She opened her three accounts (individual, IRA, and Roth) in early 2011, totaling about $500,000 investable assets. She was a professional working for herself and had reached retirement age. She had purchased a condo in a neighborhood close to her daughter and a friend of her daughter. She felt she was going to have to work the rest of her life. Even with a 6% withdrawal from her account and social security, she did not have the income to retire and maintain her quality of life.
By the end of 2018, a period of seven years, she had taken an income totaling over $200,000. The accounts had not only furnished her income but had grown enough that she was able to use it to pay off the mortgage on her condo, and she now owns it free and clear. After all that, the accounts in 2019 were worth over $1,100,000. She decided to wind down her practice and retire. On a personal level she developed a relationship with the two young daughters of her daughter’s friend and is the “adopted grandmother” of those two girls.
She retired July 1, 2020. However, in the spring of that same year, she sent me an email saying her accountant said she owed $50,000 in taxes. She asked how that could be possible, as she had never even made $50,000 a year in income. Yes, I said, that sounded correct. I had sold one stock in her account and her capital gain was significant. Since the capital gain happened in her account, I recommended paying the capital gains tax due from her account. I also mentioned capital gains of this amount were probably going to be a regular happening. it was that account which furnished the funds to pay her taxes.
“Welcome to being a millionaire,” I joked with her at the time.
Her accounts on August 3, 2023, stood at $1,325,491, even though she has withdrawn over $500,000. When her daughter and son-in-law lost their jobs during the pandemic, she was even able to help support them.
That is a success story you do not often hear. The accounts have only a moderate risk tolerance, not aggressive. They have been fully invested since 2011, although the values suffered during 2022 and the pandemic.
But it is more than that.
Nearly all financial advisors utilize a financial plan by plugging all the client’s financial information into a computer. Those plans would have told her that drawing $2,500 a month would have depleted her principal faster than it could grow. We know from studies like the one done by the SEI that almost all financial advisors will deliver returns of around four percent – that would have been about $2,000 a month in her case.1 Instead of retiring with a paid off condo, this client would probably still be working today and still making condo payments.
Instead, she is fully retired, condo paid off, and able to travel. “Welcome to being a millionaire.”
This is our goal with every client; at AFC, we believe it is our job to help every client attain the retirement they want. We can’t guarantee it, but this is just one of a number of similar client stories we can tell. We love saying, “Welcome to being a millionaire.” To our millionaire clients we also like saying, “Welcome to being a decamillionaire”.
1. “Coach Through Biases—Yours and Your Clients’”, John Anderson and J Womack, SEI, a leading global investment management for banks, trust and insurance companies, brokerage firms and financial advisors.