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The Priceless Gift of Time: Part 1

By Eve Kaplan, CFP®

Usually my columns are filled with cautionary information and advice about savings more, spending less, etc. For a change, I’d like to talk about folks who work too long because they think they can’t afford to retire.

Janet (not her real name, all identifying information changed) was self-employed. When I met her several years ago, she told me she was exhausted from work (which required her to be on her feet much of the day) but she didn’t feel she could afford to retire. What Janet really wanted was to retire and move to another state to be near her grandchildren.

Janet previously had her investments managed by a broker; she told me she once had $1,200,000 in investment assets but this shriveled to less than $800,000 after the most recent meltdown. When I tested Janet’s risk tolerance, it was relatively low but she had been placed into a relatively aggressive 80% equities/20% bonds portfolio by her broker.

Janet, by the way, was 81 when we met.

When I developed Janet’s financial plan, we looked at all the inputs and outputs. Inputs include all her sources of income (social security, self-employment income, a partial pension from a job she had years ago). Outputs include her living expenses, periodic car purchases, annual gifts she makes to her nieces and nephews, insurance (long-term care, auto and homeowners’), a small mortgage and medical expenses.

Despite the blows to Janet’s investment accounts, she still has $800,000 and she virtually owned her house (worth $400,000) outright. We calculated this $800,000 was more than sufficient at retirement, given her age and the fact that she only needed to tap $40,000 per year from her investments for living expenses.

We inflated her expenses over time, reconfigured her portfolio (to make it more conservative and income-generating), calculated her projected rates of return and created a “financial cushion” in her plan so she would remain on solid financial ground even if her investments underwent periodic corrective episodes.

Financial planning software creates thousands of scenarios that test the relative strength of a given financial plan (rising markets, falling markets, hyperinflation, stagflation, commodities implosion, highly volatile markets, etc.). On this basis, planning software can “stress test” the plan and indicate how solid it is to the end of life (95 or beyond).

In Janet’s case, financial modeling work we did for her showed she was in extremely solid shape – not only could she retire immediately but it’s possible she could have retired 10 years ago if we had met earlier.

In fact, it turned out Janet was very proficient in photography but didn’t pursue this interest for years because she had no time while working. Her adult children told her she should stop work but Janet only was convinced she could do so after working with an objective, non-family professional (me) and seeing she was in very solid financial shape after all.

Financial planning doesn’t always have to be “save more” and “spend less” – it sometimes can be “the gift of time” for folks like Janet who are overworked and who have unknowingly over-saved for retirement.

Janet wound down her business after we completed her financial plan, moved to another state and is pursuing the hobby she loves: photography. Janet recently had a small showing of her photographs at a gallery.

Do you know someone – possibly yourself – who can benefit from “the priceless gift of time”?

Copyright © 2010 by Eve Kaplan

Eve Kaplan is a Fee-Only (no products sold) Certified Financial Planner® in Berkeley Heights. Kaplan Financial Advisors is a Registered Investment Advisor in NJ and NY. Eve’s firm works with high net-worth individuals and small businesses (401k planning). Eve can be reached at 908-898-0549 or