Case Study: Making Cash Work Harder

A recording of a webinar discussing this case can be viewed here.

You’re working with a middle-aged, financially conservative couple who are doing well and have accumulated a significant cash position in an abundance of caution. They want to ensure that they’re prepared for any unexpected expenses that may arise. They understand that they aren’t maximizing their assets to the fullest but don’t know what to do next. Your goals are to:

  • Help them understand their current plan
  • Illustrate how positioning a portion of their cash into investments could benefit their strategy, while not impacting liquidity
  • Use some market stress and unexpected expenses to demonstrate the strength of the strategy

Their financial details can be found in the discovery document they filled out prior to your meeting. It can be found here: Making Cash Work Harder - RetireUp Fact Finder.


High Level Client Meeting Flow

Orient Client to their current situation

  • Recognize client’s perceived need for flexibility/safety; acknowledge need for emergency savings
  • Confirm initial data and assumptions
  • Demonstrate impact of a liquidity need
  • Stress plan with the liquidity need in place

Demonstrate an alternative strategy – invest a portion of cash

  • Demonstrate performance with liquidity need
  • Stress plan – show improved results against original plan

Demonstrate an alternative strategy – portion of cash into investments and annuity

  • Demonstrate performance with liquidity need
  • Stress plan – show improved results against original plan

Do a final comparison between strategies

  • Reiterate support for client’s risk tolerance
  • Demonstrate those needs can be met while providing a significant upside

Step-by-Step Walkthrough (a RetireUp account is needed - set up a free trial)

Action Steps

Talking Points


Before the Meeting
Set up the new client using the data from the Fact Finder. Tips:
  • Use the "Quick Calc" function to calculate their Social Security benefits
  • Enter the Savings account with a start date of 2015
  • Go to "Goals and Expenses" and create a new expense. “Parents' Medical”, $75K, One-time, beginning at age 57.
For most clients, you'll want to do this before the meeting so you can do some preliminary planning.

Since they have a general concern about liquidity, not a specific expense, we'll set up a fairly large one-time sample expense related to care of their aging parents.

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Rename your plan “Current Plan”
  • Click "rename" in the upper left hand corner
We'll be comparing this plan against others shortly, so it's useful to have a descriptive name.  Step 02 - Rename
Orienting the Client
Walk through the information you have entered:
  • Profile
  • Retirement Income
  • Assets
  • Insurance
  • Goals & Expenses
We want the client to be comfortable and confident that the information being used in the plan is accurate. Maintaining the clients' confidence in the plan is key throughout the meeting.  
Go to the Retirement Plan, Key Years view. Point out that the plan is based off of income from each account. Key items:
  • Shortfall late in the plan
  • No Ending Assets
  • Income Stability Ratio of 38% (relatively low)
 Step 03 - Orient
Go to the Graph view. Move your mouse over the red sections to show the shortfall amounts.

In the Goals & Expenses section, deselect the "Parents' Medical" expense.

After discussing the talking points, reselect the Parents' Medical expense.

The Graph view is another way to look at the plan. It tends to be easier for clients to understand.

When you remove the expense, the plan works. We need to give the client a way to stay liquid while improving the situation so that, if a major expense occurs, the plan will remain healthy.

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Set Up the Alternative Plan
Under "Current Plan", click "Copy". Enter a new plan name of "Proposed Plan" We'll make a copy of the current plan to explore other strategies  Step 5 - Copy Plan
Go to assets. Edit the “Savings” asset and lower the actual value to $40K. We'll reflect a lower but sizeable amount in Savings  Step 06 - Change Savings
Create a new Investment Account:
  • Actual Value: $170,000
  • Returns: Variable
  • Starts at: Year 2015
We'll put the majority of your Savings into a Brokerage account with a conservative portfolio targeting 5% net returns.

The great thing - it's totally liquid; take it when you need it.

 Step 7 - Reinvest Savings
Go to Retirement plan, Graph view. Review the new plan:
  • The plan now works - no shortfall even with the expense.
  • Even leaves a good cushion of $228,000 at the end of the plan.
  • Can even afford an expense significantly higher (drag slider on Parents' Medical expense all the way to the right.)
 Step 8 - Reinvested Savings Graph
Go to "Compare Plans", compare the two plans. Set the three columns to Total Retirement Income, Goals Met, Ending Assets. Here we're looking at a side by side comparison of the two different plans. You can see that with this simple change
  • Retirement Income has increased by $290,000, allowing them to hit 100% of their goals
  • Ending assets of $228,473 remain

So not bad! We could stop here. But we just assumed your market-based assets earn a flat 5% rate of return. What if the returns have some variability?

 Step 09 - Compare Plans
Set Up a Stable Income Alternative    
Go back to Current Plan – Retirement Plan.
  • Ensure you're on the Graph view.
  • Press the "+" button next to Returns
  • Change from Fixed to Variable Returns
We're looking at your original plan. Let's talk about sequence risk.
  • The market will have up and down years - and we don't know when.
  • The timing of when the ups and downs come matter a great deal
 Step 10 - Variable Sequence
Click "Sequence: Average" and select "Positive" In a positive sequence with strong years earlier in the plan, you see:
  • Ending assets jump to $2.5M
  • Even have some sizable surpluses in some year
 Step 11 - Positive Sequence
Click "Sequence: Positive" and select "Negative" Alternatively, in a negative sequence, the plan runs shortfalls less than 20 years into retirement. No assets left.  Step 12 - Negative Sequence
Select "Proposed Plan"
  • Set Returns to Variable
  • Click "Sequence: Average" and select "Negative"
Even our proposed plan, in which we invest some of your savings, struggles in the negative sequence.  Step 13 - Proposed Plan - Negative Sequence
Under "Proposed", click "Copy". Enter a new plan name of "Proposed Plan - Stable Income" Let's look at increasing your income stability, while still keeping in mind your liquidity needs.  Step 14 - Copy Proposed Plan
Click on "Compare It" next to "Max's IRA":
  • Select Proposed Investment "Indexed Annuity (Increasing Income 7)"
  • Set the Cap to 6% (let's keep it real, folks)
  • Select "Joint Life"
  • Select "Increasing Income Option 2"
Let's look at an option call an indexed annuity. The purpose is to give you a guaranteed income stream for both of your lifetimes, while also allowing the income to increase over time.
  • Point out Market Step Ups on graph
 Step 15 - Compare It
  • Click "Add to Plan"
  • "Max's IRA" now has a slider underneath it. Slowly drag it while addressing the talking points.
As we move balances, the increased income stability helps buffer your income against this market sequence.
  • When the slider is all the way over, most or all of the shortfall (red) will be gone
  • Income stability has jumped from 39% to 62%.
  • Liquidity goal is still met
 Step 17 - Move to CI7
Go to "Compare Plans":
  • Compare the "Current Plan" to the "Proposed Plan - Stable Income".
  • Set the three columns to Retirement Income, Goals Met, Ending Assets.
In a negative sequence, you’ve protected the plan against both the unexpected expense AND sequence risk.  Step 18 - Compare Stable Plan
Close in your own style. Strategy has protected your liquidity needs and sequence risk.  

From here, you can set all of the plans to different market sequences and compare to your heart's content. When you've finished the conversation, add the relevant slides to a presentation and you're good to go. Great job!

(Don't forget to do the paperwork for that $170K brokerage account and $325K Indexed annuity. )

Topics: Case Studies