How To Build with RazorPlan:
Review the Current Situation Scenario for an outline of their current situation. Based on what they are currently doing, using the Cash Flow Chart in RazorPlan you can clearly see that they will have adequate investment assets to meet their goal of spending $90,000 / year after-tax.
But an examination of the Financial Assets Chart shows that the amount of capital that will be needed (Required Retirement Assets) to provide each child with $500,000 as a cash inheritance, is more that they are projected to have.
A minimum estate value of $1,500,000 was entered through Data Entry / Settings / Set Minimum Value which results in a Required Retirement Assets value that is higher than their available net worth in the final year.
To ensure there is never less than a $1,500,000 Estate Value, they need to make some adjustments to their plan. Their options include:
- Reduce after-tax spending by $4,300 / year to $85,700
- Continue working for 1 more year to Howard’s age 56
- Take more risk with their investments to increase returns by 0.29% to 3.86%
- Somehow save an additional $155,900 this year
Implement an Estate Bond Strategy
If Howard and Shirley purchase a Joint Whole Life Policy for $500,000 with a 10 pay premium of $29,165 funded from the non-registered investments, then they will be able to achieve both their income and estate goals.
This strategy provides an Estate Value greater than $2 million for all but the final year of the plan. This offers Howard and Shirley additional Retirement Options as illustrated in the chart below.
What other recommendations can be applied to help Howard and Shirley leave an estate of even more than $2 million? You can create any number of new scenarios to test out your solutions and create a plan that will work for them.