Making the most of the new decade – Real-life case study

Most people come in to see us about 10 years from retirement and are usually very surprised on what can be achieved if they decide to switch on and focus.

This case study focuses on a couple and their 9 years as clients of Lighthouse Financial Advisers Townsville.

The couple in context fit the bill as our stereotypical clients, except for the fact that their superannuation balance was on the low side. They had approximately $264,000 combined in their super fund, while our usual clients had an average balance at circa $350,000 - $450,000 on first arrival.

They first came to us in May 2011 at 53 years of age, both experts in their own field, and with reasonable salaries.

Their youngest child had just completed university and became independent, leaving them with space to focus on themselves.

The plan was to free up a spare $600 per week, putting in circa $15,000 per annum into each of their super funds, making a huge difference to their future balances.

$600 per week may seem high, but due to salary sacrificing this money and taking advantage of the concessional contributions cap, their combined take home pay would only reduce by $370 per week (thanks to the beauty of tax savings).

They agreed to this plan and changed their spending habits to pay themselves first, as they would with any other financial obligations.

After conducting a “stress test” of going through this process for 4 pay runs, they didn’t even take notice of the money going away and were happy to continue.

The next step was for us to look at their investment strategy. It was fairly conservative, and after analysing and discussing their risk profile, it made sense for us to change this to something more suitable.

We adjusted it to a higher growth investment strategy, with more diversity and a larger space for higher returns, but also with more volatility.

Volatility may seem scary for most people, but it can be your friend. When the market drops (and there were drops), you buy in at a lower price, therefore being able to buy more units for the same price.

The couple maintained their composure through the drops in the market and remained consistent with the plan.
When December 2019 came around, their combined balance was $1,039,000.

Which is a much better result than the $600,000 balance we projected to occur if they did not make any of our recommended changes.

The elements to this strategy were consistency, tax planning, and changes to their existing investment strategy.

There was no magic, they just stuck to the plan and made the right decisions.

They made sure they paid themselves first which made a huge difference in the end.
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It’s important to note that this is not an isolated case. There is no better time for you to start looking at your retirement plans than today, and if you put in the effort needed, you too can make substantial changes to your situation.

​Written by Ali Hogue.