Case study: working towards early retirement

We specialise in helping people get set up for retirement, and many of our clients are also small business owners - so today we wanted to share a case study on how we recently helped a client clarify their goals and set up a better strategy to help them work towards early retirement.

This client has a great business, a good accountant, they were making good money - but they were really lacking strategy and direction in their long-term financial and retirement planning.

The client is earning $500,000 to $1 million a year and paying between $200,000 and $400,000 in tax. Over the last few years, they had decided to invest some of their extra profits but still weren’t sure they were putting the money in the right places for it to achieve the best outcome.

The first thing we did was understand their goals - which was to plan for an early retirement, setting themselves up to achieve this before they can access their super around age 60.

We then made some decisions to help them work towards that. One of them was that they were no longer going to take extra money from the business to pay off their home loan. This client has a tax rate of 47% - so any money they were taking out of the business, they were losing almost half of, which didn’t make sense to pay off a loan that only carried 2-3% interest.

Instead we moved that money they had been withdrawing to another entity, creating a more tax-effective way to access it and ultimately still pay off their home loan down the track.

These clients also have kids, so another thing we did was set up some trust distributions of their profits for their children to access when they turn 18. This strategy will ultimately save them $20,000-$25,000 in tax annually once their kids reach this age.

Another approach was to make some extra contributions to their self-managed super fund, which also resulted in tax savings - around $60,000 in the first 12 months.

To ensure these clients do reach the goals they’ve set for themselves, we’ve also automated the strategy. Every month, money is moving to the right place for the right reasons, automatically.

We’ll continue to work with these clients for the next 5-10 years and watch this strategy and automation pay off.

These clients have a great business and a really good accountant but sometimes accountants can’t offer the specialist financial planning, business and retirement advice that we do, to help you clarify and find your direction. If any of these ideas resonated with you, please reach out at www.financialedgegroup.com.au we’re more than happy to have a chat about how we can help you reach your goals sooner.