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He sold the mansion and the exotic cars and became a general practitioner. His salary dropped to $250,000, plus $15,000 a month in disability payments, so he reduced his annual expenses to $100,000.
But when the price of gold began falling in recent years, the man realized his retirement was in jeopardy. He had already made drastic budget cuts, but had no idea what to do next. So he reached out to adviser Lee Munson, founder and chief investment officer of Portfolio, LCC in Albuquerque, N.M., for help.
"The client had spent decades chasing a series of magic bullets," says Mr. Munson, whose firm manages $200 million for 100 households. "What he needed was a true strategic financial plan. And luckily, he was ready to start putting one into place."
Mr. Munson started by helping the client define his goals, which included retiring within five years and paying off the $350,000 left on his mortgage. But the adviser immediately saw a problem: He had no assets that could generate income once he stopped practicing.
"His only option would have been to cash out his $500,000 gold position," explains Mr. Munson. "Given his needs, that wouldn't have gotten him very far."
With the client's reduced expenses, Mr. Munson calculated he'd need about $1 million in savings to replace his income stream in retirement. But to reach that goal and pay off his mortgage, the man needed to save about $160,000 annually. So Mr. Munson recommended that he earmark his annual disability payments toward these goals.
It would require a lot of discipline, especially for someone who a few years before had barely saved at all, but the client was committed to salvaging his retirement. "Once he had a strategy, and a way to monitor his progress towards those goals, he was confident that he could do just that," says Mr. Munson.
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