CASE STUDY 3
THE CLIENT
- Bill (54) and Betty (52)
THE CONTEXT
- Incomes - $90,000 and $35,000 respectively
- Dependents – none
- Mortgage - minimal
- Cash - $45000
- Superannuation arrangements – standard pre-package products
- Superannuation balances - $260,000 and $120,000 respectively
- Investments - nil
- Insurances
- Bill – 'Life and Disability' $1.5m and 'Income Protection'- $5,000/ month
- Betty – "life and Disability - $0.75M. Bill had income protection of $5,000per month
- Disposition - inflexible
THE OBJECTIVE
- Maximise superannuation for retirement at age 65 - with little impact as possible on current lifestyle
THE STRATEGY
- Immediately reduce expensive insurance cover (reflecting changed circumstances) - reducing Bill's cover to $0.5M, and Betty's to $0.25M – with the premiums saved going directly to superannuation
- Change to a fund structure to individually selected investments, better suited to their goals and circumstances
- At age 55, Bill to start a "Transition to Retirement Pension", which, when combined with salary sacrifice, will enable him to increase superannuation contributions without reducing take home pay by anywhere near the same amount
- Schedule ongoing review service with adviser to keep things on track for them
THE OUTCOME
- Bill and Betty will achieve their two objectives
THE LESSONS
- Pre-packaged solutions are not ideal for most people
- Solutions should be tailored to personal circumstances
- There is more to effective planning than just investing