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Current Situation

Mr. Thomas West and Mrs. Jessica West are both of 61 years of age and are a working couple. Thomas is a self-employed electrician by profession, running his own business under the name Sparky Electricals, whereas Jessica is employed as a florist with Back to the Fuschia. Presently residing at their self-owned home at 29, Esther Court, Brickhill, VIC, they have one daughter, Isabelle, who is 33 years of age and lives independently and a son, aged 30 years who is also living independently. The couple have set July 2021 as their retirement date and they want their savings and assets managed for maximum returns so that they can continue living the life with ease and comfort, suggests Brunhart, (2008).

Assets and Liabilities of Mr. & Mrs. West as at July 01, 2015


Amounts in $

Principal Residence


Cash and Bank Deposits


Motor Vehicle – Thomas


Motor Vehicle – Jessica


Investment Property


Home Contents


Managed Funds


Superannuation – Thomas 


Superannuation – Jessica 


Holiday Home


Total Assets



Amounts in $

Loan on Principal Residence


Loan on Investment Property


Overdraft for Business


Credit Card


Total liabilities


Net assets


 *Mr. Thomas has stated that the overdraft is against the outstanding debtors payments and shall be cleared as soon as the payments are realised.

Income and Expenditure of the Couple for the Year Ended 30 June 2012


Amounts in $




Taxable Business Income / Salary




Investment Income




Total income




LESS: Income Tax & Medicare Levy




Net Income





Amounts in $





Mortgage – Principal Home


Household Expenses


(These include Food, Utilities, Insurance and Rates)

Total Expenditure




Annual Income Surplus




Based on the above noted details, the couple are in a position to live comfortably with an annual income of $80,000. Since they wish to do away with liabilities before retirement, the couple is confident that they can live comfortably with an annual income of $55,000.

From the information provided by you, Mr. Thomas, it can be presumed that you and your spouse have the following goals and objectives for your future life, asserts Vice, (2010).

  1. In the present as well as in future, you and your spouse do not have any intention of changing either your profession, nor do I see this happening with your spouse, Mrs. Jessica. However, both of you must be hoping that an enhancement in the business of Mr. Thomas or an increment in Mrs. Jessica’s salary will keep pace with the Average Weekly Ordinary Time Earnings (AWOTE) index.
  2. As a couple you have stated that you have fixed your target at $55,000 per annum for your expenditure needs after your retirement and under the present conditions this seems to be an achievable goal for both of you.
  3. As a couple you have also shown the desire of retaining your major current living expenses, such as insurance and rates, car maintenance expense and other essentials at the existing levels, as per Vice, (2010).
  4. As a couple you have the goal of taking a Content Insurance Coverage of $25,000 for your household effects with Suncorp, which can cost you $200 per annum.
  5. Another objective which you, as a couple have is, taking a hospital cover costing you about $160 per month, although you presume that you both are in fine health and both of you do not foresee any major ailment effecting you in the near future.
  6. As a couple your objective of paying off the mortgage balance of your principal residence, which currently stands at $150,000, before you retire from active working life, is a sensible goal and in my opinion this will make your retired life more carefree as a couple, as said by Hallman & Rosenbloom, (2003).
  7. As a couple you own a Holiday Home and have also targeted to renovate it for your post-retirement stay there. Your plans to keep aside $5,000 each year for this annual sojourn is aimed at keeping you both led a relaxed post-retirement life.
  8. As a couple you are also planning to refurbish your investment property and rent it out on a regular basis post-retirement period. This will get you a steady income with the advantage that the investment property will be able to meet its own expenses. You have also shown the inclination of selling-off this investment property and invest the money in a high yield investment provided it is a secure investment.
  9. From the interactions which I have had with you as a couple and based on the information gathered, I am of the opinion that both of you have a clear goal for your post-retirement period of investing in a market oriented fund which can give you a minimum secured return of 6% per annum, assert Lange & King, (2009).

