Terry Bork
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Blog & Resources

  • May 8, 2018
    Current retirees are healthier, wealthier, and living longer than any previous generation. This fact has been recently confirmed in a study by United Income titled “The State of Retirees-How Longer Lives Have Changed Retirement.
  • March 5, 2018
    In retirement, assets, which are in a lump sum, need to be turned into a cash flow stream sufficient to fund your desired lifestyle for life. This withdrawal rate is the source of the biggest concern to everyone in retirement. No matter the level of financial resources, there is always the fear of running out of money.
  • February 19, 2018
    As I wrote last time, in your grandfather’s day, funding for retirement was provided by the “3 legged stool”: Social Security, the Company Pension Plan and Personal Savings. Today, company pension plans are all but extinct and Social Security covers less of the cost of retirement than in the past, leaving personal
    savings to shoulder the load. There are choices when it comes to personal savings, and the burden is on each individual to choose the personal saving method that best fits their needs.

Living the life you want, now and in the future

Goals Based Asset Allocation

It’s time to examine the traditional view of asset allocation and managing risk. Tradition thinking associates asset allocation with Portfolio Management, the optimal mix of stocks, bonds and cash, based on individual risk tolerance. Risk tolerance takes into account investor time horizon and comfort with market volatility and loses. The process includes money manager evaluation, selection, monitoring and reporting. There is a place for this traditional approach, but it is only a partial solution and falls short of addressing the Major Risks to achieving individual financial goals.

Goals Based Asset Allocation provides an alternative strategy that challenges conventional wisdom on how assets are allocated. The first step is to clearly define and prioritize financial goals. Financial goals may include, retirement funding, education funding, retirement income planning, funding health care costs in retirement or maximizing legacy assets for heirs and/or charity.

Applying a ‘goals based’ approach to asset allocation matches the appropriate funding asset, including alternative asset strategies, to the identified financial goal. This process of “asset/liability matching” measures the asset’s effectiveness by how well it addresses the Major Risks.

Case Studies

Firm Sponsored Insurance Based Retirement Plan
A major law firm with 200 Partners wanted to provide an additional tax favored retire option exclusively for the benefit of their Equity and Income Partners. The solution was a firm sponsored Insurance Based Retirement Plan, offering Partners the opportunity to acquire an institutionally priced Accumulation Designed Life Insurance policy. The policy offered a unique combination of tax advantaged benefits not available with any other financial instrument or cash accumulation strategy. Each policy was custom engineered to Partner specifications to provide an additional tax favored option to save for retirement based on each Partner’s needs.
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The Multi-Generational Plan
The case involves the following family unit. Husband and wife age 77 and 75 (generation 1), with 5 adult children ages 45 to 52 (generation 2) and 9 grandchildren (generation 3). Generation 1 had total assets in excess of 10m. An Irrevocable Life insurance Trust was established to pay any future estate taxes and their assets dedicated to retirement where sufficient to fund their lifestyle objectives for life.
Generation 1 was interested in helping to provide for the current and future needs of generations 2 and 3, and were currently making lifetime gifts. But, while they felt comfortable they had enough assets to fund their desired lifestyle, they were hesitant to give away too much for fear of needing it in the future.
Generation 1’s assets included real estate, business interests and multiple investment portfolios. They wanted to reduce the risk in their current holding as well as reduce their income taxes.
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Executive Compensation/Business Succession
I have had this small business as a client for over 25 years and we are now entering the third generation of family ownership. The company has grown to over 400 employees with multi-city locations. The company has long had key employees who have contributed greatly to the growth and success of the business.
The first generation owner wanted to establish a compensation and benefit plan that would help retain these key employees while also rewarding them for their contribution to the company’s success.
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