Laying foundations for a debt-free retirement

For pre-retiree Adam*, quality advice held the key to financial independence and a debt-free retirement.

Full-time worker Adam (57) hoped to retire debt free, with plans to hang up his work boots at about age 67.  He had some savings in super but like many people of his age Adam wanted to grow his super as much as possible before retiring. He also wanted to ensure his wife and child would be able to cope financially if anything happened to him.

Adam approached Mortgage Choice Financial Planning for help meeting his financial goals.

Simple strategies to grow super

Following our first meeting, we noted that Adam held multiple super accounts. By rolling these into a single fund Adam would save on fees – an easy way to boost his super, as well as making his nest egg easier to manage.   Consolidating super is normally a straightforward process however Adam also had a ‘pension’ account, which made the situation slightly more complex.

In fact, Adam had previously been advised to set up a ‘transition to retirement’ (TTR) pension. It’s an option that allows over-55s to access their super through regular payments rather than a lump sum prior to full-time retirement.

After checking that no exit fees or penalties applied to Adam’s various super balances, we recommended he combine the existing funds into his TTR pension fund.

As part of our process, we conducted a review of Adam’s personal cash flow, which revealed he had surplus cash each month after meeting regular bills and expenses. This pinpointed money Adam could use to make additional personal contributions to help grow his super.

Becoming debt free

Adam’s main debts were in the form of his mortgage, a car loan and a number of credit cards. We encouraged him to seek advice from his credit provider about how this debt could potentially be reduced.

Adam worked with his credit provider to consolidate his loans, which significantly lowered his overall monthly repayments. With lower total repayments, Adam now had extra cash that could be used to pay off the debt sooner. This would generate savings on long term interest costs and help Adam achieve his goal of retiring free from debt.

Protecting his loved ones from financial stress

Finally, we looked at Adam’s personal insurance cover, and it was clear there were worrying gaps.

Super familyWe advised Adam to take out life insurance as well as income protection cover, which was especially important as Adam needed to maintain his current level of income in order to achieve financial independence in retirement. By adding critical illness cover and trauma insurance to his personal protection package, Adam was able to secure peace of mind that his family would be protected if anything happened to him.  

Even better, the premiums for Adam’s personal insurance were paid in part from the cash freed up through debt consolidation.

Working towards the big picture

Adam engaged us to complete a ‘Big Picture’ plan with a fee of $3,680+. Our work included:

  • reviewing Adam’s super funds
  • personal cash flow analysis
  • debt management review
  • strategy development
  • personal insurance review and product recommendations
  • tailored recommendations, and
  • implementation of an action plan.

The bottom line is that Adam is now on track to clear his debt before he retires. He has full insurance cover in place to protect him and his family against financial hardship, and he is actively growing his super to support a quality retirement.

Plan for the life you want to live

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*All images and names are for illustration purposes only
+ Fees will vary, based on the individual customer’s circumstances and goals as well as the time and complexity involved in providing financial advice.

The information provided in this article is for general education purposes only and does not constitute specialist advice. It does not take into account your objectives or needs. It should not be relied upon for the purposes of entering into any legal or financial commitments.