Superannuation Funds as Investment Vehicles

What is Superannuation?

Superannuation funds are long-term saving plans, which will give you a regular source of income after your retirement, as it has been providing many Australians, super is one of the main form of retirement income. During the working life the contributions which you make towards your super fund are reinvested in growth oriented, risk-free and regular income providing investment options, which build up the value of the investments over time, asserts O’Shea (ed.), (2004). The money which taxpayers put into their super fund has to usually stay invested in the fund until the taxpayer reaches the retirement age, or during the period when the taxpayer begins the transition towards retirement, but both occur after the declared minimum age of retirement. The best advantage offered by super funds is that the contributions of the taxpayer made to their super fund and the earnings received are taxed at 15% and this makes super as the most tax-effective investment vehicle, as per O’Shea (ed.), (2004).

Personal Details

How does Super work?

To know how super works, you must keep in mind that super in itself is a framework which is used for holding investment assets. In fact, the super is an investment in itself. Super funds offer the taxpayers a wide range of investment options for a variety of asset classes which include cash, shares and property with option of paying a fixed interest. When you, says Ashhurst, (2009), as a taxpayer contribute a certain amount of money to the super fund and the make a selection of the available investment options, as a contributor you are in fact buying units in these funds (this happens in those super funds where the super fund has been unitised). The number of units which you purchase as a taxpayer will be dependent on the daily unit price announced by the super fund, asserts Ashhurst, (2009). The price of the unit will vary every day in accordance with the changes taking place in the market.

Increasing the Superannuation Guarantee Rate from 9.25% to 12%

As a contributor, you can directly contribute the required contribution amount into the super fund of your choice or the amount can be contributed on your behalf by your employer, your spouse and in certain special circumstances by the Federal Government. For employed taxpayers it is the employer who is required to contribute at the minimum an amount equivalent to 9.25% of the employees’ salary to the super fund chosen by the employee. This amount, according to Drury, (2012), is known as the compulsory superannuation guarantee and this rate is going to increase gradually to 12% by 2020. This will prove to be beneficial for Mrs. Jessica in the coming years (see table below). As a self-employed professional, you, Mr. Thomas have certain limitations for the amount which you can contribute to your super fund, but the advantageous position for you is that there is no fixed amount for you to contribute. You have an annual cap on the contribution, on which you get a concessional tax rebate, beyond that limit, you are taxed at the marginal rate applicable to you. As per Drury, (2012), taxpayer aged 49 years or above as on 30 June 2015, can avail up to $35,000 under concessional contribution cap for the year 2015-16.


Rate (%)















 Types of Super Funds

There are many different types of superannuation funds available for contributors and depends on the choice of the contributor which one to select, as per Ezra, Collie & Smith, (2009). The mains super are –

Assets and Liabilities

Employer / Corporate / Staff Funds

Such type of funds are established by the employers so as to provide direct benefits to the employees.

Personal Funds

As is evident from the name, the contributor personally joins the super fund as an individual through a super fund provider. There are a large number of such options available in the market with most of them offering the contributor a wide range of investment choices.

Industry Funds 

The purpose of these funds was originally to provide services to people who are working in a particular industry, e.g. building industry or health care service providers. Most of these have now made the contributions open to the general public also.

Self-managed Super Funds 

Also known as 'do it yourself funds’, these service providers usually have up to four members and are usually used by members of a family or a close group of friends who have large amounts to be invested into super funds as a group, as per Hinden, (2000).

 Can I withdraw the money that I have in super?

Under normal circumstances, you or your spouse will have the restriction of withdrawing your super money till the time you reach your respective preservation age. The preservation age is calculated according to your date of birth but broadly it ranges between 55 and 60 years of age. However, according to Gitman, Joehnk & Billingsley, (2010), under certain specific circumstances, you will be allowed to access some amounts from your super funds based on the validity of the compassionate grounds given by you, but keep in mind that such situations are very limited.

 When can I access my super?

