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Assisting a high-net-worth business owner couple with retirement

A Yield Client Case Study
Pay off mortgage or invest

$422K more retirement savings by age 63 

Debt restructure and repay Div 7a loans 

Investment advice 

Tax structuring and minimisation 

Jenny and Michael are high net worth investors (HNWI) and successful business owners. They are a married couple in their early 50s, who initially approached us with the goal of purchasing another property and gaining a better understanding of how they're tracking for retirement.   

The couple were also particularly interested in receiving advice regarding how to invest funds they had available, in addition to reviewing their insurance cover.   

 

Introduction  

Jenny and Michael own their primary residence in Malvern, in addition to having investment properties in locations ranging from a farm on the great ocean road in Victoria, to a home in the mountains in the U.S. When Jenny and Michael met us, they had accumulated $500,000 in cash and were soon expecting to be in possession of another $500,000, which they wanted to utilise to the best of their ability.   

They have also expressed intent to upgrade their home in the near future and are curious to know if this will have any adverse effects on their retirement funds.   

Prior to interacting with our services, Jenny and Michael both had existing insurance cover. Michael’s level of cover was regarded as being sufficient for his needs, having recently been reviewed as part of his business exit strategy, which Yield assisted him and his business partner with. Jenny’s cover was also deemed appropriate; however, we identified a cheaper rate equivalent contract through an alternative provider.  

 

Overview – Funds Allocation & Debt Restructuring  

Jenny and Michael have done a phenomenal job acquiring a number of assets and resources. With the aim of upgrading their family home in Malvern, they knew they needed to focus these funds on strategies that would help guarantee retirement. 

As a firm we were tasked with presenting options to Jenny and Michael best suited to their lifestyle. This included strategic tax advice, debt reduction advice, including repaying their division 7A business loans, and helping them to invest well. We assessed their position considerate of the business structures they already had in place and helped them to invest using their family trust, bucket company and SMSF 

Having a large amount of capital readily available for investment, helped reduce the time needed to self-fund their retirement objectives. Jenny and Michael were advised to invest into some unique and targeted investments that help diversify their asset allocation, while taking advantage of opportunities in the current market. In order to support a swift transition to retirement, we also recommended Jenny and Michael build up their super contributions as much as possible.  

 

Outcomes  

Debt Reduction: 

We recommended Jenny and Michael pay off their credit card debt at 18% interest which led to them saving up to $5,400 interest, which could then be expended as they choose.   

We helped Michael & Jenny understand the advantages of repaying their Division 7A loans as quickly as possible and provided a debt reduction strategy to help them achieve this. This included building funds available for investment in their bucket company.  

We identified that their home loan interest rate, was higher than it needed to be and recommended a restructure of their loans to reduce their interest cost and improve their proportion of tax deductible and non-tax-deductible debt. 

 

Superannuation growth:

Based on their current superannuation position when they came to us, we advised them to increase their concessional contributions to the maximum and showed them how this was affordable. This helps them save est. $3,932 p.a. each tax or combined $6,272 p.a. Once in super, this money compounds in a tax concessional environment, therefore increasing how much funds they would have access to in retirement. 

Advice was given to consider locking in substantial gains made on an international property, with maintenance issues, and to diversify this for their future objectives at a time when the exchange rate is historically favourable.  

 

Insurance :

We recommended Michael maintain his insurance cover, both personal and business, which were recently reviewed as part of their exit plans.  

Jenny was interested and endorsed a switch to a cheaper more cost-effective alternative insurance plan and was successful in doing so, which saved her $1,813.32 in the first year. 

 

Investment:

We advised to use money they had accumulated, investing using their family trust and a pre-existing bucket company. We employed a different strategy for each entity, considerate of tax implications.  

We also helped them utilise the flexibility their SMSF provides them by recommending some investments that are not available in other super fund structures.  

 

Retirement:

Jenny and Michael aimed to have funds of around $240,000 p.a. in retirement, comparatively, they are now able to afford $258,000 p.a. a jump of 7.5%. This is an ideal situation as it offers flexibility to either retire with more security or an option to retire sooner if they would prefer, while also funding their home upgrade.  

 

Michael & Jenny are now confident about their future, with the benefit of knowing they should have $420K+ more in financial assets for their retirement, as a result of our advice to them. Highlighting the value of quality financial advice.  

 

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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