In Retirement case study
Is all advice the same? Does it really matter who you talk to? Many may feel that as long as the advice they are getting is from someone who is technically competent then the end result will be pretty much the same no matter who they talk to.
John had come to see a ClearView Financial Planner at a critical time in his financial life.
He had just turned 65 and was still working, but the trustee of his super fund had told him that he had to transfer from his existing defined benefit fund to an accumulation fund. This triggered his decision to seek some advice and having over a million dollars at stake in the fund he felt it prudent to shop around for advice from more than one source.
John spoke to three advice providers to get a spread of opinions on the best strategy. The Clearview Financial Planner analysed John’s situation and identified that there were some significant steps he could take that were going to make a massive difference in potential outcomes. There was an opportunity to implement a ‘super equalisation’ strategy because he had a large super balance but his wife had minimal super. This involved re-directing contributions to his wife to gain potential tax advantages by using two sets of contribution limits.
Next was a recommendation to implement a transition to retirement strategy, in order to help reduce income tax. This involved salary sacrificing some earned income into super, while at the same time drawing an income stream back out from his super.
There was also an opportunity to apply a ‘cash out and re-contribution strategy’ that could potentially generate significant tax reductions for John’s children down the track, when they eventually inherited his estate.
It was this last piece of advice that particularly impressed John. It represented a potential future tax saving of around $140,000 to his children. Neither of the other sources of advice had recommended that this action be taken and John appreciated how his ClearView Financial Planner had been thoughtful and professional enough to consider the wider implications of the overall strategy and how it would affect his future beneficiaries.
Summary of Key Strategies
- Super equalisation – re-directing contributions through his wife to take advantage of the contribution limits.
- Transition to retirement to reduce income tax.
- Cash out and re-contribution to reduce future taxes on his estate.
