Early Retirement – Is It Feasible In Our Modern World?
OVERVIEW
Melanie became tax efficient through salary sacrifice of her superannuation while reducing debt and ending in a position of low debt and improved asset position. Wills, estate planning and insurance all reviewed.
MEET MELANIE
Name(s): Melanie
Financial Goal: To achieve financial independence to the point where she could consider retiring at age 55
Salary: $120,000 per annum
Assets: Home $2million; mortgage $400,000; superannuation fund $500,000
THE PROBLEM
Melanie has a mortgage but has just come off her fixed rate and is unsure how to manage her budget with an underfunded superannuation fund and a residual debt on her main residence. Happy with current home and does not seek to sell her asset. Is unsure whether she should decrease debt or increase investments via increased superannuation contributions.
THE SOLUTION
Locumsgroup provided a budget plan to assist in setting some specific saving goals. Key consideration is whether to reduce debt, increase contributions to super or a balance of the two. Increased contributions to superannuation to the maximum concessional contribution of $27,500, an increase before tax of $14,300 enabling the superannuation fund to increase between now and retirement. The after tax cost of this strategy is $8,580 per annum. This will involve a tightening of the belt but will be rewarded in coming years. Melanie’s mortgage will continue to be paid off in the next ten years and will further reduce over that time. Additional key construction points are attending to estate planning (Will etc) and making sure insurance arrangements are in place.
THE OUTCOME
Melanie is more confident about her finances and now has a straight forward plan in place, she will accumulate capital while reducing debt and will improve her overall financial position when she reaches retirement.
TESTIMONIAL
Thank you Locumsgroup! I now have a clear plan. My mortgage is reducing and my superannuation fund is increasing. I am saving tax and I now have clear visibility on my financial future. Melanie, Sydney