A FINANCIAL expert has advised a couple with $2.2 million on how to retire successfully.
Enjoying fruitful golden years would involve avoiding a major risk factor in your financial planning.
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James Conole is a certified financial planner (CFP) and founder of retirement planning tool Root.
On a YouTube videohe detailed the situation of a couple in their 50s who were thinking about retiring.
Graham and his wife wanted to know what they could do to retire in next four to five years.
They both worked full-time and earned a combined total of $320,000 a year.
Graham and his wife saved $2,235,000 in the following accounts:
- $400,000 in 401(k)s
- $220,000 in IRAs
- $95,000 in a Roth IRA
- $1.5 million in a joint brokerage account
- $20,000 in a high-yield savings account
Within the brokerage account, 60% of the funds were in a single technology stock.
That meant $900,000 — nearly half — of his retirement fund was in a single stock.
Although they did not own a home, they had no debts and no children.
They were budgeting $100,000 a year for retirement expenses, plus $20,000 a year for travel and $18,000 for health care.
Although it appeared that they had a healthy financial position, it was still not perfect in the expert’s eyes.
James identified a major risk in his plan that Graham and his wife were not “fully appreciating.”
SINGLE STOCK PROBLEM
It was US$900,000 in a single share.
“Too much in a stock equals risk,” James said. “Risk equals bad.”
However, if Graham and his wife decided to sell the shares, they could face a huge tax bill.
“You know it’s risky to hold individual stocks, but now you face taxes,” James explained.
Too much in a stock equals risk. Risk equals bad.
James Conole
However, the expert felt it was better to accept the “guaranteed” impact of a tax law than risk losing $900,000 if stocks fell.
“What’s really the biggest risk is not the tax bill,” he said.
“In fact, the biggest risk to our plan is that stock, that $900,000, falling 40%, 50%, 60% or more and never really recovering.”
See how a couple retired in their 30s with just $870,000 thanks to their frugal strategy.
Or get expert advice if you have nothing saved for retirement.
This story originally appeared on The-sun.com read the full story
