He was offered a buy-out from his company. Should he take it?
Peter's Background
Peter Causon had two weeks to make one of the biggest decisions of his financial life.
The middle manager at a prominent consulting firm had been offered an early retirement package as his company tried to reduce its costs. He wasn’t sure what was the best course of action to take and he needed some help.
He met with his advisor and the team at VPIC in search of some informed advice. They knew the clock was ticking.
We all began by listening to every element of his situation – listening to his initial reaction to the package, including that his long-time employer would be fine with him leaving; listening to his personal retirement goals; and listening to what had to happen at the end of his meetings with his advisor and VPIC to feel like he was in the right spot. Most importantly, he needed to know whether the money he would receive as a buy-out would be sufficient to boost his portfolio so that it would last for the rest of his life.
Once we had a good understanding of where he was and where he wanted to go, we sharpened our pencils. We had a lot of work to do and not much time in which to do it.
How did VPIC help quarterback a solution?
The first steps were:
- Peter’s goals were summarized as we understood them and kept handy for the planning process.
- A net worth statement was compiled, including all of his assets and liabilities, plus a five-year cash and tax projection to make sure we captured all of his sources of income.
- His decision, whatever it may be, was plugged into our sophisticated retirement modelling software to see how it would impact his long-term financial future.
The projections that were generated helped us understand the likelihood of his assets lasting for his entire retirement if he accepted the package and retired, accepted the package and got a new job or turned the package down and continued to work in his current position.
Peter was helped to understand what would happen if his stock options or his entire portfolio grew more slowly than he anticipated, we all discussed the pros and cons of each possible decision and finally, a recommendation was made that he accept the package and dust off his resume. At age 50, it was best that he find work at a comparable salary for 10 years so he could retire at age 60.
A Solution to Meet His Needs
If Peter was to start drawing money from his investments in 10 years, he still had plenty of time for further capital appreciation. So, his portfolio was repositioned to invest in strong, durable and profitable businesses that pay a growing dividend to grow his capital and ensure he has enough to live on in retirement.
The decision was made to invest in fixed income to create a steady income stream and help protect the portfolio from any unexpected shocks, such as a prolonged pull-back in the market.
Peter agreed that a balance of income and growth would work best for him. He felt his portfolio was well-positioned today and for the future to meet his investment objectives.
To make sure he remained on track, he also scheduled his first quarterly review meeting with his advisor.
We also needed to invest in fixed income to create a steady income stream and help protect the portfolio from any unexpected shocks, such as a prolonged pull-back in the market.