At HPH Solutions, we often meet couples who feel ready to retire but don’t believe they have enough assets to make it happen. With proper planning and smart use of available strategies, early retirement can be much more achievable than it initially appears.
This case study features Jeff (58) and his partner Clare (49), who came to us feeling financially uncertain but hopeful.
The situation: Tired of work, unsure about the future
Jeff was feeling burnt out in his demanding job. Although initially working part-time in a job-share arrangement, he was pushed into full-time hours when the other party left. While he was earning $180,000 per year, he couldn’t imagine continuing at that pace for more than a few more years.
Clare was earning $95,000 annually. Their nine-year age gap introduced both challenges and opportunities in planning, especially given Clare’s statistically longer life expectancy.
Their starting financial position:
- Jeff’s superannuation: $600,000
- Clare’s superannuation: $160,000
- Cash: $150,000 (from an inheritance after Jeff’s father passed away)
Jeff’s goal: Retire at age 60.
Uncovering additional income: The UK Pension opportunity
Jeff was originally from the UK. After some research, we confirmed he was entitled to part of the UK government pension, equivalent to around $200 per week (~$10,000/year). He also had the option to top this up by purchasing credits for the years he spent working in Australia.
Action:
For a top up contribution of approximately $10,000, Jeff could upgrade to a full UK pension, increasing his annual income by $10,000 from age 67 onwards. This would reduce the amount he’d need to draw from his Australian superannuation.
Maximising superannuation contributions (and tax savings)
Jeff’s employer was contributing around $21,000 annually into his super. We advised him to top up to his concessional cap of $30,000, saving him approximately $2,400 per year in tax.
Clare had significantly more unused contribution room. As her super balance was under $500,000, she could carry forward unused concessional caps from previous years.
Strategy:
- Clare made $50,000 concessional contributions in each of the next two years.
- This delivered $17,000 in total tax savings.
- To allow access to these funds earlier (since Clare is under 60), we recommended splitting some of her super contributions to Jeff, who was closer to retirement age.
Result: Retiring in two years with confidence
In just two years:
- Jeff’s super grew from $600,000 to $823,000.
- By using their cash savings and anticipated surplus income, they added $240,000 in non-concessional contributions to Jeff’s super.
- At age 60, Jeff could commence a tax-free account-based pension with a starting balance of approximately $1,063,000.
- This allowed them to draw a tax-free income of $80,000 per year to meet living expenses.
Looking ahead: Planning for Age Pension eligibility
At age 67, Jeff’s account-based pension was projected to reduce to $879,000, putting him above the assets test limit for the full Age Pension.
Strategy:
- Withdraw $360,000 from Jeff’s super and contribute it to Clare’s super (which is not assessed for the Age Pension until she turns 67).
- This reduced Jeff’s assessable assets and enabled access to a part Age Pension of $21,000 per year, despite his UK pension.
- Combined with his UK pension of $22,000, Jeff would now only need to draw $37,000 per year from his super to meet their $80,000 lifestyle.
By the time Clare turns 67:
- Her super is projected to reach $980,000, from which she can start her own account-based pension.
- Jeff’s balance would have reduced to around $60,000.
- With part Age Pensions and minimal drawdown needed, Clare’s super is likely to retain a balance of around $1 million, providing long-term financial security.
Outcome: Early retirement and a comfortable lifestyle
Thanks to the careful planning and a combination of:
- UK pension benefits,
- concessional and non-concessional super contributions,
- super splitting, and
- strategic management of pension eligibility,
Jeff and Clare are now on track to:
- Retire in two years,
- Maintain their current living standard, and
- Stay in the family home they originally thought they might need to sell.
If you’re facing a similar situation, managing an age gap, unclear on your retirement options, or wondering how to make the most of your super, get in touch. With the right advice, early retirement may be much closer than you think.