How this couple will fund their living expenses of $100,000 p/a from their investment portfolio

Background:

Our clients are a married couple both turning 60 in 2023. The husband has just retired, and the wife is on long service leave. She is currently receiving 50% of her income for the next 8 months. The client’s home is in a great location in the Sutherland Shire and is worth approximately $4,000,000. They have a large property portfolio that includes a holiday home and two investment properties worth approximately $3,500,000 with debts of $1,400,000. They also have combined superannuation balances of $600,000.

Goal:

  • Fund their living expenses of $100,000/annum from their investment portfolio.
  • Develop a financial strategy to pay off all debts as soon as possible.

Strategy:

  • Sell the smallest investment property and reduce the home loan balance by $700,000 through this activity.
  • Consolidate the husband’s two super funds into one account and establish a pension account that will help fund the annual income target by providing a monthly income payment.
  • Once the wife’s long service income leave stops, establish a pension account that will help them fund the annual income target by providing a monthly income payment.
  • Following the sale of the smallest investment property, implement a personal deductible contribution strategy into their superannuation accounts of $55,000 each (using the catch-up contributions rules that allow you to utilise unused superannuation cap space from previous financial years).
  • Once they have been in their family home for 10 years (which will be in three years’ time) implement a downsizing strategy. Where we will sell their family home, purchase a new home, pay off remaining investment debt and look at trying to contribute up to $630,000 per partner into their superannuation account (depending on property sale proceeds left over after the new home purchase and loan reduction payment have been confirmed).

Advice Outcomes:

With a retirement strategy in place, our projections show that our clients will be able to fund their desired retirement income target of $100,000/annum through to life expectancy.

A pension account strategy ensures the clients are able to fund their annual income target of $100,000/annum up until they have been in their family home for 10 years. This will give us the option of accessing the Government’s downsizer contribution strategy as part of their plan.

Catch up super contribution strategy to be implemented following the sale of the smallest investment property will be implemented to help reduce capital gains tax payable following the sale of this property. The expected total tax saving that will apply following the implementation of this strategy is approximately $19,042.

Clients have a clear financial strategy in place that allows them to achieve their annual income target of $100,000/annum up until they implement their downsizer strategy. Giving the clients a few years to enjoy living in their home child-free (the last child has only recently left the nest) before needing to commence the second phase of their retirement plan.

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.