Judy, a client of mine was made redundant in 2009 with a Superannuation balance of $130,000. She had been matching her lifestyle to her income earning $41,000 per year. At the age of 59 she only needed to wait another year before being entitled to her superannuation tax free.
Judy’s Financial Plan, like so many other Australians was to use her Superannuation to pay off the mortgage and use the balance to get her affairs in order.
At 60 Judy was finally able to pay off the mortgage and update her old Nissan. She could also pay to have her teeth repaired. Something that she had wanted to do for almost 10 years.
Like many Australians, it wasn’t until retirement, did she realize that she had insufficiently prepared to maintain the lifestyle she was used to living. At 60 she was still very young, with longevity a trait in her family.
From the age of 60 Judy has been receiving a full pension and supplementing the shortfall from the remainder of her superannuation. After 4 years in a financial blur and eroding another $56,000 from the balance of her superannuation did Judy awaken and become very present with alarming clarity that she had a problem.
The difference between her pension and living expenses has been $14,000 per year. With an account balance of $14,000 remaining and only aged 64 panic finally hit home. Unfortunately many of us treat our finances and our health in the same way. We ignore the early warning signs. The tightness in our chest or ache in our back. We try and ignore it until the pain becomes too much to leave un-attended. In the terms of Finances I refer to this as Financial Cancer and in Australia it is Epidemic.
Let’s look at what options Judy has available
– Returning to the work force
For the last 12 months Judy has applied for more than 19 Jobs in the field that she had worked in previously. Of the 19 she was interviewed for 3 and offered 0.
– Family assistance
Judy has 3 children, all with families of their own trying to get ahead in life. Becoming a burden or asking for financial assistance was the last thing Judy wanted to do. Judy knows how hard it is for them to get ahead these days and this just was not an option.
– Selling her home and downsizing
Judy’s home is approximately valued at $650,000. If she was to sell Judy would be looking at around $16,000 in Real Estate Fees plus the purchasing costs of Downsizing.
The smaller homes she had been looking at in the area are still around $400,000 plus body corporate fees. Should she sell she would free up $220,000.
Based on her previous experience she knows that this too, falls well short of her life expectancy. Not only is she apprehensive to sell the home that has taken so much effort to purchase and holds so many years of memories, but she is also very comfortable where she lives.
– Reverse Mortgage
With uncertainty around interest rates and the capital growth of Property, Judy is very concerned that with rising interest rates as the economy improves, the compounding interest will quickly erode her equity. Judy’s concern is that when she reaches an age when she may need Aged Care that she will no longer have access to any funds to pay for it and their will nothing left for the kids.
– The SURE Property Option
The advantage of the SURE property Option is that it provides Judy with absolute Financial Certainty. She knows exactly the amount of supplementary income that she will receive indexed over the next 15 years, She knows exactly the amount her property will sell for in the future regardless of the property market, and she knows her Equity is preserved and she is in control.
After weighing up all the Pro’s and Con’s Judy decided that the SURE property Option was the way to go for her. The outcome was the following:
Through the SURE Property Option Judy has been able to continue to receive the full pension, maintain ownership of her property, Keep all her $650,000 home equity preserved and access an additional $375 per week or $19,500 per year to supplement her income and meet her financial needs with peace of mind and certainty.
End result:
Happier Judy, with financial Security today and Financial Certainty tomorrow living the quality of life she is used to and deserves.
