45 – 55 years – Superannuation as an investment tool.

Start to think about Superannuation as a preferred investment tool.

You know time is ticking away and that you should consider putting funds away, but ongoing living expenses inhibit the savings pattern.

  • “Where do we cut to save some funds and invest…?”
  • “The current set of investment options all look pathetic maybe a term deposit is the  best option…..?”
  • “What should we do now for the kids…?”

 

Case Example I:

Message:  Isolate and Consolidate expenses and trim where possible.

Carl & Lyn are 48 and 44, with a small mortgage and 2 late stage teenagers, one in high school and one just starting Technical College.

Carl Earns $70,000 in IT as a Programmer;  while Lyn earns $30,000 year as a part time teacher.

The mortgage is only $40,000 but the house is worth about $650,000, this is their third. They worked their way up the value tree by buying and doing up each house as they went, Carl is a reasonable home handyman.

They have acquired a number of disparate insurance policies with different companies, an old investment bond (originally started as an investment strategy 17 years ago), and a half a dozen superannuation policies (all in contradictory investment strategies cancelling one another out).

The combined income after tax is $82,000 but is all spent on usual living expenses, and mortgage with only small savings to show.

Our recommendations in this case were as follows:

  • Rationalise the insurance policies and lower the payments being made. Look to move some insurance inside super.
  • Consolidate the super and choose 1 common strategy for both partners.
  • Use the funds in the investment bond as tax effectively as possible transferring the tax benefits into other investments, tax effectively.  Saving 15% upfront – that is as good as a 15% return in year 1 alone.
  • With identified surplus income now focus on eliminating the remaining mortgage at a faster rate.

In 3 – 4 years the mortgage will be eliminated and with the kids both “off their hands” Carl and Lyn will commence an early version of the 55 – 65 year old’s strategies.

One option we recommended  - that they decided against – was to sell the newish car (3yrs old) for $20,000 and buy an older but lower cost car for $12,000.
The $8,000 savings would assist with paying off the mortgage more quickly and then focus on the Superannuation a few years earlier than originally planned.