Client Case Study: At 40, Are You on Track to Retirement?

Ever experienced that moment when you wake up and realise you’re approaching a significant milestone in life? At that moment, you can’t help but wonder – Am I on track to achieving my goals?

That was where John found himself on his 40th birthday. Married to his wife, Kelly, they have two sons, Sean and Kyith, aged 8 and 3 respectively. As the CEO of an engineering firm, John had a good income and a solid job.

But at 40, John had several financial goals that he wanted to achieve.

  1. Retire at 58.
  2. Save enough money to provide for his children’s tertiary education in the UK.
  3. Buy an investment property or a bigger home for his family.

John was unsure if he could manage the additional commitment of buying another property. He was still servicing a mortgage on their current home, and Kelly had expressed her desire to stop working to spend more time with their children. She felt guilty for not spending enough time with them and was especially concerned about their academic progress.

To achieve his financial goals, John diversified his investments across various platforms and stocks, including thematic funds and ETFs. However, he was unsure if his investments could achieve the desired return within his desired timeframe. The performance of his investment was mixed. His allocation to both China and the technology sector has taken a hit recently. This has shaken his confidence and held him back from investing more. He was also worried that if he proceeded to buy another property, his retirement plan and his children’s education plan might be at risk.

John knew that he needed to put a proper wealth plan in place. As a busy CEO with frequent deadlines and business travels, he wasn’t very conscientious about money management. After investing on his own for a couple of years, he decided to reach out to us. He hoped Providend would help him and his family achieve financial security and peace of mind.

We begin with your money values.

To gain better insights into John’s concerns and pain points, we started by asking questions about his money values, priorities in life, family relationships, goals and aspirations.

John values family time and financial freedom. He is willing to spend money on experiences believing that experiences such as family vacations are more important than material possessions. In his words, he will do his very best to support his children in their life aspirations within his capability. John puts more emphasis on building strong, resilient kids than on academic achievement. Therefore, time spent with his children is important to him. That’s also the reason why financial freedom ranks high in importance to him.

The information we gathered about John’s income, expenses, assets, liabilities and existing investment and insurance gave us a clear picture of John’s current financial situation. As Kelly had expressed her intention to be a stay-at-home mom, planning was based on John’s sole income.

We discussed assumptions that formed the basis of our input to John’s wealth plan. We reviewed each of his financial goals in detail to understand the amount of money he needed to accumulate and the timeline for achieving each goal. This was helpful to identify any potential conflict between the goals and to prioritise them accordingly.

From options to clarity.

We then worked on a couple of scenarios for John’s consideration. The analysis showed that if John were to commit to a bigger property, the financial commitment will require him to delay his retirement by an additional five years. In addition, John would have to invest at a higher risk level than what he was comfortable with. In view of John’s money values, family time and financial freedom, he decided not to proceed with the property upgrade but instead allocate his resources to pay down his home mortgage.

Considering that John’s source of funds and source of wealth was from his income, protection of his income through term insurance to mitigate the risk of income loss due to the diagnosis of a dreaded disease, disability, or early demise was important. This ensured that his wealth plan would not be derailed upon the occurrence of eventualities.

Execution of Wealth Plan.

After more discussion and fine-tuning, a comprehensive wealth plan was developed. The wealth plan detailed the specific steps John needed to take to achieve his goals.

Through our recommendation, John replaced some of his participating whole life plans covering death and total and permanent disability. The premium savings were directed to increase his coverage on critical illness with relapse coverage features. He also bought into occupational disability insurance as John did not have any provision in this area. With the restructuring of his insurance program, John was able to direct the insurance cash value from his whole life plan to his investment portfolio so that investment can be executed at the risk level that John needed to fulfill his financial goal.

Given that John had an existing portfolio of investments and our recommendation required him to sell out of his investment to invest in the portfolio offered by Providend, we spent some time educating John on our investment philosophy and why we do the things we do. This was part of risk coaching to educate John on the resilience of the capital market. In investing, we diversify investment across all sectors, and geographical locations so as to reap the return from the market using low-cost, evidence-based funds. We also emphasised the importance of focusing on the long-term and keeping costs low. To further support this, we shared with John the past 50 years of data on the performance of equity vs bonds, and the range of return that investors can expect. We also stressed the importance of planning before investing, matching cashflow with liabilities. The purpose of risk coaching is to inculcate a mental mindset that encourages staying invested, with an assurance that the probability of loss decreases with a longer time frame, thus increasing the likelihood of achieving one’s financial goals.

As John’s wealth adviser, we continually monitor and review the portfolio’s performance to ensure that it remains aligned with John’s evolving life goals. By doing so, we helped John to achieve his aspirations and supported his role as a husband and father.

When John received company bonuses, he checked in with us on resource deployment. We acted as his “Chief Financial Officer”, journeying alongside him towards his wealth goals. We also provided regular market outlooks and rebalanced his portfolio to mitigate risks.

At Providend, we have had the privilege of working with many clients, including John. Our philosophy is centered around taking time to develop a comprehensive wealth plan that reflects the unique goals and circumstances of each individual we work with. We start by having a deep conversation with our clients to help them to articulate what is most important to them in their life. By doing so, we provide an opportunity for them to clarify their concerns, needs and desires. While the number-crunching part of wealth planning may be relatively straightforward, developing a plan that truly reflects our clients’ values and aspirations is the crucial part. We strongly believe in the philosophy of making life decisions before financial and investment decisions. This shapes our approach to working with clients.

This is an original article written by Eleanor Ng, Associate Director of Advisory Team at Providend, Singapore’s First Fee-Only Wealth Advisory Firm.

For more related resources, check out:
1. My Reflection on the True Value of Estate & Legacy Planning
2. To Live the Good Life, Make Life Decision First Before Wealth Decisions
3. Providend’s Money Wisdom Podcast S1E39: The 6 Distinct Stages of Retirement

We do not charge a fee at the first consultation meeting. If you would like an honest second opinion on your current estate plan, investment portfolio, financial and/or retirement plan, make an appointment with us today.

Contact Us

We're not around right now. But you can send us an email and we'll get back to you, asap.

Not readable? Change text. captcha txt