth discussions with their Aris Alpha financial advisor, the Thompsons adopted a conservative, income-oriented investment strategy that minimizes risk while keeping pace with inflation. The portfolio was structured as follows:
- 40% in U.S. Treasuries – Focused on short and intermediate maturities to generate stable income with low risk.
- 30% in Dividend-Paying Stocks or Broad Market ETFs – Designed to provide steady dividend income and potential growth to protect against inflation.
- 30% in Balanced Income Funds and Municipal Bonds – Chosen for diversification, tax efficiency, and additional yield stability.
This allocation was selected to strike a balance between growth and safety, allowing their portfolio to generate an average annual return of 4 to 5 percent while maintaining low volatility.
4. Retirement Strategy and Safeguards
The Thompsons’ plan emphasizes sustainability and structure. Their advisor implemented several strategies to help maintain their standard of living throughout retirement:
- Withdrawal Rule: Capped at 4 percent annually to prevent premature depletion of assets.
- Inflation Protection: Introduced Treasury Inflation-Protected Securities (TIPS) and dividend-growth ETFs to ensure purchasing power remains intact over time.
- Tax-Efficient Withdrawals: The advisor planned withdrawals from taxable accounts first, delaying IRA distributions until required minimum distributions (RMDs) begin at age 73.
- Portfolio Rebalancing: Conducted annually to maintain target asset allocation and reduce risk after market fluctuations.
- Emergency Reserve: One year of living expenses held in a high-yield savings account for liquidity and unforeseen needs.
- Healthcare and Insurance Review: Long-term care insurance and supplemental Medicare policies were evaluated to protect against potential medical expenses.
John mentioned during one of their review meetings, “We just want to make sure we can enjoy the years ahead without worrying about the markets every day.”
5. Implementation Results
After the first year of following this plan, the Thompsons’ portfolio performed within expectations. Despite market volatility, we assume they achieved approximately 5 percent annualized return, enough to comfortably fund their withdrawals without reducing principal. Their income was consistent, and they reported feeling more confident about their finances than at any previous point in retirement.
They also made a few lifestyle upgrades renovating their kitchen, visiting their grandchildren twice a year, and booking their dream vacation to Italy, which they had delayed for almost a decade.
Mary said, “Having a structured plan changed everything. We no longer feel the constant stress of checking our portfolio. We know what’s coming in and what’s going out, and that’s given us real peace.”
6. Long-Term Projection
With their current withdrawal rate, moderate market returns, and Social Security income, financial modeling shows that the Thompsons’ savings should last well beyond their projected lifespans, even under conservative assumptions. The inclusion of inflation-adjusted investments ensures their purchasing power remains strong, and their legacy goals remain achievable.
By age 90, assuming average returns of 4 percent, their projected portfolio value remains above $1.2 million leaving sufficient funds for heirs and charitable giving.
7. Key Takeaways
John and Mary’s case illustrates how thoughtful planning and disciplined implementation can transform a static nest egg into a sustainable income system. The combination of stable fixed-income assets, moderate equity exposure, and structured withdrawals gives them what every retiree seeks: predictability, security, and independence.
They no longer measure success by market performance but by the quality of life their plan allows them to maintain. Their story is a clear reminder that the goal of retirement planning is not just to make money grow but to ensure it supports a life well-lived, with confidence and dignity.
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