By Matt Samson, CPWA®
Every client that comes to ILS Financial for guidance is in need of a unique financial strategy. To unveil their path to financial success, we craft a custom, comprehensive strategy that gets them closer to realizing their goals while aligning their financial resources with their values and priorities.
When John and Mary Smith (1) asked for our assistance making the financial transition from John’s retirement from the military to his new career in the civilian sector, we knew we had the skill, knowledge, and dedication necessary to guide them.
Let’s take a closer look at how our team addressed their needs.
The Client
John is an active-duty O-4 officer currently stationed in California. At 43 years old, he’s retiring from the military after 20 years of service with a High-3 pension of $46,000 a year. In addition, he has an anticipated VA disability rating of 80%, amounting to a pension of $2,292 a month. 90 days from his retirement date, he has begun his terminal leave.
Mary, John’s wife, is a homemaker currently raising their two children, William (age 15) and Susie (age 12). After her parents passed, she received an inheritance currently valued at $120,000. John has transferred his post-9/11 GI Bill to his kids, saved $500,000 in his TSP, $100,000 in a Roth IRA, and they’ve started saving for their children’s college through 529 plans.
John and Mary have a mortgage of $420,000 on their California home (valued at $700,000), one car loan of $28,000, and credit card debt at $7,000. They have saved $10,000 in an emergency fund and to help with transition expenses, and the only life insurance either has is through Servicemembers’ Group Life Insurance (SGLI), providing John with $500,000 of coverage and Mary with $100,000.
The Goal
During our initial meeting with the Smiths, we asked John and Mary what is important to them. John identified family security, investment strategy, and tax planning as his top three priorities. While Mary agreed on family security and investment strategy, she named peace of mind as her third top priority.
After discussing what this meant to them, we learned they both wanted to make a smooth transition for their family and be protected financially and legally if something were to happen to one of them in the years following their transition to civilian life.
They desired an investment strategy that was in line with reaching their goal of retirement at age 65, with enough resources to travel and help their children through school and early adulthood. They also hoped to consistently reduce their tax bill while receiving John’s military pension as well as his benefits from his new civilian career.
How My Firm Helped
To help John and Mary work toward their financial goals, my first recommendation was to get military legal assistance to review and confirm their legal documents (e.g., wills, powers of attorney, medical power of attorney) were in order.
Military bases offer legal assistance on wills and powers of attorney and sometimes offer trusts on a “time available” basis. In John and Mary’s case, however, the military base was not able to help with the trust, which was important for them to establish.
To help, we referred them to a civilian estate attorney who could create a living trust for them. Once their trust was established and their funds were transferred, we titled their taxable accounts into the trust and reminded them to retitle their home, cars, and external bank accounts so they could take advantage of the tax benefits living trusts offer.
We also helped them evaluate whether a military Survivor Benefit Plan (SBP) or commercial life insurance was the best option for them. They decided to establish a tiered set of life insurance policies, of $500,000 for 30 years, and $1,000,000 policies for 10- and 20-year terms. This provided coverage through the children’s college years, John’s second career, and partially through their anticipated retirement.
The Outcome
John and Mary’s overall goal was to understand their desires and priorities, evaluate their current assets, and distribute them to take advantage of John’s military retirement options and also his future civilian employment.
To that end, we helped them draft a statement of financial purpose. We then evaluated their investment profile and found that they were being much more conservative than the assessed risk profile we created for them. We modeled their future retirement with an expected growth rate that aligned with their current portfolio, as well as a portfolio designed toward their Riskalyze score through a detailed financial plan. Ultimately, they decided that they would redistribute their funds to align with the new portfolio.
Then we analyzed John’s military Thrift Savings Plan (TSP); knowing that the funds within the TSP are at extremely low cost, we decided to leave 50% in the passive TSP funds and move 50% over to the actively managed funds in the proposed portfolio. We also discussed consulting their CPA to help us manage Roth conversions of the tax-deferred TSP funds.
To help manage their taxes, we looked at John’s VA disability rating and advised him to invest that amount in the Roth 401(k) option his future employer offered. We filled out their PFO with all of the strategies currently in place and discussed which items were most important to them to accomplish next.
Regarding housing, we discussed whether John and Mary would keep and rent their California home or sell it to buy in a less expensive state. We learned that they planned to sell their California home but that Mary was interested in starting a business once they moved. We encouraged her to establish an individual 401(k) to help invest any income they didn’t need and to defer taxes.
We also recorded their estate attorney and CPA’s contact information and placed a copy of their wills, POAs, life insurance policies, and trust in one binder, making a convenient single document if something were to happen to them. We built a one-page financial plan and linked all their accounts to their Elements financial health monitoring system, allowing both them and us to easily track their progress.
With their financial plan in place and recommendations made, John and Mary had a much better understanding of how to effectively transition to their new chapter as civilians.
Get Started Today!
Using an approach customized to your unique situation, my ultimate goal for every client is to help you prepare for financial success.
Are you experiencing a situation similar to John and Mary’s? Or do you have an entirely different need? No matter your circumstances, I encourage you to reach out. I’d be happy to evaluate your situation and share how I can help.
You can contact me by calling (402) 281-0447 or emailing matt.samson@ilsfinancial.com.
About Matt
Matt Samson is a financial advisor at ILS Financial, a financial services firm based in Omaha, Nebraska, empowering military members and veterans toward financial freedom. In his role, Matt is dedicated to serving clients with tailor-made financial strategies that help them work toward work-optional lifestyles. He values the trust his clients place in him and thrives off helping them live out their dreams and enjoy less stress. He is proud to have the opportunity to be a positive influence on the individual’s life, their family members, and possibly for generations to come.
After a distinguished career spanning over 21 years of active and reserve service as a United States Marine, in 2014, Matt made the transition from military service to financial planning, discovering his true calling as a financial advisor. His passion led him to establish ILS Financial—a place where he could leverage a refined and structured process to design and help clients pursue the lifestyle of their dreams.
Matt holds a Bachelor of Science in Actuarial Science from the University of Nebraska – Lincoln, an MBA from the University of Nebraska – Omaha, and a Certificate in Wealth Management Theory and Practice from the Yale School of Management. He also obtained the Certified Private Wealth Advisor® certification from the Institute of Investments and Wealth. Matt continues to proudly serve our nation as a member of the United States Marine Corps Reserves, where he currently serves as a Space Operations Officer. Outside of the financial world, Matt enjoys spending time with his wife, Laura, and their three sons, Brayden, Connor, and William. A big sports fan, he engages with his local sports community as a coach for high school football, youth football, and travel baseball. To learn more about Matt, connect with him on LinkedIn.
Investment advice offered through ICA Group Wealth Management LLC a registered investment advisor
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(1) Client names changed for confidentiality purposes.