Case Study

Allan and Gail Willmott have come in to see you to ask for your assistance to plan out their next seven years and then help them settle into retirement. Gail (aged 53) and Allan (aged 52) have been married for 29 years and live at Lot 3 Wattle Road, Geelong, Victoria. Their only child, a daughter, Megan, is independent and has two children. Gail works full time for Best Marketingand has recently been promoted. She now earns $90,000 p.a, plus an additional Superannuation Guarantee Contribution of 10%. She has heard about salary sacrifice and thinks this might be a good idea to help build funds for her retirement. She has informed you that she is about to start receiving $17,000 p.aof a capital nature for the next 7 years as part of the proceeds from her great Aunt's estate. She is unsure whether this amount will be paid annually into her superannuation fund as a personal (after tax) contribution or another alternative. Gail's superannuation is currently in a balanced retail superannuation fund, MM Superannuation. Her current balance is $220,000 and earns on average 7% p.a. after fees and taxes. She also has $100,000 in term life and TPD insurance cover within her superannuation fund. She drives a new Toyota RAV4 that is fully paid for. It has low kilometers, and she expects to keep it until she retires. Upon retirement she intends to purchase a new car, and expects that she will need an additional $30,000 on top of the trade-in she expects to receive from the Toyota RAV4. Allan works full time making custom furniture for Newbold's Pty Ltd. He earns $45,000 p.a. plus an addition Superannuation Guarantee Contribution of 10% and intends doing this work for the foreseeable future. He has $51,000 in superannuation savings, held within the PP Superannuation Fund. The funds are invested in a capital stable portfolio with a very low allocation to growth assets. Returns on this fund are around 4% p.a. after fees and taxes. They are living on a four-hectare semi-rural property that is valued at around $750,000, but they currently have a mortgage of $130,000in the form of a line of credit. The interest rate on this facility is 7% and they currently pay interest only repayments of $758.33 per month ($9,100 pa). Both are non-smokers and in excellent health, and they do not have a current will or any powers of attorney.

Their personal expenses are around $40,000 p.a. and they spend an additional $10,000 p.a. on holidays. (Total outgoings are therefore $59,100). Aside from private health cover, car, and house and contents insurance, the only personal insurance they have is the coverage provided in Gail's superannuation fundand .

Gail intends to work for seven more years (until aged 60), once she retires, they believe they will need $40,000 p.a(in today's dollars) for their living expenses in retirement. However, Allan intends to then start working part- time until age 65and estimates that he will earn $25,000 p.a. and they intend to use this income to fund any holidays or other expenses asrequired.

Before Gail retires in seven years-time they wish to pay off the remainder of the mortgage. They also want to increase the amount of money in both of their superannuation funds.

They have also stated that they want to ensure they have sufficient money for their grandchildren (now aged 6 and 4 years) to attend university. They estimate they will need to accumulate approximately $120,000(in today's dollars) over the next 12 yearsto pay for this.

Aside from their superannuation funds, they also have $9,000 in a bank account earning 4% p.a., $15,000 in a term deposit earning 4% p.a. and

$12,000 in a cash management account earning 5% p.a. However, they are not happy with the taxation implications of these accounts, as any interest earned seems to go in tax. Their everyday transaction account holds $3,000 but this has been set aside for emergencies and the clients are happy with this amount and do not want this changed.

Their credit card limit is $8,000, but the balance is paid out monthly as part of their $40,000 pa personal expenses. After completing a comprehensive risk profile analysis, you ascertain that they both have 'balanced' risk profiles.

