how Jon and Jillian made the right choices
Jon and Jillian* are aged 65 and retired three years ago. The couple own their home and plan to spend $30,000 pa during retirement from Jon’s $450,000 Allocated Pension. They receive no government pension - but should do in about five years time as their capital runs down.

Their goal: more income to help pay their grandchildren’s school fees, and confidence their money will last.

Jon and Jillian have plenty of choices, but let’s look at the effect of one modest change.

Instead of the Allocated Pension alone, they invest $200,000 of John’s super in a Term Allocated Pension (TAP) based on Jon’s life expectancy.

This gives Jon and Jillian a part age pension of $3000 pa, because TAPs are 50% exempt from the age pension “assets test”. It does, however, mean this capital is locked away - a choice Jon and Jillian are prepared to make. There are other implications too.

Next Jon and Jillian take a close look at their retirement plans with their adviser, and find that at their current spending level, their money should last beyond age 100.

Jon and Jillian think this is excessive and would rather spend now. So they choose to reduce the expected age at which their money runs out to 98. This frees up another $3000 pa.

With no change in investment returns, the couple increased their income from $30,000 pa to $36,000 pa.

These were Jon and Jillian’s choices but they won’t be right for everyone. Are your circumstances like Jon and Jillian’s? What choices are right for you?

Make an enquiry or see an adviser now or call us on 1800 626 881.

Assumptions: Inflation rate: 3.0%pa. Investment return (AP and TAP): 8.5%pa. Jon and Jillian have the following assets: Home: $600,000. Allocated Pension (Jon): $450,000. Shares: $50,000. Cash $10,000. Lifestyle assets (car etc): $20,000. Initial lifestyle costs: $30,000 pa.

*Important Note: Jon and Jillian are not real people. Their story is based on the type of financial situation that ipac’s financial advisers help people manage all the time.