We all have busy lives, combining substantial work commitments while simultaneously trying to balance our family lives. Each year seems to be passing more quickly, and as the years tick by, Lanham Financial Advice Sydney has helped many Australians who are close to retirement make sure they have enough to retire and enough assets to lead the life they aspire throughout retirement.
In my last article titled Will you have enough to retire?, I provided an example of Andy and Sue, who were financially secure with ten years of accumulating wealth until retirement. But at retirement, my calculations found that their income surprisingly fell well short of what they would need to live the lifestyle they desired. Of particular importance for Andy and Sue was being able to afford an overseas trip at least every second year throughout retirement.
On the surface, Andy and Sue appeared to be in a strong financial position. Their family home was worth $2.4m, and they had an investment unit worth $950,000 that produced a net income after costs more than $2,000 per month. They had a combined superannuation balance of $600,000 that was projected to grow to $1.44million at retirement, and they were earning good wages of $150,000 between them. But at retirement, Andy and Sue would have to reduce their living standard by $42,300 per annum from their current standard, and that is a figure that has not taken into account the impact of inflation over the next decade, on essential living needs such as food, wine, and electricity.
When Andy and Sue came in for financial advice on another matter, they had no inkling that they would have a shortfall at retirement, and certainly not a shortage of $42,300 per annum that would require the accumulation of an additional $850,000 in assets at retirement.
The financial advice that we provided to Andy and Sue included documenting and explaining the strategic steps they would have to take each year over the next decade to get to where they need to be.
In their case, the strategic steps that we outlined in their financial advice document included selling their investment property, clearing the mortgage and making substantial non-concessional contributions into their superannuation fund. This also eliminated the need for Andy and Sue to reduce their current lifestyle in order to make the additional superannuation contributions required to increase their superannuation to the level they would need.
There were a number of other strategic steps for Andy and Sue to follow, but in essence, the critical strategic step was to increase the size of their superannuation as quickly as possible. The financial advice we provided would save Andy and Sue an average of $11,000 in tax each year, but more importantly, it would lead to them increasing their superannuation from an estimated $896,000 at retirement to a figure of $2.08million.
This additional superannuation would mean that they would be able to live off an additional $187,650 income over the first five years of their retirement, would not only enable them to have more than the minimum $90,000 per annum that they required for their basic living needs, but it would allow them to enjoy an overseas holiday every year in retirement, rather than just every second year.
So, if you are within ten years of retirement, it’s best to seek quality financial advice to ensure that you are on the right path to having the wealth you need to get you where you need to be at retirement. Give us a call today, to find out how we can help you ensure you have enough to retire.