Plan for a secure future
A property portfolio, plus super, can provide the wealth for retirement
NAME: Kathleen Murray STATUS: Married with two children, 14 and 11.
QUESTIONS: How do we plan for retirement? Should we salary sacrifice more through non-concessional contributions or do we leverage off our home and investment properties to invest elsewhere? How do we help set up our kids?
ANSWERS: Continue salary sacrificing and take advantage of the non-concessional contributions to super. When the property market dips, look to add another property or two to your portfolio. Keep your insurances and estate planning up to date.
Retirement is a long journey and good preparation is key. But even with compulsory superannuation contributions now at a robust 9.5%, only 15% of Australians feel well prepared. The vast majority (around 66%) feel unprepared for their retirement, according to research by MLC. Perhaps it’s not surprising that people find preparing for a secure retirement hard because there are so many big variables, such as their longevity, investment performance, the state of their health and family needs.
Retirement is still a decade away for Kathleen, 47, and her 52-year-old husband Tim but she wants to know if they are heading in the right direction. “How does one sensibly plan for the right amount to comfortably retire on with a shifting focus on being fully self-sufficient?”
Kathleen wants to consider different scenarios and needs a resilient plan. Are their finances on track? Is there anything they should be doing better now to get there? “It seems a bit overwhelming but we want to make the next 10 years in the workforce really count,” she says.
They have around $435,000 in superannuation, largely in Tim’s REST account. He salary sacrifices to the maximum level of $35,000 a year. They have kept a 1920s apartment that Kathleen bought 20 years ago when she was single. They have never had a problem finding tenants so they bought another similar apartment six years ago. Their investment property debt is around $600,000 and their rental income around $35,000.
They are set to inherit a small sum and wonder what to do with it. “I am concerned that a financial planner will be more keen on selling products and strategies rather than fully targeting or customising our needs,” says Kathleen. “Where should we focus our efforts? More super contributions through non-concessional amounts? Or do we leverage off the equity in our home or flats and invest somewhere else?"
At the same time they want to set up something for their kids. What is the best way to do this?