The truth is that professional advice can be a smart idea for anyone who wants to improve their financial wellbeing. It doesn’t always matter how much money you have or when you seek advice, what matters is that you set a plan to reach your financial goals.

As you will see in our case study, Linda is not a millionaire, but seeking professional advice allowed her to get on track with her retirement planning and develop a personalised financial strategy.

Meet Linda

Linda is an active 62-year-old who’s divorced, has no children and spends her spare time playing and volunteering at her local golf club. She currently earns $90,000 a year including her super guarantee contributions, and she’s thinking of retiring at age 65. 

What are her retirement questions?

Linda’s $450,000 super balance, and the 2-bedroom home she owns outright, might seem like enough to retire on, but she has some questions that need answering before she finishes work including:

• Do I have enough money to retire?
• Will I be eligible for the age pension?
• Should I boost my savings prior to retirement?
• Once I retire how should I invest my superannuation?
• How do I make sure the right people get my assets when I pass away? 

What are her first steps?

After calling TelstraSuper for simple advice, Linda realises, that she needs more help so books in a complimentary initial appointment with Rahita from TelstraSuper Financial Planning. 

How does a financial planner help?

Prior to the meeting Linda completes a short background and risk profile document which ensures her upcoming meeting can focus on discussing her objectives, financial situation and needs. Rahita then gathers Linda’s financial information and works to understand what’s important to Linda - when she would like to retire, what lifestyle she’d like, and if she’d like to leave assets to her beneficiaries. 

After getting to know Linda and her situation, Rahita and Linda agree that a comprehensive retirement strategy would be beneficial. The initial fee for this advice is $1600, which in this instance can be deducted from her TelstraSuper account.

As part of her personalised retirement strategy Rahita:

• Agrees on her risk profile and potential investment strategy
• determines how to increase her nest egg to ensure longevity of her retirement assets
• clarifies her potential eligibility for the Centrelink Age Pension
• establishes how her retirement strategy may be impacted if she is made redundant or becomes ill, or injured, and
• ensures that Linda’s assets will be distributed to her beneficiaries, according to her wishes after she passes away.  

What’s her retirement strategy?

Linda was originally looking to retire at 65, but at this age she would need to self-fund her retirement income which leaves her with a 69% chance of outliving her super. Instead, Rahita recommends Linda work for longer, retire at age 67 to align to her potential Age Pension eligibility and increase contributions to her account. This will maximise her superannuation retirement income, which could be supplemented with a part Age Pension (depending on her assets values at the time), and her potential for outliving her super is reduced.

Linda wants a stable after-tax income throughout her retirement of approximately $45,000 p.a. (or $1,730 net per fortnight) and wants to reduce the volatility of her investments leading into her retirement as she has seen first-hand the impact of negative returns.  Therefore, Rahita starts restructuring her superannuation investments to match her individual risk profile, to ensure Linda is comfortable with the potential outcomes. 

When she does eventually retire, Rahita suggests investing in an Account Based Income Stream. This means she will not pay tax on her retirement income and investment earnings (as she is over age 60), whilst providing flexibility to access her funds to withdraw lump sum amounts if required. 

Linda also agrees to join the TelstraSuper Super on Track ongoing advice service – at a cost of $1400 per year - as she wants to continue the relationship with Rahita, and to ensure things stay on track via the annual review.

What actions does Linda need to take now to achieve her goals?

Linda contacts Telstra payroll and commences contributions of $600 a fortnight to her super from her pre-tax salary, otherwise known as salary sacrificing. This is likely to reduce her fortnightly salary by only $393 (due to tax concessions) and will increase her super balance to approximately $574,000 at her retirement in 5 years. Linda can make these tax effective contributions knowing that when she retires the money is in her super ready to access.  

She also starts to make plans for her estate. Linda has no children or spouse; however, she has a nephew and would like her super left to him.  As she has no dependant relationships, she makes a binding death benefit beneficiary nomination to a legal personal representative (her estate) so her superannuation assets will be distributed in accordance with her will.

