Meet Mr & Mrs Not Enough

Steve and Sue worked hard. Very hard. But they played hard too: They enjoyed the lifestyle which they
had worked hard to create for themselves and their daughters, Rebecca & Lucy.

Steve was 45 and he had a plan. It was his own financial plan. He wanted to retire at 55.
Steve hated three things

• His mortgage.
• Pensions.
• And, most of all ……. financial advisers!

So Steve’s plan was simple: pay off his mortgage as quickly as possible. Then, when he was mortgage free, he intended to accumulate as much as possible via his business between 45 and 55 – so that he could retire early. Simple!

Steve didn’t think he had a problem. He didn’t need any ‘advice’.  However, Steve’s accountant recommended that Steve should speak to me.

At our meeting I spent some time getting to know Steve and Sue. I wanted to understand the life they’d had, the life they’d got, and the life they wanted in the future. I helped them to think about the lifestyle they desired throughout their lifetime. I also wanted to understand why retirement at 55 was so important?

The reason?
It transpired that Steve wanted to ‘escape’ at age 55 and pursue his passion! His passion was Motor Sport. He loved it! He wanted to do a lot more of it while he was still young enough and, more importantly, fit enough to do so. He wanted to do more hill climbs, more rallying, some saloon car racing and Formula 3.  Better still, both Steve and Sue wanted to travel the world together, ticking off more Formula One events. They wanted to ‘do stuff’ – ‘before it’s too late!’.

But for Steve, why 55? Why was that so important?
Steve shared with me the fact that his own father had worked hard his whole life, retiring at age 65, only to drop down dead at age 67.

It turned out that this was Steve’s main motivator. He could not bear the thought of that happening to him. More than anybody, Steve knew – and understood – that ‘Life is NOT a dress rehearsal’ and Steven lived it accordingly. That’s why Steve worked so hard now, so he could ‘escape’ early.

With his knowledge, I said I would work with Steve and Sue through a lifestyle financial planning process to help them understand where they were heading financially.

I helped them to identify the cost of their current and future desired lifestyle. I built in the cost of continuing private education for Rebecca and Lucy. I built in the cost of their daughter’s weddings. I encouraged Steve and Sue to really focus on the lifestyle they expected at various stages of their lives. We then put it all into a simple expenditure questionnaire. I went back to my office and crunched the numbers.

Unfortunately, at our next meeting, I had to break the bad news.

I carefully explained (with the help of my financial planning software) that on agreed assumptions, Steve and Sue’s current plan would see them running out of money early – by age 67! That’s not a good plan.

Fortunately, with the help of my software, using meaningful, prudent assumptions, it was possible to help Steve and Sue discover how much was ENOUGH. This would be the amount of money they needed by age 55 to ensure they could live the life they wanted – without fear of ever running out of money.

You’ve guessed it. Due to the cost of their current and future desired lifestyle it was a BIG NUMBER.

But once they understood ‘How much is ENOUGH’ they realised immediately that they needed to do something about it. Better to know, than blindly head off into the future without ever knowing what was in store. I then worked with Steve and Sue to find ways of accumulating money through savings and investments. More importantly, I showed them how they could utilise their greatest asset (their business) to help to build their Number.

Once Steve and Sue began to understand ‘How much is ENOUGH’, an amazing thing started to happen. In their business, Steve started to see opportunities everywhere to increase turnover, reduce costs and create profit. All of which would help Steve and Sue to achieve their Number. The funny thing is, those
opportunities were there all along! But Steve didn’t need to see them – UNTIL HE KNEW HIS NUMBER!

Steve and Sue are now well on course to achieve their Number and achieve their intended retirement at age 55. Steve now has a reason to work hard; a real WHY? Steve is motivated. Steve is inspired. Steve knows where he is going.

For the first time ever he could see his target. And now, as it gets closer, it becomes even easier to hit.

Meet Mr & Mrs Got Too Much

John and Mary were in their late 60’s and happily enjoying their retirement. And so they should!

John had worked long and hard in a Company that he had helped to grow over many years. He had benefited from his share options. He had accumulated some real wealth.

They had plenty of income in retirement; from his Final Salary pension, from some private pensions, interest from their savings and dividends from their shares and ISAs. They had accumulated a lot of money and they were enjoying it!

House-wise John and Mary were ‘empty nesters’ and were about to downscale to a smaller, more manageable property. Their three children had all moved out some time ago and their five bedroom house was now far too big for them. They had found an apartment overlooking John’s golf club. It was perfect. Their downscale in house value would soon see over £600,000 going from bricks and mortar into savings.

But what did all this mean? And what about Inheritance Tax?

John was encouraged to meet me by one of his golfing pals who was a client of mine.

As always, I spent some time really getting to know John and Mary. I enquired about the life they’d had and the life they’d got. I also wanted to fully understand what John & Mary had planned for their future. I also wanted to know if they had any plans to help their grandchildren. By asking these questions I helped them to identify the cost of the lifestyle they wanted to continue to enjoy – this gave a good indication of their ‘expenditure’ requirements throughout their life.

I also got them to think about what else they might like to do in their lifetime in order to really enjoy their remaining years. I gathered the facts about what they had accumulated; their capital position, their assets, their liabilities and their many sources of income. I also asked them to complete my expenditure questionnaire.

After returning to my office, and using my cutting edge financial planning software, together with a thorough
understanding of their circumstances, I identified what was going to happen to their bucket.

This is what I found …..

Based on the conservative assumptions they had made, after allowing for inflation, and after allowing for the potential costs of long term nursing care, John and Mary would NEVER, run out of money.

In fact, John and Mary’s wealth would continue to increase, even after allowing for extra expenditure.

Instead of running out of money, John and Mary were well on course to die with TOO MUCH!

This sounds like great news. It is great news! But this meant John and Mary had a big problem.

John had paid a huge amount of tax throughout his whole life. In fact, they were about to pay yet another slug of tax (£24,000 stamp duty) when they downscaled and moved to their new apartment.

Tax, tax, tax.  So I helped John and Mary realise the size of their problem.
Allowing for the fact that they had three children, guess who was going to be the single, largest beneficiary of their hard earned estate …?

The Chancellor!  If both John and Mary died, the Inheritance Tax bill was already over £1.4million. Even on low growth assumptions, it was forecast to get far worse. The Tax Man would receive far more than any of their children!

But it didn’t have to be that way.  Again, using my financial planning software, using conservative assumptions, I helped John and Mary work out just how much more they could afford to spend each year, and how much they could confidently afford to pass onto their children NOW and over the next ten years – without the fear of ever running out of money.

Effectively, I helped John and Mary create a ‘spending and gifting programme’.

John and Mary are now well on course to eliminate their Inheritance Tax liability. They are on course to manage their money to give them the life they want whilst gradually passing on wealth down to their children and grandchildren so the Chancellor does not benefit. They also booked a First Class Round The World Cruise. And why not?

They can do this, because John and Mary now know – and more importantly, understand – just how much is ENOUGH.