Updated: May 24, 2021
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Bob and Diane worked hard to blend their families, their financial lives and their retirement goals.
 
Key Takeaways    

• Many successful people are on the right track financially—they just need professional validation for ways to move forward with the next stage of life.

• Blended families bring a host of challenges financially, regardless of the couple’s age.

• It’s great you have earned substantial stock options—but are you aware of the “concentration risk” to which you may be vulnerable?

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Bob and Diane were in their early 50s when they first came to see us. They had all the makings of an ideal client. They had diligently saved for retirement and they had many good options for reaching their retirement goals. It was clear to us, however, that they weren’t as confident about their financial future as we were.
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The Situation

​When we first start working with clients, we often find them on the right track with their financial future, but still feeling uncertain about exactly what to do next. They have big dreams, but they don’t have the confidence to go after those dreams because they are afraid of making costly mistakes with the money they have worked so hard to accumulate. That’s natural.

That’s why many successful people hire financial advisors. It’s not about solving a particular financial problem; it’s about finding the validation they need to move forward with a new part of their life.
 
In Bob and Diane’s case, there was more complexity than appeared on the surface. They had been together a long time but hadn’t gotten married yet. Both had been married before--Bob was widowed and Diane was divorced. While getting married again was something both wanted, they wanted to get other things in order first.
 
One of their primary goals was to retire within the next year.

While devoted to each other, each had a different relationship with money. Both were raised in large families, but Diane’s was significantly less financially secure than Bob’s. In addition, Bob had accumulated more money than Diane during his working life as he was an executive at a large New York area financial firm. They were in different places both emotionally and financially.
 
Bob and Diane each had two adult children, and both were worried about their partner’s financial success if something were to happen to the other. Bob was also worried about providing an inheritance for his children since he was their only remaining parent. That always gets complicated in blended families.
 
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The Challenge

How were they to stop working and merge their financial lives–all during a punishing recession.
 
When discussions surrounding money move to family, beliefs and cultural heritage, it is important to be respectful and mindful that comparing apples to oranges is futile—especially when blended families are involved.

Fortunately, Bob and Diane were financially and emotionally mature and willing to take the necessary steps to get to joint financial plan to the next level. We just helped them discover new solutions that incorporated their combined needs, values and backgrounds.
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The Goal​

As mentioned earlier, Bob and Diane came to us about 12 months before they had planned to retire. Of course, they had no way of knowing their projected retirement date would collide head on with a painful global recession that hit the U.S. very hard. Neither did we.

But, if they wanted to retire, purchase a new home together and live off the savings they had accumulated, we had to plan for both their immediate and their long-term financial security.
 
Solution

Our planning showed they had sufficient money for retirement, assuming they did not lose a lot of money early in their golden years or at any time along the way.
We spent as much time counseling the couple about clarifying their values and goals as evaluating their tax and investment strategies. After solidifying their vision for the future, we implemented a plan to ensure they could meet their goal of retiring young and not having to worry about supporting their lifestyle.

They asked us about purchasing put options to protect their downside, but after careful analysis, we determined the simplest solution was the best solution—simply selling a large portion of company stock and allowing the remaining stock options to grow so they could be exercised later as needed.
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One of the couple’s biggest hurdles was paying taxes. Bob had accumulated a significant amount of company stock at his firm. This is not an uncommon situation for our clients and smart treatment of that stock can be vital to a loyal employee’s long-term financial success.

In addition to his company stock, Bob had a significant number of stock options that would vest over the next 10 years. The fate of the couple’s financial success was directly tied to the success of Bob’s company. We advised Bob to sell the majority of his stock and pay the taxes immediately—which he did. This enabled the couple to make financial and life decisions based on their goals--not on the whims of the stock market and Bob’s company stock.
 
That decision turned out to be prophetic as the stock market collapsed about a year after Bob sold and his company stock would have plummeted with it.
 
At the time, both Bob and Diane had agreed to work one more year. While it was tough to let go of their careers, their timely planning enabled them to retire comfortably and confidently, despite significant turmoil in the over financial markets.
 
Bob and Diane’s story doesn’t end there, however, as they still had to find a way to merge their financial lives. Because they came from different financial circumstances and upbringings, orchestrating a financial “merger” for the couple was not easy, despite how much they loved each other

As mentioned earlier, Bob and Diane were very coachable and proactive. For the most part, they found common financial ground on their own and respected each other’s differing views about money. I like to think that Novi helped foster their dialogue.
 
The Outcome​

Bob and Diane now reside happily in Burlington, Vermont in a dream house overlooking Lake Champlain. They continue their active lifestyle with more confidence than ever. Bob captains their beautiful Tartan 3400 sailboat, while Diane teaches yoga as a master instructor. They remain a big part of their children’s lives, helping guide them through the challenges that so many young adults face today. With the financial freedom they have worked hard to create, they travel freely and live comfortably knowing that they have the financial skills and resources to ensure peace of mind in retirement.
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Conclusion

Merging families is never easy when it comes to dynamics or finances. But, if you respect your partner’s wishes, acknowledge your different views about money and stick to a long-term plan, chances are you can enjoy your golden years like Bob, Diane and their extended family does. If you or someone close to you has concerns about their retirement readiness, please don’t hesitate to reach out.