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  • Writer's pictureAndre Dirckze

Retirement planning case study: Couple aged late 40's

Cameron, aged 47, currently earns an annual income of $160,000 and possesses a superannuation balance of $230,000. Allie, aged 48, earns $80,000 per year and has a superannuation balance of $120,000.

As they approach the end of their mortgage payments and with their daughter in university, the couple is interested in assessing their readiness for retirement, targeting an age of 60 for Cameron.

At present, Cameron and Allie enjoy a comfortable lifestyle with a combined after-tax income of $188,166 per year. Their retirement goal is to sustain this lifestyle, aiming for approximately 66% of their current after-tax income, which equates to around $125,000, factoring in the absence of mortgage and superannuation obligations in retirement.

Although their primary focus has been on mortgage repayment, given their proximity to retirement and their daughter's impending independence, they are considering shifting their attention to their superannuation.

According to our client-friendly retirement calculator, if they maintain their current approach without altering their strategy or enhancing their investments, Cameron is projected to retire at 60, and Allie at 61. The estimated combined superannuation balance at retirement is anticipated to be $1,229,955 ($792,796 + $437,159). This is expected to generate an annual combined retirement income of $161,522 until Cameron is 90 years old.

As this is an indexed figure, the couple decided they wanted to improve their standard of living in retirement. We advised they pay off their mortgage by cashing an investment and using the catch-up provision to manage their capital gains tax liability. We then suggested they both salary sacrifice to the maximum of their concessional caps each year, $27,500.

This means Cameron's employer contributes $17,600 per year, while Allie’s employer contributes $8,800. That means Chris could contribute an additional $9,900 per year, and Allie could contribute $18,700, earning them both a handy tax deduction in the process.

This was enough to provide them with the lifestyle they wanted.

However, when we delved a little deeper, they decided they wanted to travel more in their early years. We discussed options such as working longer to boost their retirement income streams further and also considered using the downsizer contribution to boost their retirement savings so that they could spend more in their early retirement years.

Cameron and Allie expect to receive an inheritance from their parents at some point, but there is no way of knowing when that will be, so it can’t be relied upon to provide retirement income when they need it. Perhaps these funds could be used to help their daughter into her first property and provide for aged care for themselves later in life.

If you'd like to learn more about how to plan for retirement, please contact us directly, or click here to learn the steps to retirement planning.

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