Developing a strategy for our retired client that will save her an estimated $59,252 in estate tax plus continue to accumulate super funds in the first five years of retirement

Background:

Our client is recently retired. She is 65 and in a de facto relationship with no financial dependents. The client owns her home worth $2,500,000, has $250,000 in cash, $830,000 in superannuation and has retirement living expenses of $50,000 per annum.

Goals:

  1. Develop a financial plan for retirement. 
  2. Review her current super account, investments and super strategy to ensure she is set up correctly.

Strategy:

  • Leave superannuation funds in accumulation mode for now (to stay invested) and fund annual living expense target from savings until these funds run out.
  • Update super portfolio investment mix from a conservative investment mix (34% in growth investments) to a balanced investment mix (63% in growth investments).
  • Implement a superannuation re-contribution strategy of $440,000 (taking funds out of super and then re-contributing back in). This will increase the tax free % of superannuation funds with the aim of reducing the amount of income tax that may need to be paid on a superannuation payout that goes to client’s nieces and nephews.

Advice Outcomes:

The estimated estate tax saving once re-contribution strategy has been implemented is $59,252.

By leaving superannuation funds in accumulation until cash balance is drawn down we increase the longevity of clients superannuation balance. The modelling we completed is showing that the $830,000 balance grows to approx. $1,070,000 before it is used to help fund annual living expense target. This is because our client will be using her savings to fund living expenses for first five years of retirement.

Ryan Porter is a Wealth Coach at Catalyst Wealth Group. His mission is to help his clients achieve financial success and live their ideal life.

Any advice or information in this publication is of a general nature only and has not taken into account your personal circumstances, needs or objectives. Because of that, before acting on the advice, you should consider its appropriateness to you, having regard to your objectives, financial situation or needs.