the-value-of-advice-for-laurie-who-is-not-yet-age-pension-age

Can the right advice help you get a life?

It did in Laurie’s case.

A divorced 64-year-old painter, Laurie is tired of working full-time, but he needs his full-time salary – or the equivalent – to live an enjoyable life.

His daughter wants him to spend more time with his grandkids. So does he, but he’s normally too tired to do much with them at the weekend.

Right now he’s literally hanging in there until he is old enough to be eligible for an Age Pension, which he plans to top up with his super.

Laurie is not a happy traveller.

But the good news is that he shared his woes with Nicole from the Retirement Essentials advice team during a Retirement Forecasting Meeting, and here’s the result.

Spoiler alert – Laurie will soon work part-time, on the right income.

But how can this be made to work if he’s under Age Pension age?

Does he have to take a financial hit?

No, he doesn’t.

Let’s begin by sharing an overview of Laurie’s starting position:

  • Owns home worth $850,000 (no mortgage)
  • Has $405,000 in superannuation
  • Has $10,000 in savings account
  • Currently earns $60,000 per annum
  • Needs net $40,000 to maintain his lifestyle

At first glance, if Laurie goes part-time, from 36 hours to 18 hours per week, this will halve his salary, giving him a before tax gross of $30,000 per year. He believes he needs around $20,000 extra in supplementary income.

Based upon this information, Nicole did the sums for Laurie and shared a positive scenario.

He really does not have to wait for Age Pension qualification age to retire.

Instead, if he decides to transition to retirement by cutting his working hours, he can supplement his own new gross salary of $30,000 directly from his super.

Here’s how this works.

Laurie is past preservation age – or access to superannuation age – so he can move $60,000 of his overall balance of $400,000 from super and use this amount to pay himself $20,000 per year.

This is not a straight loss of $60,000 from his savings though.

During their online appointment, Nicole stepped Laurie through the Retirement Essentials Retirement Income forecasting tool during their Retirement Forecasting Meeting.

The forecast showed that the $60,000 super withdrawal will not make a huge difference over his expected 20+ years of longevity.

For the next three years, while he is accessing this $60,000, he is also still working and so his employer is obliged to continue contributing at least 10.5% (rising to 11% next July) of his $30,000 salary, back into his super fund. Meanwhile, it is fair to expect the new ‘opening’ balance of $340,000 in super to earn about 5% per annum, so he is replenishing his savings from this capital growth as well.

To say Laurie was happy with this projection is an understatement.

He now plans to inform his employer that he will be stepping back as of September 1 this year. But first he wants to share the good news with his daughter that at last, he can be the hands-on grandad he’s always hoped to be. And maybe even have time to get out his camera and take some lessons. Life looks good.

And it doesn’t end there. Laurie has other questions he would like to discuss in more depth when his part-retirement is underway. One is how he might structure access to his home equity through the government’s Household Equity Access Scheme if he wants to take a long overseas trip. He’s already made an appointment for a consultation in November to see if he can include some travel plans in two to three a years when he reaches Age Pension Age or two.

Why seek advice?

Financial advice has had a lot of bad press, quite understandably, in the wake of the Royal Commission into Financial Services in 2018.

But an unexpected result of the findings is that many ordinary Australians who can’t possibly be across all the rules of super, Centrelink and retirement income, now feel that there’s no point in even engaging with an adviser.

And many can’t justify the $3000-$4000 for an extensive financial plan.

That is the reason that Retirement Essentials offers financial advice consultations for between $150 and $330, depending on your needs.

It allows members contemplating, or already experiencing, retirement the luxury of sorting their most pressing financial problem, by checking the rules and doing (in real time) calculations with our qualified advisers.

Ultimately you will make your own best decisions. But to do so based upon accurate projections, with the support of a qualified professional who knows the rules, is a reassuring place to start.

Book an online consultation now and find out your options to maximise your income – and minimise your stress.

 

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This article is provided by Retirement Essentials Representative Number: 001260855.  We are an authorised representative of SuperEd Pty Ltd ABN 88 118 480 907 AFSL #468859.  This information is not intended as financial product advice, legal advice or taxation advice. It does not take into account your personal situation, goals or needs and you should assess your own financial situation, consider if the information is suitable for you and ensure you read the relevant Product Disclosure Statement (PDS) if you choose to make any changes to your financial situation. It is always advisable to consult a financial adviser before making financial decisions.