Help me critique a retirement plan I’ve been working on

Hi Brains Trust,

I’m helping some family with their retirement planning. Wife 60, husband turns 67 next year. Target is $40k a year post-tax income. We spent some time working out the income target and it’s more than enough for them. Situation is as follows:

PPOR fully paid off. 750k value.

1 IP 100k debt with a bottom tier lender at 5.5%. Due to age and no jobs they can’t refinance. Brisbane, 650k value, $400p/w rent. Taking 70% net in my calcs.

400k shares (mining).

300k super.

100k cash.

As with many older people they are set in their ways and there are a few “immovables”:

1. The IP has sentimental value so even if it makes sense to sell, I’m likely not going to bother pushing it.
2. They are very adamant their capital base is not eroded...at all. It’s one of their main requirements I am trying to adhere to. It’s kind of silly but again I’m just going to work with what I have.

So this is what I’ve come up with:

Use 100k cash to pay off high interest debt.

Transfer all their super into an APB.

Next, they should not have all their shares in mining at this point in their lives, too risky and volatile. So the next bit involves selling all their mining stock and:

Option 1) Transfer proceeds into super then ABP, or:

Option 2) Use proceeds to buy ETF’s. Sell down a small percentage each year to supplement income. The amount being sold would be a few points below the long term average growth rate (eg if growth averages 8% a year, they sell a conservative 4% a year). This satisfies their requirement not to erode the capital base.

I’m not really sure whether it’s better to go ETF’s or ABP. I get that you don’t pay tax on ABP but with a target income of 40k for a couple they’re under the tax free threshold anyway.

So the income from rent, the ABP, and the dividends, and yearly share sales comes to roughly 40k.

Is there anything I’m missing here?

 

an AFSL?

Are they working currently? CGT on the disposal of the shares considered? What income the share paying now?

There should be no tax on each earning $20k per year. They could get up to $40k per year each even without tax - more even.

What about the estate planning issues?

 

They want to see a planner but they want to go into the meeting with a few ideas first so they don’t feel overwhelmed by choice.

The CGT is considered. I’ve lopped a rough 20% off the sale price before calculating the projected income.

Current shares paying about 1% dividends. Why chase low yields and high risk when they are retiring and want less risk. Hence my suggestion to transfer into ETF or ABP.

And one is working but only part time. She is keen to stop working and begin her retirement. Current salary is about 20k pa net.

Estate planning is still needed agree.

 

Can they maximise voluntary contributions (bring forward rulings) into wife’s super?

If they can get below the asset test limit, they may qualify for a part pension.

 

AFSL
Insurance
Could they become eligible for a part pension ?
Use of 8% growth projections without considering market corrections : ASIC says Choose your investments - Moneysmart.gov.au
Tax elements in super and strategies (agree is super even needed ?)
CGT impacts of sale of shares. Is there a deductible contribution benefit ?
Consideration of downsizer strategy if it is available and sale of property is eligible.
Super and death nominations, reversionary pension etc and that should dovetail into estate planning
Failure to address and assess risks and needs. eg what happens if market exposure causes a capital loss ? eg Immediate overnight loss of 40% of capital.
Experience and knowledge in providing personal financial advice that considers all the circumstances.