Case Study 1 – Double the Time
Increase Retirement Savings by Double the Time
We met with a retired lady who wanted to increase her retirement savings and had $350,000 in a cash account earning 0.25% pa, she was withdrawing $2,500 per month to cover her living costs.
At this pace her retirement savings would completely dry up in around 12 years and that doesn’t include any lump-sum expenses like house or car repairs or medical costs.
After assessing her risk profile she discovered that all she really needed to remain confident and prepared for emergencies was $50,000 in cash savings and the rest could be used to provide her with a tax effective retirement income.
Her risk profile ended up being 60% growth and 40% defensive, instead of 100% defensive (which is what cash in a Term Deposit is).
She was prepared to commit to the investment for a minimum recommended period of 5 years.
We broke up her funds as follows:
|
Amount |
Description |
Result |
|
$50,000 |
Remained in her cash savings account |
She could call on these funds anytime to cover emergencies or other incidentals |
|
$120,000 |
Invested 100% into a spread of equities using a tax-effective pension fund | The expected growth on this fund would be $8,400 pa |
|
$80,000 |
Invested into a tax effective pension cash account earning 4.15% pa | The expected income from this fund would be $276 per month and the initial investment is fully refundable after 12 months |
|
$100,000 |
Invested into a partially Centrelink exempt and tax effective income guaranteed cash account earning 4.20% | The guaranteed income from this fund would be $350 p/month for at least 10 years with the initial investment fully refundable |
In the above example, now the client only needed to withdraw $1,174 per month instead of the full $2,500 and 66% of all her retirement savings were still invested in defensive based assets which means:
- 66% of her funds did not fluctuate due to market conditions such as a GFC, global Pandemic or market crash
- All of this money was fully refundable within the relevant notice periods
- The $8,400 expected growth amount now offset the amount she needed to withdraw which preserved her savings; and
- She now had a predictable and guaranteed monthly income
Instead of her money lasting only 12 or less years, now we could increase her retirement savings by stretching them out to almost 25 years which would possibly see her out to her life expectancy AND provide for her aged care needs as she ages – now THAT is smart retirement planning 101 and that’s how you protect and increase retirement income and savings.
There are all sorts of risks and considerations that need to be made when it comes to defending and managing your retirement income and savings and that’s why its always important to consult a retirement planning advisor who intricately knows your fears, concerns and objectives and can provide you with several different scenarios and outcomes.
Do you know what your risk profile is?
If not, download our free Risk Profile cheat sheet and answer the questions. Once completed send it to us and we can have a general discussion on what has worked for people in your situation and what could work for you.
Want to Know More?
If you have a situation similar to this case study or want more information or advice on increasing your retirement income then fill out the Contact Form below and a retirement planning adviser will contact you to discuss your unique situation and answer your questions.
Learn more about Retirement Income Strategies on this page
Read up on the ABS Retirement Statisctics on this page