As detailed above, as a contributor to a super fund puts certain restrictions of withdrawal from the fund. However, you are allowed to access your super fund savings as per your will only when you reach the declared preservation age applicable on you. The purpose of this is, as per Lim, (2007), to ensure that you use your super savings for the purpose for which you have been intending to save them, which is when you take retirement. As per the rules of the superannuation fund regulations, in order to access your savings in the fund, you are required to fulfil at least one of the below noted conditions –

  • Reach your preservation age and take retirement.
  • Reach your preservation age but continue working.
  • Change of jobs on or after reaching age of 60 years.
  • On reaching age of 65 years.

The exact meaning of the term 'preservation age' is used to determine when you can access the money saved in your fund, even if you have not taken retirement, asserts Newnham, (2011).

Income and Expenditure

 How much super is enough?

Even if your retirement age is a distant away or is just around the corner, it is important for you to know how comfortable you will be and how much you can afford for your lifestyle after your retirement. The amount of super savings which you will require for your retirement will depend on the circumstances, such as your present age, present income, your desired age of retirement, income and also on your present super balance, as per Newnham, (2011).

Risk Profile

After having studied your current situation and discussed the future goals and objectives with you, I am in a better position to deduce your risk profile based on the facts and information now available with me. I have been able to conclude that after being a self-employed professional for a long time, you have developed a reasonable risk tolerance, which is above average. On this basis, says Ashhurst, (2009), you are less susceptible to the knee-jerk actions when you face a loss or profit. In my professional life I have come across many investors who take abrupt decisions because of their weak disposition to risk and this eventually puts them in a financial mess, say Gitman, Joehnk & Billingsley, (2010). It is the professional assessment of the Financial Planning Advisor to whom I consulted your case, to place investors in any one of the following categories –


Such investors are content if they have a moderate income but always select a stable path of growth rate for their investments.


Such investors always look for a high level of income along with a stable path of growth for their investments.


Such investors are known as short-term investors as they have an eye on the growth of their capital and want a steady income but plan for a 2 to 5 year span. They have the acumen to bear small losses and do not aim for instant returns on their investments.

Moderately Aggressive

Although such investors keep a lookout for the growth of their capital, they will take moderate risks in the short periods and will always aim at long term investments.


Always aiming at long term investments, such investors keep their target on long term growth schemes for their investments and are capable of taking large risks as they aim for large potentials of growth. They are not aiming at short term targets, as explained by Gitman, Joehnk & Billingsley, (2010).

 The Financial Planning Advisor with whom I discussed your case was of the firm opinion that you fall in the Moderate category of investors. His assessment was based on the fact that although your aim is to have regular earnings post your retirement period, you are not aiming at a short-term instant returns but are prepared to span out investments over a 2 year plus period and are willing to take a controlled risk for the growth of your investments.

In the last few decades there has been a huge change in the trends regarding Asset Allocation. New strategies have been the foremost reason for this in the wake of globalization of businesses. With the emergence of the third element of business, the service sector, I must point out to you that asset allocation is not confined to only ‘Stock v Bond’ war and neither are the results dependent on ‘Rate of Withdrawal’ by investors, assert Lange & King, (2009). With rapid changes taking place in people’s lifestyle and with an increasing tendency of the working class to take early retirement (down from traditional age of 60 years to 50 years), the asset allocation system is also changing. The strategy of the investors now is in fluctuating mode, which is to have accessibility for a quick withdrawal and also options to change incomes to suit the demands. Under the demands being created and with all the strategic alliances becoming operational, I have always advised my clients to, especially couples like you, Mr. and Mrs. West, who are making plans for their retirement, to plan according to any one of the following three segments –


I place those investors in this segment who invest 20% of their investments in stocks and 80% in investment bonds. Times have changed and have made us advisors to change their suggestions. Now the strategy to be adopted is –

Stocks: 20%;

Bonds: 60%; and

Variable Annuity: 20%.

