Was this a $950k retirement mistake?
I got off the phone this week with Jeff who was looking for some help planning his retirement.
The only problem was that as we got into the discussion his sole focus was accessing the age pension…
I was a little surprised as Jeff seemed to be a smart guy and accumulated a reasonable amount of assets over his working life.
“I’m trying to get my assets below the assets test and just sold my investment property and gave away $950k to my two sons”, Jeff said…
Wow…I was shocked…as I slipped down into the back of my chair.
Was this a BIG mistake?
For some you might be thinking hell yes, others not so much.
Don’t get me wrong, I advocate helping out children. In fact, for clients who have more than enough money we actively encourage it.
BUT not to the detriment of your retirement lifestyle…
Curious, I asked why he did this…his answer “I want to make sure I get the age pension”.
Mmmmm, I thought…
He was age 58 with his wife still working and looking to retire in 3-4 yrs time.
We continued talking about how he was going to fund their lifestyle until he reached 67.
This was an interesting discussion…they didn’t have a huge amount in super.
By my back of the envelope calculation, they were going to churn through this at a RAPID rate and run out prior to reaching age pension age…
The interesting part was that the income they wanted every year was more than the age pension…
I was totally confused…
I wasn’t sure whether he wanted help or just wanted validation he’d done the right thing.
Before you give money away, do your numbers…
Don’t get me wrong, we are not against helping children out. Actually we advocate and actively have these discussions where clients have more than enough money.
It’s better seeing them get the benefit while you are alive, right?
But not to the detriment of your own lifestyle…
As we talked further with Jeff, he mentioned his children were on really good coin. We’re talking north of $100k.
They didn’t need the money…
But I’d bet they know how to spend it…
Retirement planning success is all about knowing your number which then drives your decision making.
Get your PDF copy of ENOUGH? here…
Planning is essential before making any BIG financial move…
It’s critical, if you want a comfortable retirement, that you know your numbers.
Get these numbers wrong…use the wrong assumptions and it doesn’t end well…
Know what you need money wise to meet your needs in retirement.
Have a safety margin.
And if you want to give money away, know at what stage you can do this.
It’s a safer way to plan.
Would Jeff had changed his mind had he’d known his options prior?
I’m not really sure, but maybe…
He did seem a little worried when I said it’s likely he’ll run out of money prior to the age pension kicking in.
Not sure how someone who wants at least $50k a year to live thinks the age pension of roughly $40k a year will meet their needs.
There’s little room to move and I suspect he’ll need to lower his expectations of what they’ll be able to do in retirement.
Jeff, unfortunately, didn’t run his numbers to work out what was possible. To drive his decisions…
It’s a gross underestimation of his retirement needs.
Had he not given the money away, not focused on accessing a full age pension, they would have had more than enough to see them through and fund a comfortable retirement lifestyle.
And still have the option to give some money to his two sons…
You may also like, Scary Market Action Plan…
BIG questions everyone thinking about retirement are asking but struggling to find answers too…
How much money do you need for the rest of your life?
Will you be okay in retirement?
Will I run out of money in retirement?
How do we set it all up in a safe manner?
These are the questions we get asked every day of the week. Yes, there is a tonne of information on the internet.
But people are still struggling to get the answers that relate to their own situation.
Once you know the answers to these questions you can confidently plan for the future. Know what is possible and plan for a comfortable retirement.
Maybe even consider retiring earlier than you thought was possible.
Would you like to know the answers to those questions?
Maybe it’s time to book a call and we’ll have a chat about a roadmap which can help get you all the answers to these questions and more.
Sure you can continue to browse the internet for a couple more years. Still confused more than ever. Still no wiser…
Or we can have a chat and see how you can get these answers once and for all.
Maybe even consider an early retirement if you plan well…
Glenn Doherty – CFP – Financial Planner | Helping people within 10 years of retirement achieve a successful retirement
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