In 2001, I was caught up in one of Telstra’s reorganisations and had the option of leaving with a redundancy package or moving into a joint venture company. Several colleagues were in the same situation, and like most people, we had not spent a lot of time learning the details of superannuation and retirement planning. We had been contributing to a compulsory superannuation scheme that had been compounding away nicely for 25 to 35 years, and this was rapidly becoming the major asset for most of us. With the prospect of retirement looming, we underwent an accelerated learning process, and spent many coffee breaks sharing our new-found knowledge of superannuation, taxation and retirement planning, and our experiences with various financial planners.
I had already realised the importance of retirement planning after observing that too many people who retired 10 to 30 years ago – a generation that had learned the value of frugality during a depression and a world war – had not managed their assets effectively to provide themselves with a comfortable retirement. While they did not have as many options for investing their assets as we now have, they were not well informed – or worse, misinformed – about how to use their savings and assets to either supplement their Centrelink benefits, or to make themselves financially independent. Their savings were often spent, buried in the backyard, given away or invested in low interest term deposits. Assets such as investment properties often gave them a low – or even negative – net income, and benefited their heirs more than they benefited the retirees.
At that time, my knowledge of financial planners was limited to what I had read in Choice and Money magazines. My wife and I had not been impressed by the financial planners we had met, as they seemed more interested in selling us financial products than in optimising our joint financial situation. Consequently, when I first met with James Walker-Powell, I was prepared with a list of questions from a Choice article on financial planners. I did not have to actually ask these questions, as James’ presentation answered them in the first few minutes. He provided us with a comprehensive financial plan, and enough information to enable us to make an informed decision about our options. Consequently, we decided to move our superannuation to a wrap fund so that we could have flexibility and control over how our money was invested.
When I was again offered a redundancy in 2003, I accepted the offer after discussing it with James, and retired three years earlier than I had originally planned. James made my financial transition from working life to retirement painless, with advice on how to manage my ETP, and he adjusted the mix of superannuation investments to provide enough income to pay my pension and the ongoing costs of managing the fund, while maintaining a good growth rate. My wife continued to work and run a small business until she retired, and James has also handled her transition to retirement.
Although it would have been easy to remain in Telstra’s superannuation fund (which is one of the better performing funds), the wrap funds have given us better options for tax minimisation and income sharing in retirement. Over last the five years our personal superannuation funds, combined with James’ investment advice, have consistently produced returns equal to or better than the top performing retail and industry funds, and are on track to provide us with a long and comfortable retirement.
Some years ago, my wife and I were having lunch with a couple who had retired several years before. I asked them how they spent their time, and their simple, common sense reply “we have more time to do things that we want to do, rather than things we have to do” has significantly influenced our retirement planning. We started to seriously think about the lifestyle that we wanted to have over the next twenty or thirty years. We had two properties, a house in Sydney and an apartment at Mollymook on the South Coast that we had bought as an investment before the last property boom. We therefore had an opportunity to use the next few years comparing the lifestyles and facilities that each location offers, and to think about how they would develop and change over the coming decades. After weighing up the facilities available at Mollymook (ocean view, golf course across the road, lakes, rivers and national parks nearby, reasonable medical and shopping facilities, some live theatre….) versus Sydney (no compelling advantages for us really, and lots of disadvantages), we sold our Sydney property and moved to Mollymook. With the proceeds of the sale added to our superannuation, we are able to confidently enjoy our retirement lifestyle, stay in good hotels and serviced apartments when visiting Sydney (or any other city), and to plan holidays around Australia and overseas.