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Asset Re-Allocation for a couple seeking advice for retirement planning

Image of couple happy they can retire early
Ability to retire 5 years early
Services Used – Wealth Creation, Retirement Planning, SMSF & Wealth Protection.

A Yield Client Case Study

Able to retire 5 years early 

Enabled an additional $330,000 each in super contributions  

Reduced tax payable from sale of Direct shareholdings 

Provided guided investment advice allowing for personalised investment decisions 

Advice For Early Retirement

Mark and Susan are in their early 50’s and have been clients of Yield Financial Planning Melbourne, for just under 10 years. Their advice for retirement planning has been focused on wealth creation strategies, to help put them in a position for a comfortable retirement and over this time they have built a well-diversified portfolio of shares and property. Through our regular reviews, we could see they were at a point they would benefit from a comprehensive review of their position and advice for retirement planning. They are clients that value their financial security, yet don’t mind market exposure to financial assets valued at a comfortable price. Susan is a senior professional in a large US firm and has accumulated stock options which have vested and grown to become a sizeable amount, and our advice was to diversify some of this position. A key finding, of our retirement planning advice was that Mark and Susan appeared to already be in a position where they could self-fund their desired retirement expenditure of $80,000 p.a. to Susan age 90, assuming they could generate a net rate of return of 5.40% p.a. on the value of their financial assets.  

Investment Advice

We made a number of investment related recommendations to Mark and Susan considerate our advice was for their retirement planning. They consisted of; Reducing exposure to the company shares Susan owned in their portfolio, valued at $642,578. We recommended that they decrease this holding to $200,000, to reduce potential risk from market conditions and diversify this money across different investments and debt reduction. As this was advice for retirement planning, we also recommended both Mark and Susan sell their other direct shareholdings, to create a simpler financial position and to consolidate their retirement financial plan. Through tax reduction strategies, Mark was required to pay no tax on the sale of their direct shareholdings. Susan was required to pay at the Capital Gains Tax rate. We did financial modelling for Susan, to determine any potential benefit of holding the investment in full until retirement but found that because they are high net worth investors, with property and managed funds outside of super, there was likely to be very little tax benefit in holding off.  

Superannuation Advice

With the extra cash holdings Mark and Susan have accumulated from the sales of shares, we recommended that they make non-concessional contributions to their super, to help make their transition to retirement much more tax effective. We recommended both Mark and Susan contribute $330,000 from their bank accounts into their super accounts. This type of contribution is called a personal contribution and will be classified as non-concessional. No contribution tax is payable when making this contribution. We also recommended they maximise their concessional contributions to super, which are made pre-tax and for Mark, we were able to make larger contributions as a catch-up contribution from previous years, to offset tax payable on the sale of shares.  

By concentrating their funds into superannuation, they will have more wealth that will eventually be income and capital gains tax free, as it will be converted into an account-based pension, to be used once they have both retired. Their funds will also be invested considerate of their risk profile, therefore targeting returns that are appropriate to the risk they are willing to take on. In doing this Mark and Susan will ensure that once they turn 60 they can access their super, so they will be able to enjoy a very comfortable retirement. Showing them strategies to grow their super is a cornerstone of our advice for retirement planning for Mark and Susan.  


Cash Flow Management 

While Mark and Susan are both still working, meeting cashflow needs is not a challenge. The tricky part comes along if Mark and Susan retire before the super preservation age of 60. This will mean they have to live off of their cashflow from assets held personally for a couple years. Given our analysis identified that they could retire today, our advice for their retirement planning has been structured to provide this flexibility, if they choose to retire sooner rather than later. We also recommended that they both turn their super accounts into account based pensions once they turn 60, funding a chunk of their retirement income needs. Our projections indicated that they could continue to supplement their drawings from Super with funds held personally, until the financial year ending 2031 onwards where minimum pension drawings from their Pension would be sufficient in meeting their expenditure needs. 


Benefits of Our Advice

Mark and Susan are excellent clients’ of Yield Financial Planning Melbourne and we have been fortunate to have shared their journey as they have pursued different wealth creation strategies, with and without our advice. Through in-depth analysis and planning considerate of Mark and Susan’s goals, they are now in a much more likely position to retire than they would have been before and have the peace of mind now of knowing that they are financially secure. Through our advice for retirement planning, we were able to highlight that the 5 years’ worth of remaining work they intend on carrying out, will merely improve their financial position at retirement, where they may have otherwise worked when not essentially needing to. This is not unusual amongst our client base and we find that people choose to continue working for many reasons once money is no longer the primary driving force. We’d like to thank Mark and Susan for being such lovely clients and we were glad we could help improve their financial situation and retirement prospects. 

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Important Note 
Produced with our client’s permission. Names within this case study have been changed to protect the client’s right to privacy. The content of this case study has been based on a real-life client. Any information provided here is general advice only and does not consider your objectives, financial situation or needs. This information should not be taken as comprehensive and does not constitute legal or financial advice. You should seek legal, financial or other professional advice before relying on any content. Yield Financial Planning is not responsible to you or anyone else for any loss suffered in connection with the use of this information. Information is only current at the date initially published. 

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