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A real-life case study - Meet Adam and Christine
When we met Adam and Christine
We met Adam and Christine when they were in their 50s, both professionals in their industries with two daughters in secondary school. Adam and Christine knew that they wanted to move to part-time work when they reached the age of 60.
For the couple, it was crucial not to go backwards financially, continuing to grow their hard-earned money. Adam and Christine had a healthy level of savings, superannuation, and some rental properties. They still had an outstanding loan attached to one of the properties and at times it seemed like they were not making any financial gains; making repayments on the bank loan and meeting property holding costs (including ever-increasing maintenance bills) that the rent simply did not meet. The properties, loans, savings and superannuation were operating independently of each other. But Adam and Christine wanted to ensure that all their assets were streamlined, instead.
Consolidating some of the properties and paying off the loans seemed like a sensible idea; however, they were worried that they might make the wrong financial decisions. Capital gains tax was a concern, too, as one of their properties had made a significant profit.
On top of all that – Adam and Christine wanted to make sure that they never ran out of money once they had retired.
The Strategy: Initial Consultation
Adam and Christine scheduled an Initial Consultation with Money Over 50.
During that first meeting, Michael Hogue from Money Over 50 was able to demonstrate that, with the right plan, everything that Adam and Christine were worried about could be overcome.
Michael also showed them how they could avoid ever paying income tax again once they moved to part-time work from the age of 60 – contributing their assets into superannuation and claiming a tax deduction on the way in; then moving their superannuation into a 0%-taxed superannuation income stream, all whilst significantly reducing the capital gains tax payable on their property sale.
Where they are now: Full Service Clients
Adam and Christine decided to become full-service clients of Money Over 50. The financial plan created by us was designed with the outcome of transferring all their assets into a 0%-taxed superannuation income stream when they turned 60.
We ensured that their assets and income were orchestrated into an ensemble. The couple ended up selling the investment properties and paying off their remaining loan. Through our knowledge of superannuation legislation, we were able to provide advice that significantly minimised the capital gains tax payable on the property sale and directed the proceeds into their superannuation funds, instead. Now instead of pulling in opposite directions, the bank accounts, investments and superannuation all worked together harmoniously.
During their remaining full-time working years, Adam and Christine continued to be diligent savers, but now, their savings were directed to the right environment. Instead of losing money on property expenses and loan repayments, they made tax-deductible superannuation contributions, reducing their tax percentage on those contributions from 39% to 15%, while also increasing their superannuation balances significantly.
Having only recently turned 60, Adam and Christine were able to meet a condition of release of their superannuation funds under our guidance. Taking advantage of this legislation, it allowed them to convert their superannuation funds (which are internally taxed at 15%) into 0%-taxed superannuation income streams.
Their superannuation income streams now generate more passive income for them compared to their full-time employment income (this is where you can picture your money getting dressed and going to work for you, too!). This passive income is completely tax-free.
As for work … Christine has happily cut down her hours to part-time work, but Adam can’t quite say ‘no’ just yet and keeps being persuaded to work full time … for now!