Real client story. Names and some details have been changed to protect our clients’ privacy. Figures were estimates at the time of advice and outcomes are not guaranteed. Every situation is different.
Cameron and Allie are in their late 40s, with the mortgage nearly paid off and their daughter at university. For years the home loan had been their focus. With that finish line in sight, a new question had crept in. If Cameron wants to stop work at 60, are they actually ready?
Where they stood
Cameron is 47 and earns $160,000 a year, with $230,000 in super. Allie is 48, earns $80,000 and has $120,000 in super. Together they take home $188,166 a year after tax and live comfortably on it. In retirement there would be no mortgage and no need to keep saving into super, so they felt about two thirds of their current after-tax income, roughly $125,000 a year, would let them keep living the way they do now.
We started by modelling their current path with no changes at all. On those numbers, Cameron would retire at 60 and Allie at 61, with combined super of about $1,229,955 ($792,796 for Cameron and $437,159 for Allie). That was projected to support a combined retirement income of $161,522 a year, indexed, until Cameron reaches 90.
What we found
That result already cleared their $125,000 target, and seeing it in black and white changed the conversation. Rather than asking whether they could retire, they began asking how well they could live once they did. They decided they wanted a higher standard of living in retirement.
Two opportunities stood out. The remaining mortgage was tying up money that could be working harder elsewhere. And neither of them was using their full concessional contribution cap, the annual limit on before-tax contributions to super.
What we did
First, we recommended they clear the mortgage by selling an investment. Selling would trigger a capital gain, so we used the catch-up concessional contribution rules, which let people with a total super balance under $500,000 use unused cap amounts from earlier years, to make a larger tax-deductible contribution in the same year and manage the capital gains tax.
Second, we recommended they both salary sacrifice up to the concessional cap each year, which was $27,500 at the time. Cameron’s employer was contributing $17,600 a year and Allie’s $8,800, which meant Cameron could add $9,900 a year and Allie $18,700. Both gain a handy tax deduction, and the money is taxed at 15% inside super rather than at their marginal rates.
The rules have changed since this advice was given. The concessional cap has been increased, and the 50% CGT discount is due to be replaced from 1 July 2027.
The result
On the projections at the time, those two changes were enough to give them the retirement lifestyle they wanted.
Then the conversation went a step further. Once they could see the plan working, they told us they wanted to travel more in the early years of retirement, while they are fit and well. We looked at ways to fund that. One was working a little longer to build their retirement income further. Another was making a downsizer contribution later on, which lets eligible homeowners put part of the proceeds from selling their home into super, giving them more to spend in those early, active years.
Both of them expect an inheritance from their parents at some point. We were clear that it should not be part of the core plan, because nobody knows when it will arrive. If and when it does, it could help their daughter into her first home, or be set aside for their own aged care later in life.
What we took from it
What strikes us about Cameron and Allie is how close they already were. Many couples in their late 40s assume they are behind, when the real issue is that they have never seen the numbers laid out. Once they could, the question shifted from whether they could retire to how they wanted to live when they did. That is a far better conversation to be having at 48 than at 58.
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General advice only. This story describes advice given to particular clients at a particular time. It does not take into account your objectives, financial situation or needs, so consider whether it is appropriate for you and read our Financial Services Guide before acting.
Wealth Effect Group (CAR 424768) and Andre Dirckze (AR 395157) are Authorised Representatives of Boston Reed Pty Ltd, ABN 89 091 004 885, AFSL 225738.