Sick of eating into your retirement capital?

With cash rates falling, Barry & Erica’s SMSF cash was earning them close to a 3% return. They were concerned that this was not sufficient to continue to pay them the income required from the fund to meet their income needs, without drawing into the capital.

After delving into what it was they wanted their money to do for them and the level of risk they were prepared to take, they wanted to try and get a return of around 6.5% to meet their income needs and maintain the portfolio valuation over the long term.

With volatile markets, we implemented a strategy over time to reduce the risk of market entry and to provide a diversified portfolio that would aim to deliver this type of return over the long run. With a portfolio focused on income and the fund having the ability to claim back franking credits, we have been able to increase the income of the fund and still be defensive enough to ensure that we do not need to sell any growth assets over the coming 7 years within the fund.

With regular reviews, we will continue to ensure that their portfolio maintains on track and as markets and cycles change, we can adjust the portfolio to maximise opportunities and try and overcome any potential hurdles along the way.

Maximise Centrelink entitlements to take pressure off your assets

After seeing another financial planning firm, Matt (66) and Helen (65) had been told to leave their situation as it was with a spread of Super and investments in Matts name and review again in 12 months time when Helen was at age pension age. Matt and Helen wanted to maximise the benefits they receive from the government, reduce tax and have a structure that would provide them with a tax effective income stream in retirement.

After reviewing what was important, we were able to consolidate their Super and also look at annuities for security for a portion of their money. We also changed some of the ownership of the assets and were able to increase the age pension entitlements for Matt over the next 12 months from $9,880pa to $16,950pa. Also by consolidating we were able to reduce the ongoing fees that were payable from $7,400pa down to $3,380pa. In making the changes we were also able to reduce some potential estate tax for non-dependent children down the track. The structure is now simplified and ready for the next stage when Helen turned age pension age the following year to meet their ongoing income needs in retirement.

Utilising Super rules for maximum benefit

After meeting with Ruth and discussing her current Transition to retirement strategy, there were some issues in how much tax she was paying on a regular basis. Ruth was using the funds in her SMSF to draw the maximum income for her of around $100kpa to help reduce debt which was really important for her. As Ruth was under age 60, this income stream was creating additional tax each year that was preventing hr paying down the loan sooner.

After researching and working with Ruth’s accountant, it was discovered that she was able to draw some lump sums from the SMSF without tax implications, allowing us to simply change the way the funds were coming out each year and we were able to pay the home loan off in 18 months and reduce around $40k of tax in her personal name as a result of the change. This was done without taking on additional risk and simply by completing detailed research to ensure that the current strategy was indeed appropriate for Ruth.

Grow your Super through Salary sacrifice

After coming together for a 2nd marriage, both Mary and Tom needed to rebuild their assets over the next 5-7 years to retirement. Not only was the growth focus important to build the nest egg to a level that they would be comfortable to meet their retirement income needs, they also realised that after what they had been through in marriage splits, protecting their assets was also an important area of focus for them both, so they did not go backwards again.

By understanding their current income needs and also their surplus income that they could put towards growing and protecting their wealth, we were able to balance the strategy of debt reduction as well as tax effective contributions to Super that would help rebuild over the coming years – saving approximately $6,500 of tax each year. As Mary is also younger than Tom, we have looked at ways to split the contributions each year from Mary to Tom as Tom will reach preservation age first and will likely be able to access these funds sooner as a result.

A protection strategy to make sure that not only their incomes and assets were protected in the event of sickness, injury or death so that they would still be able to achieve their retirement goals in these circumstances, we were also able to try and leave assets to each of their children in the event of their death so that they received an inheritance straight away. The ownership of these policies was important to manage the potential tax deductibility of premiums, while also ensuring that there would be certainty that the funds would go to where they needed in a timely and tax effective manner, with no potential for disputes. 

Tax effective investing from a gift or inheritance

After receiving a large gift from an elderly relative of around $1 million, Peter and Sam were unsure of how to use these funds to invest for the long term to deliver a tax effective income to meet their retirement needs. As they were both retired and under age 65, they were unsure what they could do to utilise Superannuation and pensions to meet these goals. After discussion around what was important and the income needs from the funds, we were able to implement a strategy where some of the funds would be used for short terms expenses around the house and also maintain a buffer for flexibility. We were then able to utilise the tax free pension environment for the remainder of the funds to provide a regular monthly income to meet top up other income to meet their $80kpa goal.

By carefully discussing the risks and what was important to them about money, we were able to diversify their portfolio of assets to try and receive the income they required and still aim for growth in line with inflation – without taking on more risk than what they were comfortable with.

Income Protection Claim

Steph was single, fit and healthy and 10 years out from retirement. Steph was self employed running a consulting business earning around $200,000pa. Steph was concerned about her future lifestyle if she was unable to work due to sickness or injury and we implemented an insurance strategy to close the gaps that she had. 3 years later Steph was unable to work due to a change in health and has now been receiving income protection payments that have meant she is still able to afford the home loan payments and now is in the position to retrain and potentially change careers to something that will better suit her health circumstances. The payments will continue until she is able to go back to work or when she reaches age 65, meaning she won’t have to go without or move out of the house that she recently purchased.

Legacy for the kids

Alice came in and saw me as she had concerns around what she was leaving to her children in the event of her death as it was important to pass through a lump sum to them to provide as she felt she had not be able to do this that well til now. 3 years later, Alice was diagnosed with pancreatic cancer and had only months to live. The insurance proceeds meant that she was able to get the medical attention that she needed herself at her own home and also leave a legacy of $200,000 to each of her children after she had gone.