Married couple Graham and Tracey are both 62 years of age and they have been working since
Question:
Married couple Graham and Tracey are both 62 years of age and they have been working since their 20s. They have two financially independent adult children and the following joint assets:
$900,000 home (no mortgage) $6,000 home contents $10,000 car $100,000 savings account $300,000 superannuation ($180,000 for Graham and $120,000 for Tracey)
Tracey recently received a $80,000 inheritance from her late aunt and this amount is included in the $100,000 savings account. The couple is now considering retiring in the next few years and using their assets to generate an annual income of $30,000 to cover their living expenses.
Graham and Tracey approach you, a financial planner, for advice on how they can best plan for their retirement.
1.1 What other information would you like to obtain from Graham and Tracey before you develop a financial plan for them?
1.2 Discuss how Graham and Tracey's desired annual retirement income compares with Association of Superannuation Funds of Australia's (ASFA) benchmarked modest lifestyle budget for a couple aged between 65 and 85. Why do you think Graham and Tracey are satisfied that their annual income of $30,000 would cover their living expenses?
1.3 How realistic are Graham and Tracey's retirement objective based on their current financial assets? In your answer, determine whether Graham and Tracey have sufficient retirement capital to meet their retirement objectives. Show all calculations. Assume a rate of return of 6%p.a. for a retirement horizon of 20 years. Graham and Tracey intend to use the funds in their savings account to supplement their retirement savings and have no plans to preserve their retirement capital (in other words, they will use all their retirement funds to finance their retirement years).
1.4 Identify and discuss three types of risks that Graham and Tracey may face when planning for their retirement.
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill