This case study examines the retirement planning decisions facing a married couple (referred to as the Trudeaus) who are weighing two retirement timelines: age 60 with approximately $1.5 million in savings, or age 67.5 with over $3 million. The paper analyzes whether their target of $10,000 per month in post-tax income is achievable under each scenario, considers the couple's potential bequest motives, and evaluates investment vehicles given a fragile global economic environment. It concludes with a recommendation to retire at or near age 60 and to implement a wealth-preservation strategy using cash reserves and precious metals as hedges against anticipated market volatility.
The Trudeaus are seeking to retire in either six years at age 60 or in 13.5 years at age 67.5. They will have approximately $1.5 million in savings at age 60 and over $3 million in savings at age 67.5. They want to be able to live on $10,000 per month. If they live until age 85, the Trudeaus could do this — but one of two outcomes will follow: they will use all their money and have nothing left for their children, or they will have to delay retirement in order to live off the interest while preserving the principal for their heirs. A compromise is also possible: the Trudeaus could reduce their monthly income target and still maintain something for their children. Ultimately, the decision depends on what they wish to do with their savings and with the time they have remaining.
It is recommended that the Trudeaus construct a detailed plan for how they wish to spend their retirement years — including travel, hobbies, and other activities — and then build a table of projected costs reflecting what they would genuinely like to spend. It is also recommended that they not assume they will only live to age 85, as longevity risk is a significant factor in retirement planning. At the same time, they must consider market instability and evaluate asset classes that serve as wealth preservers, not merely growth vehicles. The coming years may see a downturn in market productivity. Implementing a wealth-preservation strategy may be the best option; this would include purchasing precious metals as an asset class, maintaining a cash account in the event of a market downturn (so that equities could be purchased at reduced prices), and reducing overall portfolio risk. As most of the Trudeaus' money is held in a tax-sheltered annuity plan, this repositioning is not expected to dramatically alter what they can spend per month in retirement, but it could significantly protect their long-term financial security.
Robert and Linda Trudeau have been married for nearly 30 years. They have two adult children — both college graduates who are not financially dependent on their parents. Since the time when they began instilling the importance of saving in their children, the Trudeaus themselves have opened several accounts of various types in preparation for their own retirement.
The central question Robert and Linda now seek to answer is how to approach retirement. They are nearing retirement age and must decide whether to retire sooner with a smaller nest egg or continue working and retire later with significantly more savings. Additional questions include how best to use their existing funds and accounts in order to meet the monthly income they believe will be sufficient during retirement.
According to the table of surviving accounts (see Appendix 1), the Trudeaus are well-positioned for a comfortable retirement. If they retire at age 60, the wealth they will have accumulated — given the investment strategy outlined in the exhibits — will be just over $1.5 million (see Appendix 2). If they choose to retire at age 67.5, they will have just under $3.2 million (see Appendix 3).
If the Trudeaus want to live on $10,000 in post-tax payments per month during retirement, it is essential to determine whether they have adequate funds to meet these expectations. They could retire in six years at age 60 with nearly $1.5 million, or in 13.5 years at age 67.5 with more than $3 million — though in the latter case they will be nearly a decade older.
There are several considerations the Trudeaus should weigh in order to fully understand their available options. Beyond the financial figures, it is important that they also clarify what they are retiring for. At nearly 68 years of age, they would be much closer to 70 than they would be at 60. Those ten years may appear small on paper, but in reality they can mean the difference between enjoying a world cruise and wishing one were simply resting at home. The longer retirement is deferred, the less time remains to enjoy it and pursue the activities they value. One important consideration, therefore, is whether $10,000 per month is truly what they require at age 60. They may be overestimating that figure by a significant margin.
"Comparison of retirement ages and investment options"
"Retire at 60, preserve wealth with cash and metals"
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