CASE STUDY 2
THE CLIENT
- Michael (67) and Michelle (67)
THE CONTEXT
- Incomes - Interest - $13,741 plus Pension - $25,851 - TOTAL - $39,592
- Dependents – none
- Home value - $550,000
- Contents value - $45,000
- Mortgage - nil
- Cash - $10,000
- Superannuation - nil
- Investments - $450,000 (term deposit)
- Insurances – nil
- Disposition – risk averse
THE OBJECTIVE
- Income security in an environment in which they have been struggling
- Maximise income without impacting on pension
THE STRATEGY
- Immediately place $400,000 from term deposits into a jointly held lifetime, indexed annuity
- Retain $50,000 in short term deposits to provide an emergency cash reserve
THE OUTCOME
- Guaranteed, indexed (at CPI minus 2%pa), income for life - $19,098/ annum
- In the event of death in the first 15 years, there will be cash payable
- Following death after 15 years income will continue to be payable until the last survivor dies.
- Annuity payments - $19,098, Interest - $1,050, Pension - $25,851 – TOTAL - $45,999
- By year six they should be entitled to a full pension – a further a further $8,131 pa
THE LESSONS
- Clearly understanding your situation provides for good planning
- Even low income earners can benefit from a strategy
- The strategy can be very simple indeed.