A couple in their mid fifties with adult children
Pay off debts and prepare for retirement
Janine and Robert were concerned that they were inadequately prepared for retirement. They had some assets in superannuation, and Janine was working part time and Robert was working full time. Their combined income was $200,000 p.a. and they still had $200,000 to pay off their home mortgage. Both were hoping to ease back from work in the coming years, but they also hoped to be in a position to travel overseas regularly to visit their daughter who was married with a child and living in the US. They wanted to live their life in retirement in the same manner that they have lived throughout their lives. That is, they wanted to be able to eat out often, to have a holiday every year (with an overseas trip at least every three years, particularly to visit their daughter.) They also wanted to do some much-needed renovations to their home and to be able to update their car every five years or so.
We recommended that Janine and Robert commence a program to salary sacrifice, so that they could continue to live on the same income, but to divert more ‘before tax dollars’ to their super fund. This tactic saves them $15,000 p.a. in tax, and these savings were able to be directed to reduce their home mortgage. We also set up a Transition to Retirement strategy that saves them $6,000 p.a., which created more funds to devote to super. We maintained the underlying investments they held in their super funds because they were quite sound, but we restructured how they are owned. We arranged that they hold their investments directly, which reduces fees and assigns tax benefits directly to Janine and Robert (rather than being spread across all investors as can be the case with a managed fund). They’ve been able to make the renovations to their home including a kitchen replacement, and have the peace of mind of knowing that their financial strategy has improved their situation by more than $21,000 p.a. This boost to their wealth has enabled them to grow their super faster, to reduce their home loan and to know that they will have the means to travel when they wish to.