Rob is a 55 year-old divorcee selling his chain of eight local tire stores to a large, national chain. He’ll work for the national chain for two years to transition the business, but is not sure what he’ll do beyond that.
Challenge:
- What should Rob do with the money he receives?
- Can he retire after two years?
Financial Issues:
- How should Bob invest the $4.5 million after taxes, he will get from the sale?
- What income could he expect if he retires in two years? Can he live on the income from the sale, and will it last his whole life?
- He has $158,000 in a SEP plan. Should he roll that into the national firm’s 401(k) or into his own rollover IRA?
Lifestyle Issues:
- Rob has always wanted to coach football. He played linebacker in college and taught English and Physical Education years ago, before he got in the tire business. Could he coach a high school or a Pop Warner team?
- Rob’s girlfriend has a restaurant and would like to expand and is looking to help to help finance it. He is concerned about going back into business and the impact of a business partnership on his relationship.
- He wants to be sure his three children are taken care of if anything should happen to him, but does not want his ex-wife to get any of his money.
Solutions:
- As Rob doesn’t have a rich lifestyle, he should be able to live on income from his sale proceeds when he’s ready to retire.
- WrapManager would create an Envision plan for him, analyzing his expenses against the resources he has to meet them, and then determine his probability of success.
- We will ensure that Rob has enough liquid cash to pay his taxes and invest in the restaurant if he chooses.
- We suggest that he invest the remaining proceeds in a balanced diversified portfolio designed to provide both growth and income. He should reinvest the income portion until he’s ready to retire or invest in his girlfriend’s restaurant.
- We will compare the investment options in the acquiring firm’s 401(k) with alternatives.
- We will work with an estate attorney to create a trust that ensures his estate goals are met and help him move his assets into the trust.
This case study represents hypothetical situations as examples only. Accordingly, no client or prospective client should assume that solutions presented (or any component thereof) serve as the receipt of, or a substitute for, personalized advice from WrapManager, or any other investment professional.