Retiring Government
Walter and Eva are both proud of their careers in Government service. But as their 50's are now behind them, they are looking forward to retiring. Walter plans on retiring ASAP to start working on the Cabin they've been talking about building for years, but Eva is being pursued to do consulting when she leaves the government. She loves her work and would be happy to keep working, especially if she could do it remotely from the Cabin that Walter is starting on.
Walter and Eva have many big decisions in front of them. Can they afford for Walter to retire now and get the Cabin started? When he collects his pension, what survivorship options should they select?When should they start collecting Social security? If Eva starts consulting, how should she structure her business? What Should Eva charge for her time? Do they need to get Long Term Care insurance or is it too late? Where do they start?
It can be overwhelming to try to understand the impact of all of these decisions. Our goal is to help Walter and Eva make the right decisions in the right order so that they can be confident.
First, we stop and take a breath and talk about what's important to Walter and Eva now, and in the future.We can't plan for your future if we don't know what you want to accomplish. Walter never realized how important Eva's work is to her, so he decides to redesign the cabin so she has a beautiful office space with a view of the lake. Eva discovered that Walter had always wanted to learn to Kayak and fish so they also add a boat shed and small pier to the property as well. After more discussion they decide it should be big enough for 2 kayak's so that once he learns how to fish from his Kayak, he can teach her.
Now that they have a better understanding of what's important to them, we dive into their numbers to see what is possible. After reviewing the pension we realize that the pensions alone will not get this cabin built. Walter's concerned they will have to pull social security early and he's heard there can be big penalties for that. Eva thinks that her consulting income can fill the gap and they can wait on social security. So we started designing Eva's business.
After much consideration we have a plan. Eva will set up a sole proprietorship and will offer her service in bundles to the companies that need it. Since Walter has always enjoyed numbers he volunteers to do the invoicing and keep the books to give Eva more time to help her clients. This creates an opportunity. Eva hires Walter as an employee and pays him a salary. We decide to set up a "Health Reimbursement Arrangement" (HRA) so Eva will reimburse Walter for the cost of their health insurance that will be deducted "after tax" from his pension. This turns an $18,600 annual expense into a business deduction for Eva, saving over $8,000 in taxes every year! Not only that but the HRA can pay for the Hearing aids that Eva thinks Walter needs. Walter is not so sure... about the hearing aids. They laugh and agree to talk about them later.
Their journey goes on as does the planning to keep it on track. At each step we stop to remember what is important to them. We make sure their decisions are aligned with their goals so they are living a meaningful happy life. Eva turns and asks, "What about when we are gone? What happens then?". "Whatever you want." I say, and the conversation turns to estate planning.