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Preparing To Retire & Providing For Your Family

A Yield Client Case Study

Financial assets increased by 10% by retirement age

Retire 3 years earlier than currently projected with our advice implemented

Super platform would save them $700 per annum

$4,752 saved in tax per annum through salary sacrifice

We recently provided advice to a couple in their 60s where the husband, Mark, was still working, however, was also preparing to retire in the not too distant future.

 

His wife Alice, who was already retired, spent a lot of their savings over the years on improving their property whilst aiding their adult daughter and other relatives whenever they could.

 

Introduction

With Mark preparing to retire, they came to us wanting to know when he would be in a comfortable position to retire.

 

Along with this, our clients also wanted to understand the options available to them that might help improve their financial situation during retirement whilst continuing to assist their daughter where they could.

 

They lived on a substantially sized block and one option they had considered in the past was to add another extension to their property where their daughter and her family could live, another option was to downsize their current residence.

 

They were interested in finding out how these decisions might impact their financial position and the husband’s ability to retire.

 

Overview – Being Prepared For Retirement

We provided the couple with clarity around their situation by identifying when Mark could retire based on the different scenarios that we projected.

 

We found that a variety of strategies could be implemented for their set of circumstances that were in line with their stated goals and desires of their retirement.

 

We first saw the need to pay off credit card debt due to the very high-interest rate, so we recommended taking a lump sum withdrawal out of their pension to

pay off this debt in full.

 

Preparing to retire and ensuring that their retirement fund continues to provide for them throughout their lives, recasting their pension each year to keep more money in the tax-free pension environment would be efficient.

 

We recommended that the couple start to maximise their contributions to Super through salary sacrificing $35,000 per annum, which would save them a further $4,752 in tax each year.

 

For the long-term prospect of their retirement outlook, the couple wanted advice over what they should do with their property, with their explicit goal being to keep it in the family and have an additional section built to house their daughter and her small family.

 

Mark and Alice also saw their home as inheritance for their daughter, so downsizing for them was not an option they were enthused by, but still wanted to explore.

 

To complete our holistic retirement advice, we advised on reducing the level of insurance Mark had to keep his cover in line with their needs, but not pay premiums than needed.

 

Outcomes – Preparing To Retire

Looking at their current position, our analysis suggested our client might be able to retire by the time he was age 75.5, with the funds they’ve accumulated potentially lasting to age 90.

 

Mark and Alice’s primary goal was to keep their home and be able to add an additional section for her daughter and her family.

 

We suggested that the daughter sell her property to buy 50% of their property and then use the proceeds to build the extension and then have the rest put away for the client’s retirement fund.

 

This would help Mark retire at 72.5, 3 years earlier than currently indicated, and benefit the daughter by giving her exposure to a property that is positioned for future growth.

 

This advice also projected that our clients would also increase their financial assets at retirement by 10%.

 

We compared the above strategy against how they are currently tracking for retirement, and as seen in the graph below, this leads to an improved position.

Our analysis also included the option to simply downsize by selling their property and purchasing something cheaper for retirement.

 

This results in Mark still retiring at age 72.5 on their desired level of income but will mean the couple will need to make a significant lifestyle decision that at this stage is difficult for them to seriously consider.

Along with all of the scenarios analysed, we also identified that our client had a superannuation product through a provider that now had a new product on offer that had all of the same features of their existing account however was offered a cheaper price. We recommended this to them as this would help save them almost $700 a year.

 

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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