A Yield Client Case Study 
Doubled the couples original annual expenditure and still have a growing asset base
Saved $36,000 in tax through estate planning
Financial plan that allows for a $7,000 travel allowance in retirement.
Clear plan for what to do with $190,000 inheritance
Doubled the couples original annual expenditure and still have a growing asset base
Saved $36,000 in tax through estate planning
Financial plan that allows for a $7,000 travel allowance in retirement.
Clear plan for what to do with $190,000 inheritance
We had recently been approached by a couple in their mid-60s, Charles and Angela, who desired to retire but had uncertainty around affording retirement.
They didn’t have many assets however they did recently receive a large inheritance in the tune of $190,000, which until now had merely been sitting in cash. They both worked full-time and owned their home outright.
Introduction
During our initial conversation with Charles and Angela, we identified that the main reasoning for them seeking our advice was due to the concern they felt around whether they had sufficient funds available to retire.
Their original retirement plan was to make do with an annual income of between $18,000 to $20,000, whilst they felt comfortable with this, it was clear that this wasn’t their desired retirement lifestyle.
In addition to this, they also had a variety of super funds with about $100,000 invested that needed consolidation, they also showed interest in any advice that we could provide that may improve their situation leading into retirement.
Overview
The first place we started is to work out what their current position looks like if they simply continued as they currently are, with the expectation that they’d retire in the next few years.
This provides us with a baseline to contrast alternative strategies and allows us to determine how much value there is in any given strategic step being assessed.
Our projection showed the clients that even without implementing any of our strategies, that they would be able to afford their minimum retirement objective.
This was because these clients were eligible to age pension benefits, where their entitlements would easily support this level of income.
To enhance their position, we showed them that their assets will consistently grow throughout retirement, which gave them greater confidence to retire sooner rather than later, which was welcomed clarity for them.
Despite this position suggesting they would have no issues achieving the bare minimum, we did identify steps that could be taken to further elevate their situation in retirement further.
To begin with, their money had no clear investment strategy. Most of their funds were held in cash, which was mainly due to their stated lack of knowledge around investment.
Our advice to them helped strike the balance between keeping enough funds liquid to meet their income needs, whilst also investing funds that they felt comfortable within assets that have historically consistently delivered better long-term returns than cash.
The rest of our advice was centered around superannuation, and we helped them understand that it is a purpose-built retirement structure that is highly tax advantageous and provides a centralised & convenient way to manage retirement income payments.
Being over the age of 65, Charles and Angela had met a condition of release for super, meaning they had full access to their funds once contributed.
However, to be eligible to contribute they would be required to meet the work test, which meant they still needed to be working 40 hours in a 30-day period. Lucky for them, they were.
Outcomes
We took advantage of their eligibility to contribute to super and make non-concessional contributions to qualify for the government co-contribution, which they would then have immediate access to when needed.
In their specific situation, this virtually gave them a risk-free way of obtaining a free $500 each for three years, adding $3,000 to their savings.
We recommended they both carry out a re-contribution strategy to consolidate their super funds into one that meets their needs ongoing and has more tax-effective characteristics.
This strategy involved withdrawing the entire balance of their super and contributing it back to super non-concessionally, converting the “Taxable” element of their super balance into a “Tax free” element.
This is an “Estate benefit” for their children, but with no detriment to themselves. We estimated this will save their children around $36,000 in tax.
From here we wanted to give Charles and Angela some idea of an amount they could consider spending that would allow them to live a less frugal lifestyle and even take the opportunity to travel.
We looked at a spending level of double their original expectation (i.e. $36,000 p.a.) along with also allowing $7,000 p.a. for travel until age 80.
We also evaluated their Centrelink eligibility to see what their position would entitle them to.
Even with the confidence of their increased expenditure, their position still reflected a growing asset base, in other words, they were still generating an overall net financial position surplus each year.
Had these clients refrained from seeking our advice, they may have found themselves living the frugal lifestyle they thought they needed to, when in fact they could have been enjoying the years they’d worked all their lives to earn.
