Covisum's financial advisor technology can help you grow your financial planning practice by helping you communicate and deliver additional value to your clients. Separately, each tool can help you offer actionable insights into individual elements of a financial strategy. Together, the Covisum software suite allows you to build a comprehensive retirement strategy that includes: Social Security, tax efficiency, portfolio comparison and more. You can test your clients' financial plan against potential stress events.

Provide the big-picture perspective that differentiates you from other advisors with the entire Covisum suite of financial advisor technology: Social Security Timing®, Tax Clarity®, SmartRisk™, and Income InSight®

This case study highlights one of the many ways you can use financial advisor technology to build a comprehensive retirement strategy and add value for your clients.

Case Study

Sarah Smith is a retired nurse. Her late husband, Sam, took care of many of the household financial matters, so she attended your financial planning seminar about taxes in retirement at her local library to gain a deeper understanding of the different income streams in retirement. She was impressed by your presentation and scheduled an appointment at your office.

You learn more about Sarah at the appointment. Her husband, Sam, was an engineer and died three years ago. Sarah is planning to take a trip to Canada with her daughter soon, and she has two grandkids. She enjoys volunteering at the local animal shelter.

Because your taxes in retirement seminar initially attracted Sarah to your services, you reiterate that even with the recent Tax Cuts and Jobs Act, middle income retirees can face federal tax rates as high as 49.95% on each additional withdrawal from a retirement account.

Start with Tax Clarity

You log in to Tax Clarity and enter the information from Sarah’s 1040, it takes less than five minutes. The Tax Map graphic clearly shows Sarah how ordinary and capital incomes interact and how your technology and expertise can help her make better decisions about which income streams to use at which points in retirement. You create a customized report in Tax Clarity. The report will help you quickly and easily identify tax traps and opportunities within the current year.

Right now, Sarah is living off of $20,000 of annual income from part-time work and withdrawals from the investment portfolio that was created with life insurance proceeds from her husband’s death. The portfolio generated approximately $10,000 of bond interest and $20,000 of realized long-term capital gains last year. Although Sarah is not receiving Social Security benefits today, adding her eventual Social Security benefit into her Tax Clarity report allows you to demonstrate the interaction between the three income types.

Run a Social Security Report

Sarah believes that her part-time work prevents her from taking Social Security benefits. However, you recognize that although she will likely forfeit at least one benefit check each year, she has a lot to gain by optimizing her Social Security decision. Since Sarah is a widow, she has access to Sam’s benefit, as well as her own. There are several layers of complexity to the widow(er) benefit that make it difficult to determine whether to claim widow(er) benefits early, when to wait, and when to switch to the survivor’s own benefit. Using financial advisor technology such as Social Security Timing helps you identify the best possible election strategy to help Sarah achieve the maximum Social Security benefit possible. The suggested strategy delivers approximately $100,000 greater value than simply filing for the highest benefit available now (which is the Social Security Administration’s default).

You walk Sarah through the suggested strategy and show her that the earnings test has only a slight impact on the benefits she’ll actually receive under the suggested strategy and demonstrate the cash flows the suggested strategy provides.

You note the switch from the widow benefit to her own retirement benefit at age 70.

Income Harvesting Patterns

Sarah’s upcoming trip to Canada with her daughter has heightened her concern about which accounts she should draw from and when. After reworking her Social Security strategy, building other income streams around it to meet her lifestyle needs can add additional value. You use Income InSight® to show the various income streams. The income streams are color-coded to make it easy for Sarah to see the cash flow.

Stress Testing the Strategy

Now that you’ve determined which accounts to draw from at which points in retirement, you may want to consider whether any portfolio changes are necessary. Often it will make sense to place lower risk assets in the accounts that will be used early in retirement. You use SmartRisk to provide Sarah with a reasonable expectation about how her portfolio will perform in the event of down market and suggest changes to get to a point where she is comfortable with the risk.

Build Your Custom Tech Stack 

You have all of the tools to alleviate Sarah’s concerns and make sure she feels prepared for the next chapter of her life. Communicate the big picture for your clients with an overview of what their retirement could look like with Income InSight, or dive into specifics with Social Security Timing, Tax Clarity, and SmartRisk.

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