We wanted to share with you some of our client stories, to provide a snapshot of what we do and how we support our clients.

We need to be careful of privacy, so we wont be sharing names, locations, etc.

*All this information is general in nature and does not take into consideration your personal circumstances. Please seek personal financial advice for your specific situation.

Part One

A couple in their 60s wants to retire in 5 years time, however they cannot see how it is possible.

They are both working four days a week, and they look after their grandchildren once a week.

They currently still have a mortgage of $289k and super/investments of $450k.

After taking a deep dive into their finances, we found they are spending over 40% of their take home pay on insurance premiums and their mortgage.

We needed to re-assess this as this is the cornerstone of their entire retirement plan.

Imagine going to work everyday, with 24 mins of every hour you work used to pay your insurance premiums and mortgage.

Given their age and health, they are currently paying over $23,000 per annum in insurance premiums.

However, if one of them were to pass away today… They would still be able to repay their mortgage and meet their lifestyle needs of $700 per week.

Let’s jump into the numbers:

Mortgage = ($289,000)

Cash = $67,000

Total = ($222,000)

Current Super balances = $378,000

Net amount is $156,000

This could generate a $10,920 income per annum.

Plus the Age Pension (when you reach age 67) $25,662

They will have effectively $36,582 or $703 per week to meet their living expenses.

This may not be sufficient for most people, however once their mortgage is repaid, they will have a 5 bedroom home worth over $1.2m. They do not need anything fancy and have been living off this amount for a long time given how much insurance premiums and mortgage repayments are eating away at their household income.

However, they are also going to receive an inheritance in the next few years, with their parents in their 90s and in not the best of health.

If we were to add an additional $100k inheritance to the situation, this would boost their weekly income in retirement from $703 to $838 per week.

Therefore, the abovementioned numbers illustrate that the ridiculous insurance policies are not required as the cost far outweighs the benefits and they are still able to achieve their retirement goals if one of them were to pass.

So what do we do with our insurance saving of $23,000 per annum?

We are going to use the low tax environment of superannuation to build your wealth for retirement.

By contributing $$$ to super you effectively save 17.5%

Therefore, we have recommended:

Client 1– contribute $20k per annum

Saving $3,500 per annum in tax

However, net income will reduce by $13,500

Client 2 – contribute $15k per annum

Saving $4,750 per annum in tax

However, net income will reduce by $8,000

Total tax saving $8,250

Total net income will reduce by $21,300

Based on our advice, they still won’t be able to repay the $289k mortgage in 5 years.

We will need to use superannuation to support the repayment.

Mortgage in 5 years = $260,000

Superannuation in 5 years = $697,000

Net Amount after mortgage repaid = $437,000

Superannuation generates = $26,220

Plus Age Pension $38,000

Will provide us with $64,220 pa or $1,235 per week

Our strategy has supported them retiring within 5 years, whilst repaying their mortgage and having over $1,200 per week to live off. They will actually have more disposable income in retirement then they currently have now!

This income will be entirely tax free for the rest of their lives.

However, this is where most financial advisers would stop.

The client has met their retirement goals with their capital longevity lasting into the foreseeable future.

But Newcastle Advisors are different. We are not just solving todays problem, we are also solving tomorrows problem too.

Within superannuation we have two components…

Tax free & Taxable

Tax free = any amount of money you have contributed from a􀈇er tax money, being money from your bank account

Taxable = any amount of money your employer has contributed or you have generated in earnings.

If you were to pass away, your surviving spouse would receive the benefits tax free.

However, if you both were to pass, your kids would be up for tax on the taxable component.

Based on your remaining super balance of $437,000

The estimated potential tax if distributed to your kids would be just over $72,000.

There is a strategy that we can consider to eliminate this potential tax.

We can drawdown the money or withdraw it – entirely tax free at retirement, then re-contribute the monies to superannuation. Effectively eliminating any potential tax, as your entire benefits will be tax free.

There are rules around how much we can contribute to super and age restrictions which we will make sure we abide by.

But effectively, we will look to eliminate any potential death benefit tax payable, should they both pass and the superannuation benefits then pass to their adult children.

For most people they do not care, as they will not be around when the tax is due.

However, for many, if there is a way to minimise the potential tax on death and maximise the legacy to their family which they have worked hard for they will consider implementing the strategy.

Summary of Advice

● Cancel insurance policies – save $23,000 per annum or $115,000 over the 5 years to retirement.

● Use the savings on insurance premiums to minimise your tax and grow your super

● Implement a Salary Sacrifice strategy saving $8,250 per annum or $41,250 over the 5 years to retirement.

● Implement a re-contribution strategy at retirement to save potential death benefit tax of $72,000

● Move Client 1 - Super to save $172 per annum or $860 over the 5 years to retirement

● Repay $260,000 mortgage at retirement

● Use remaining super to generate income and supplement Age Pension in retirement

● Income estimated to be $64,220 per annum or $1,235 per week once you reach age 67

If you or your loved ones are looking to retire in the next 1, 2, 5 or 10 years, please feel free to get in touch to understand how we can support you.

Client Stories Series - Part 1

Summary of Advice