What’s the conclusion?

Linda feels more confident in her future now. She has a personalised strategy, and she knows that her financial planner is there to answer any questions and refine her strategy should her circumstances change. 

Let’s look at the numbers^

	Retire at age 65 - no advice	Retire at age 67 – with advice
Superannuation balance at retirement	$499,000	$574,000
Salary Sacrifice until retirement	No	Yes - $600 per fortnight*
Retirement income	$45,000 p.a. or $1,730 per fortnight	$45,000 p.a. or $1,730 per fortnight
Chance of outliving your super	69%	45%
Eligible for age pension	Not until age 67	Yes – part pension
Cost of initial plan	No advice received	$1600
Cost of Ongoing Advice Service		$1400 per year

Need some help?

If you want to talk about planning your retirement but don’t know where to start, give us a call on 1300 033 166 or request a call back online. 
You can get general and simple advice about your TelstraSuper account for no additional cost – it’s part of your membership. Talk to us about how to boost your super, your insurance and your investment option.

If you want more personal advice make an appointment with Telstra Super Financial Planning.  Talking to a professional about your finances – your income, your savings, your debt, potential for investment and creating wealth outside of super – could help you get a feel for whether you’re on the right track and how to make the most of your financial future.

All of the figures in Linda’s story have been generated from the TelstraSuper Retirement Income Projector based on certain input examples and assumptions. Try it for yourself and take a glimpse into your potential future.

The above Case Study is an illustrative example only and should not be relied on as a substitute for financial advice. Any general advice in this case study has been prepared without taking into account your objectives, financial situation or needs. Before you act on any general advice in this case study, you should consider whether it is appropriate to your individual circumstances.
*This figure has not taken into account any bonus or employer paid premiums. 
^Assumptions in Retirement Income Projector as at February 2021

• Inflation (Consumer Price Index Growth) 2.5% p.a.
• Improvement in living standards 1.0% p.a.
• Community wage growth 3.5% p.a.
• Balanced Option Investment Return 6.4% p.a.
• Conservative Investment Return 4.7% p.a.
• Defensive Growth 5.2% p.a.
• Superannuation Guarantee Rate 9.5% p.a. increasing with legislated changes
• Dollar based administration fees $200 p.a.

Today's dollars
The above projection of balance and retirement income is in today's dollar values. Showing results in today's dollars allows you to consider future retirement income in the context of today's goods and services and the current standard of living.
The today's dollar amounts have been calculated by deflating future dollar amounts using community wage growth. Wage growth is commonly described as a combination of price inflation plus a margin for improvements in living standards. It is assumed that salary growth is the same as community wage growth. The above projection estimates wage growth by adding a margin to the rate of price inflation shown on the “Assumptions” panel.
Current environment
Unless otherwise stated the above calculations are based on legislation and rules at 1 July 2020. In particular, the case study allows for:

• Concessional contributions that are taxed at a rate of 15% by the super fund;
• Age Pension asset test from 1 January 2017;
• Phased increases to the Superannuation Guarantee rate (to 12% of earnings), including the legislated delay in the phased increases;
• Reduced contribution caps;
• Reduced income threshold for higher contributions tax (Division 293).

The case study does not allow for:

• Low Income Tax Offset;
• Senior and Pensioner Tax Offset;
• Any applicable benefit payment tax before age 60;
• Any Centrelink payments apart from the Age Pension (including supplements).

The case study assumes that certain legislative thresholds and limits relating to superannuation, tax and social security are increased or indexed in line with wage inflation (unless otherwise stated). The actual rate of increase in these legislative thresholds and limits may vary from the assumed wage inflation rate.
Age Pension Assessment - the assessment of the Age Pension in the case study has assumed no other assets are owned or income generated pre-retirement or within retirement.