Case Study - The Jones Family
Andrew Jones (aged 63) is married to Sarah (aged 60). They are living in a lovely
beach side suburb North of Sydney with their two children, Robert (30) and Gina (26).
Robert is married to Lisa, they have 2 children, Leila age 4 and Ziggi age 1. Roberts
work full time and Lisa is currently working part time.
Gina has recently become engaged to Spyros and they are planning to get married in
September next year. Andrew and Sarah are very excited about this and they are
looking forward to the big day. They would like to assist Gina financially with the
wedding. They are also thinking to assist Gina and Spyros buy their own house as they
are concerned with the property prices in Sydney are becoming less affordable.
Andrew is a senior partner in a consulting firm. Andrew works very long hours and
travels frequently. He can’t wait for the opportunity to slow down so he can have more
time to see his wife and spend time with his grand children.
Andrew is considering to possibly continue to stay involved in retirement with potentially
taking on a company board position considering his extensive experience and possibly
independently undertaking consultation projects in areas he feels passionate about
such as green technology.
Sarah works as a teacher. She is currently working part time after she reduced her
working hours 3 years ago. She has commenced a Transition To Retirement pension
(TTRP) in a form of an Account Based Pension (ABP) to supplement her income. She
is currently drawing the maximum allowable annual pension payment form the TTRP.
Sarah looks after Robert and Lisa’s children for the 2 days she stays at home
Andrew and Sarah have been discussing for a while the need for them to see a
financial adviser to help them put in place a plan for retirement. They would also like to
know if the latest superannuation changes impact them and their retirement plan. They
would also like a plan to manage some upcoming expenses including Gina’s wedding,
their planed holiday, buying a new car and house renovations.
Andrew and Sarah have very strong belief to remain close to their children and grand
children and assist them in every way possible. They are also realistic with regards to
the fact they need to look after themselves and recognise the fact they need to be able
to meet their expenses in retirement.
Both Andrew and Sarah have reasonable experience when it comes to investment and
management of their financial affairs. Although in recent times Andrew and Sarah have
been too busy to pay attention to their financial affairs, they feel this will be different in
retirement where he would have ample time to managed their financial affairs and take
control of their finances and investments as they both feel this is important for them.
Andrew and Sarah have decided to come and see you. Sarah made an appointment for
both Andrew and herself for an initial consultation with you.
Andrew and Sarah have left you with the information below after the first interview.
You need to clearly address the following issues:
ô€¸ Their goals, objectives, needs, and concerns and whether they can achieve their
objectives including their retirement objectives and how (attempt to present
them with more than one option where applicable).
ô€¸ They also ask you to address and take into account the following specific
o Andrew and Sarah would like to retire once Andrew reaches age 65.
However, they are happy to postpone retirement for a few more years if this
would help them achieve a more comfortable retirement as Andrew is happy
to scale down his workload and stay working on a consultancy basis for a
few more years. They think that they need an after tax income of $80,000 in
today’s dollars during their retirement as by then the mortgages will be paid
out (assume that this income can be produced tax free at retirement).
o Andrew and Sarah would like to pay off their home loan as soon as possible.
o They would like to save and invest.
o They are happy to consider the concept of borrowing to invest if they feel it
can help them achieve their retirement aim.
o Andrew and Sarah would also like to assist their son Robert in providing for
their grandchildren’s high school education. They would like to provide
$15,000 pa per child for the 6 high school years.
o Andrew and Sarah would like to help Gina with her wedding. They would like
to put aside $25,000 in today’s dollars and be made available to Gina one
year from now. They would also like to do what they can to help Gina save
to buy a home with Spyros.
o Sarah would like to do some renovations on the house after they have both
retired. The expected cost is approximately $200,000 in today’s dollars.
o Andrew and Sarah would also like to go on a trip around Europe for which
the expected cost is approximately $50,000 in today’s dollars.
o They would also like to replace their car for which the expected cost is
approximately $150,000 in today’s dollars.
o Andrew and Sarah have been considering to establish an SMSF as they are
getting close to start their life in retirement. They wanted to know the key
relevant issues they need to be aware of including their roles and
responsibilities as trustees as well as the key risks and benefits related to
their specific circumstances. At present Andrew and Sarah’s superannuation
contribution goes to an employer nominated retail fund.
o Andrew and Sarah wanted to also explore the concept of borrowing to
purchase a property by using a Limited Recourse Borrowing Arrangement.
Andrew and Sarah would like to know more about that and the possibility to
use such a facility through a SMSF to buy an apartment in the city for their
daughter Gina to live in after she gets married at a subsidised rent.
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o Andrew and Sarah would also like to explore the ability of transferring their
residential rental property they currently owned into their SMSF as they have
been told by at a family BBQ that this could beneficial for tax purposes. They
would like to confirm this with you.
o Andrew and Sarah have also heard from one of their friends about a
strategy that was referred to as "using salary sacrifice to superannuation to
maximise retirement income". They are questioning whether such a strategy
would be suitable to either and/or both of them (provide the relevant
calculation/s with your explanation).
o Andrew and Sarah would like to know more about utilising their
superannuation savings to commence a pension or an income stream to
help them maintain their life in retirement. They also would like to know if
latest superannuation changes impact their retirement plan.
o Andrew would like to get some advice on the share portfolio he has recently
purchased after receiving some tips from an old friend who invests regularly
in the market. Advise Andrew if his share portfolio is well diversified and
explain why or why not. Also elaborate on what can be done to make the
share portfolio more diversified. Be specific. Provide Andrew with a clear
o Andrew and Sarah would like to get some advice on their possible eligibility
to obtain the age pension once they are retired. Provide them with a clear
explanation of the reason why or why not. Explain any other social security
issues, if any.
o Andrew and Sarah would like to get some advice on the different types of
pensions they can start with their superannuation savings.
o Andrew and Sarah would like to ensure they have adequate general and
o Andrew and Sarah would like you to consider their estate planning needs.
o The term deposit is maturing soon and they would like some advice on what
they should be doing and possible options available for them.
o Projections should be made up to Andrew and Sarah’s life expectancy + 8
o Cash flow and asset projections (include projections of cash flows for
Andrew and Sarah, presenting both pre-tax and post-tax results).
o Cash flow and net worth tables.
o Provide assumptions used and justifications (cost, risk, suitability, etc.) when
o Use diagrams and charts to assist with your illustrations.