Clients, in their early 50’s, seeking help to build their retirement nest egg.
Andrew and Nadia were in their early 50’s when they first came to see us. Their three children have now left school and were at University, all still living at home.
While they both had well-paid employment, the cost of education and home loan repayments until now had meant that they had only made limited commitments towards their own financial security. As a result they had become increasingly concerned about their prospects for retirement. In fact they were actually concerned as to whether they would ever be able to retire.
Initially, our engagement centred on discussions and projections relating to sources of family income and expenditure. One of the first steps in planning for retirement is obviously to have some idea of the standard of living you desire and in turn how much you want to spend. As is so common with clients who have marked time while paying for education and housing, Andrew and Nadia actually had an inflated idea of their standard of living.
When we examined their annual expenditure, which they believed to be exorbitant and out of control, it transpired that they were paying more than double the minimum monthly repayments on the home loan and had also been paying one set of private school fees over the previous 12 months. Given that the loan was about to be paid out and that school fees had now ceased, we were able to show that the other expenditure was not nearly so dramatic.
Furthermore, they were able to see that currently they were meeting the bulk of the personal expenditure for five adults in the household. While the reality is that the children are likely to remain in the house for some years to come, it is also likely that by the time Andrew and Nadia were due to retire, the children should all be independent and in well-paid jobs. In turn, this again allowed us to reduce the targeted expenditure for retirement.
That exercise alone was a tremendous relief for Andrew and Nadia as they had talked themselves into a feeling of hopelessness that any amount of savings would not achieve a target sufficient to meet their needs in full retirement.
The planning stage then centred on providing them with an understanding of their current savings capacity, ways that may improve their savings capacity, projections to various retirement date targets and ultimately an optimal and agreed strategy. This was all done in various discussions to ensure that Andrew and Nadia understood the various assumptions and felt confident that the goals could be achieved.
Some of the issues and strategies covered included cash flow planning, superannuation strategies, salary sacrifice, salary packaging, tax efficient insurance, investment strategies and asset allocation advice. We also had a full and open discussion on the merits or otherwise of children paying board and/or paying for the University fees!
Happily, Andrew and Nadia have now been clients for over 8 years and their retirement plans are well in hand, to the extent that they should be able to retire at age 60 if they so choose. They have also been able to maintain a very comfortable lifestyle in the meantime, without feelings of guilt. Best of all, this has all been achieved without the children paying board! They had agreed that no board would be paid while at University, until they found full-time employment. Quite coincidentally, all three left home almost immediately after finding that job! Amazing!