Achieving Debt-Free Retirement and Direct Property Decisions
Background: Meet Peter & Susan
Peter and Susan are long-term clients and successful property investors approaching retirement. Over the years, they had built a strong asset base, including multiple investment properties and superannuation.
A key feature of their financial position was Peter’s Defined Benefit superannuation, accumulated through many years working in the government education system. This provided a significant and reliable source of retirement income, but also introduced complexity around how best to structure it.
Key Results at a Glance
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Debt Free Retirement :Eliminated debt by selling one property.
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Age Pension :Covered for the event of her permanent disablement.
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Superannuation:Identified more affordable options, for savings over time.
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Estate improved :Reduced tax for beneficiaries through a re-contribution strategy
Why Did They Seek Advice?
- To determine the best option for their Defined Benefit (pension vs lump sum).
- To assess whether to sell a property or carry debt into retirement.
- To ensure their retirement income was sustainable and secure long-term.
- To reduce risk while maintaining a strong financial position.
- To optimise tax outcomes and improve estate planning for their children.
Strategies Implemented
Retirement Strategy:
- Modelled three options: full lump sum, part pension/part lump sum, and full pension.
- Projected long-term outcomes under each scenario using conservative assumptions.
- Identified that both lump sum options could see funds depleted by around age 79.
- Determined that the full pension option provided the most stable and sustainable income, particularly given their good health and longer life expectancy.
- Highlighted the benefit of indexation, ensuring income keeps pace with inflation.
- Factored in the reversionary pension, allowing Susan to receive two-thirds of the pension if Peter passes away first.
Selling Property to Fund Retirement Strategy:
- Analysed the impact of retaining versus selling one of their investment properties.
- Identified that while holding both properties could produce higher long-term returns, it would also involve ongoing debt and maintenance risk.
- Recommended selling one property, eliminating debt and reducing financial risk in retirement.
- Advised on optimal timing of sale to manage capital gains tax effectively.
- Modelled their financial position under both current and recommended strategies.
- Demonstrated that even after selling a property, they would maintain strong wealth levels through to age 90.
Superannuation & Tax Strategy:
- Recommended transitioning to a more cost-effective superannuation platform, maintaining the same features while reducing ongoing fees.
- Implemented a re-contribution strategy to convert taxable super into tax-free components.
- Reduced potential tax liabilities for their adult children, improving estate outcomes.
Outcomes and Benefits
- Secured a stable, indexed lifetime income through the defined benefit pension.
- Eliminated debt by strategically selling one investment property.
- Reduced financial risk while maintaining strong long-term wealth.
- Ensured retirement income exceeded their lifestyle needs.
- Improved estate outcomes through a tax-effective re-contribution strategy.
- Reduced ongoing costs through a more efficient super structure.
Key Takeaway
Retirement planning isn’t just about maximising returns, it’s about balancing income, risk, and long-term certainty. Peter and Susan’s story shows how the right strategy can simplify complex decisions, reduce financial risk, and provide a stable income that supports their lifestyle well into retirement.
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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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