Professional planning pays off

31 August 2018

Just because you’ve retired, it doesn’t mean you should take your eyes off your financial plan. As things change with you  and your lifestyle, it pays to have your plan reviewed and amended, like LGS member, Andrew and his wife Jan.

Andrew has always been a meticulous planner. Having run his own business all his life, he was accustomed to budgeting and forecasting, and setting his own agenda. So when it came to his and Jan’s financial future, he thought he had it covered.

Andrew had set the pair up for a reasonably comfortable retirement, forecasting they would have an income of around $52,000 a year.

When he stopped working at age 65, Andrew and Jan jointly-owned their home and contents, a motor vehicle, a modest amount of cash and a small parcel of shares. Their joint term deposit of $200,000 was earning 2.3% p.a. in interest and was due to mature soon. In addition, Andrew’s account-based pension was worth $400,000, invested in a balanced fund of 50% growth and 50% defensive assets, while Jan had no super as she had not worked.

Based on their total assessable assets, Andrew was entitled to 19% of the age pension.

The scenario appeared adequate, however after speaking with friends in a similar situation they decided it would be a good idea to have a financial planner run their ruler over their plans to see if they could be doing better in retirement.

Improving their situation

Andrew and Jan’s financial planner advised them to set up a super account in Jan’s name, and use the money in their term deposit to make a non-concessional contribution into her fund in a mix of growth and defensive assets to diversify their returns. Andrew was also advised to withdraw $100,000 from his account-based pension, and contribute that to Jan’s fund.

Their financial planner also suggested Andrew take a further $100,000 from his account-based pension to purchase a guaranteed lifetime income stream that provided for them no matter what happens in financial markets. This means that they now have a guaranteed income of $5,578 a year, for life. If their retirement capital ever depletes and they are left only with the age pension, they will always have this additional layer of income over and above the age pension.

As shown in Figure 2, while their overall retirement capital balance was still the same, it is now divided up differently. And that difference means Andrew is now entitled to 50% of the age pension; his age pension jumps 165% from $6,691 a year to $17,756.

Meanwhile Jan, aged 62, can watch her super grow over the next five years in a long-term investment, further contributing to their overall retirement nest egg.

Capture missed opportunities

Rather than go it alone and hope for the best, seek professional advice. Hope isn’t a strategy, but professional, affordable advice certainly is.

To be more like Andrew and Jan, and capture opportunities to boost your savings, call 1300 LGSUPER (1300 547 873) to book an appointment with your LGS financial planner or you can request an appointment here.

The information on this website is of a general nature only and does not take into account your personal objectives, situation or needs. You should consider obtaining professional financial, taxation and or legal advice tailored to your personal circumstances prior to making any financial decision.