Most important component in this segment is the variable annuity part and it so because it provides the investor with a wider base to choose from the other options or choosing between stocks and bonds or adjusting the fund allocations according to the immediate and medium-to-long term needs.


A moderator investor used to be the one who kept 40% of the investments in Stocks and 60% in Bonds. The investors are changing their priorities now to

Strategy And Recommendations

Stocks 40%;

Bonds 45%; and

Variable Annuity 15%


Stocks 40%;

Bonds25%; and

Variable Annuity 35%. The choice is dependent on the investor’s lifestyle and needs.


Previously it was a stocks 60% and bonds 40%, for the aggressive investors but this category has now changed the options to

Stocks 60%;

Bonds 30%; and

Variable Annuity 10%.

It is very clear from the above changes that investor’s options are not confined any more to the traditional but are being changed with the change in lifestyle and needs. Also the changing business environment and changes in the economic values of the nations is also another reason behind these changes, as per Vice, (2010).

The element of risk increases as you approach your retirement age and time is short for making preparations for planning the future. But in your case, Mr. and Mrs. West, you still have time at your hands for planning your strategies for your post-retirement life and with our expert guidance you will have sufficient time in adjusting your investments during the pre- and post-retirement periods by following these six steps for your estate planning –

Estimate Your Needs

I sincerely advice all my clients to make a clear estimate of what will be their post-retirement expenses and accordingly plan their investments. This is essential as the only source of income available to the retiree is the investment portfolio.

Calculate Your Retirement Income

Always take into consideration all the available income sources and after you compare them with your needs, then only finalize the income required.

Estimate the Gap between Needs and Sources

In case there is a gap between what you intend to spend and what can be your earnings from the investments, then take another look at both sides and adjust the option which is least difficult.

Evaluate the Tax Implications

Evaluate your marginal tax level after retirement and take into account the effects of any CGT implications. Make possible adjustments as to have minimum tax liability.

Diversify Your Investments

Before finalising, always compare your portfolio for the least risk factor.

Take into Account the Effects of Inflation

Variables effect the most including the rate of return on your investments, the life of your investments and the effects of inflation. Keep a check on these as they will make a huge impact on the amount of income you will require post-retirement.

Reference List

Ashhurst, L. 2009, Talking about Retirement: The Secrets of Successful Retirement Planning. Kogan Page Publishers, London.

 Brunhart, N. 2008, Individual Financial Planning For Retirement. Springer, Heidelberg.

 Drury, B. 2012, Sorting Out Your Finances for Dummies. John Wiley & Sons, Milton, Qld.

 Ezra, D. D., Collie, B. and Smith, M. X. 2009, The Retirement Plan Solution: The Reinvention of Defined Contribution. John Wiley & Sons, Hoboken, NJ.

Gitman, L. W., Joehnk, M. D. and Billingsley, R. S. 2010, Personal Financial Planning, 12th ed. Cengage Learning, Mason, OH.

 Hallman, G. V. and Rosenbloom, J. S. 2003, Personal Financial Planning, 7th ed. McGraw-Hill Professional, New York.

 Hinden, S. 2000, How To Retire Happy: Everything You Need to Know about the 12 Most Important Decisions You Must Make Before You Retire. McGraw-Hill Professional, New York.

 Lange, J. and King, L. 2009, Retire Secure!: Pay Taxes Later - The Key to Making Your Money Last, 2nd ed. John Wiley & Sons, Hoboken, NJ.

 Lim, P. J. 2007, Financial Planning Demystified. McGraw-Hill Professional, New York.

Newnham, M. 2011, Funding Your Retirement: A Survival Guide. John Wiley & Sons, Milton, Qld.

O’Shea, B. (ed.). 2004, Retire Ready: The Definitive Financial Guide to Retiring Well. UNSW Press, Sydney.

Vice, A. 2010, A Straightforward Guide to Financial Planning For The Future: From 45 To Retirement, 2nd ed. Straightforward Co. Ltd., Brighton

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