Lifestyle Assets

Assets	Owner	Value ($)	Liabilities ($)	Net Asset Value ($)
Home	Joint	750,000	130,000	620,000
Car	Joint	40,000	Nil	40,000
Contents	Joint	50,000*	Nil	50,000*
Total		840,000		710,000

Investment Assets

Case Study

You are an authorised representative of a full-service licensed dealer group, Mentor Financial Planning Pty Ltd. Allan and Gail Willmott have come in to see you to ask for your assistance to plan out their next seven years and then help them settle into retirement. Gail (aged 53) and Allan (aged 52) have been married for 29 years and live at Lot 3 Wattle Road, Geelong, Victoria. Their only child, a daughter, Megan, is independent and has two children. Gail works full time for Best Marketingand has recently been promoted. She now earns $90,000 p.a, plus an additional Superannuation Guarantee Contribution of 10%. She has heard about salary sacrifice and thinks this might be a good idea to help build funds for her retirement. She has informed you that she is about to start receiving $17,000 p.aof a capital nature for the next 7 years as part of the proceeds from her great Aunt's estate. She is unsure whether this amount will be paid annually into her superannuation fund as a personal (after tax) contribution or another alternative. Gail's superannuation is currently in a balanced retail superannuation fund, MM Superannuation. Her current balance is $220,000 and earns on average 7% p.a. after fees and taxes. She also has $100,000 in term life and TPD insurance cover within her superannuation fund. She drives a new Toyota RAV4 that is fully paid for. It has low kilometers, and she expects to keep it until she retires. Upon retirement she intends to purchase a new car, and expects that she will need an additional $30,000 on top of the trade-in she expects to receive from the Toyota RAV4. Allan works full time making custom furniture for Newbold's Pty Ltd. He earns $45,000 p.a. plus an addition Superannuation Guarantee Contribution of 10% and intends doing this work for the foreseeable future. He has $51,000 in superannuation savings, held within the PP Superannuation Fund. The funds are invested in a capital stable portfolio with a very low allocation to growth assets. Returns on this fund are around 4% p.a. after fees and taxes. They are living on a four-hectare semi-rural property that is valued at around $750,000, but they currently have a mortgage of $130,000in the form of a line of credit. The interest rate on this facility is 7% and they currently pay interest only repayments of $758.33 per month ($9,100 pa). Both are non-smokers and in excellent health, and they do not have a current will or any powers of attorney.

Their personal expenses are around $40,000 p.a. and they spend an additional $10,000 p.a. on holidays. (Total outgoings are therefore $59,100). Aside from private health cover, car, and house and contents insurance, the only personal insurance they have is the coverage provided in Gail's superannuation fundand .

Gail intends to work for seven more years (until aged 60), once she retires, they believe they will need $40,000 p.a(in today's dollars) for their living expenses in retirement. However, Allan intends to then start working part- time until age 65and estimates that he will earn $25,000 p.a. and they intend to use this income to fund any holidays or other expenses asrequired.

Before Gail retires in seven years-time they wish to pay off the remainder of the mortgage. They also want to increase the amount of money in both of their superannuation funds.

They have also stated that they want to ensure they have sufficient money for their grandchildren (now aged 6 and 4 years) to attend university. They estimate they will need to accumulate approximately $120,000(in today's dollars) over the next 12 yearsto pay for this.

Aside from their superannuation funds, they also have $9,000 in a bank account earning 4% p.a., $15,000 in a term deposit earning 4% p.a. and

$12,000 in a cash management account earning 5% p.a. However, they are not happy with the taxation implications of these accounts, as any interest earned seems to go in tax. Their everyday transaction account holds $3,000 but this has been set aside for emergencies and the clients are happy with this amount and do not want this changed.

Their credit card limit is $8,000, but the balance is paid out monthly as part of their $40,000 pa personal expenses. After completing a comprehensive risk profile analysis, you ascertain that they both have 'balanced' risk profiles.

Lifestyle Assets

Assets	Owner	Value ($)	Liabilities ($)	Net Asset Value ($)
Home	Joint	750,000	130,000	620,000
Car	Joint	40,000	Nil	40,000
Contents	Joint	50,000*	Nil	50,000*
Total		840,000		710,000

Investment Assets

Assets	Owner	Value ($)	Return (%)	Liabilities ($)	Net Asset Value ($)
Bank Account	Joint	9,000	4	Nil	9,000
Term Deposit	Joint	15,000	4	Nil	15,000
Cash Management Fund	Joint	12,000	5	Nil	12,000
Total		36,000			36,000

Question

Based on the above information, give financial planing advice for them.