Personal Retirement Planning – a Quick Case Study

In this case study, Mr and Mrs Brown from Perth were referred to one of our financial advisors by their daughter. They’re both in their early sixties and would like to retire as soon as they possibly can. They own the home that they live in, and they also own an investment property – the home they lived in before. They currently rent that property out for rental income.

Mr and Mrs Brown also have an additional Perth property they plan on moving to when their retirement is finalised. They’ve got about $500,000 distributed over various superannuation funds, including Gold State Super, as Mr Brown is a government employee, and has been for quite some time.

Mr Brown has benefited from the old “Defined Benefit” scheme based on the duration of his employment and his income. Mrs Brown also has a few Super Funds which they haven’t really paid much attention to. Both Mr and Mrs Brown are still employed.

Based on those circumstances, here’s our advisor’s strategy

Our advisor identified the fact that Mr Brown’s history of employment service with the government, which is still ongoing, and the Gold State Super, allows for the establishment of a West State Superannuation Account with a lifetime limit on super contributions, as opposed to an annual limit.

The lifetime contribution limit means that the Browns are free to put around $100,000 per year pre-tax, into the West State fund. And they have the capacity to draw out some of their Superannuation earnings as a tax-free retirement transition pension because they’re over 60.

In terms of their retirement planning, they gain the tax-free income they need in order to survive as they gradually sacrifice a large chunk of their income through to their new West State superannuation fund.

A little learned advice goes a long way

The Browns’ new superannuation strategy saves them around $24,000 per annum in tax. Our advisor helped them clarify what their financial priorities were, and helped give them a working, technical perspective on how to invest.

Our strategy was entirely based on the resources they had at hand. It’s never advisable to run your life around investments. It should work the other way around. We believe that money choices are secondary to lifestyle plans. But it’s important to never forget that planning is important.

Don’t put your life on hold just to get a good financial result, talk to a financial planner as early as possible to optimise what you have. Tax-effective retirement income planning must start early in order to maximise the significant benefits available from the superannuation system.

“Retirement Calendar”by aag_photos is licensed under CC BY-SA 2.0

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