Retirement Planning: Superannuation Advice for Sutton Family Case

This case study presents a financial plan for Graham and Anna Sutton, who are seeking advice on managing their wealth for retirement. Graham, a mining engineer, and Anna, a personal assistant, aim to retire in nine years and maintain their current lifestyle. The advice includes strategies for managing their self-managed super fund (SMSF), property investments, and other assets to achieve a post-retirement income of $125,000 per year. The plan considers their risk profile, estate planning, and cash flow projections, as well as aged care considerations for Anna's mother. Recommendations focus on dividend income, safe investment options, and asset allocation to ensure a secure and comfortable retirement.

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SUPERANNUATION AND RETIREMENT ADVICE
Letter to Client
18 September 2018
Mr Graham Sutton and Ms Anna Sutton
1, White Ave, Wollongong NSW 2550
Dear Graham and Anna,
I, Jess Craig, Senior Financial Planner associated with All Out Financial Planning
welcome you to the boutique financial planning and advising company in NSW. I thank
you on behalf of All Out Financial Planning for giving us this opportunity to resolve
your financial situation and to offer our most professional and sincere advice for your
post-retirement financial needs. A copy of our valuable Financial Service Guide was
presented to you on your first visit to our office, I am sure you must have taken out
some of your time for studying it.
I assure you that our final Statement of Advice (SoA), which will be based on facts and
financial data provided by you, will meet your required future goals. We will make this
SoA appropriate for your post-retirement needs and will advise you sincerely about your
objectives, as specifically desired by you. I would like to reiterate that the SoA should
be considered as a personal financial advice which has been prepared to meet your
financial objectives. All information about our fees, commission and other interests or
associations helpful to your objectives has also been included in the SoA.
We are also providing you our Product Disclosure Statement (PDS) containing various
financial products which you may find purposeful. We can also arrange for you any
specific financial product that you would like to recommend. We are confident that
information provided in the PDS will not only guide you in making the right choice, it
will also help you in taking the right decision about the most suitable product.

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Please note that since this SoA has been prepared on the basis of the data and facts
given by you, the outcome and impact of the SoA will depend largely on the
authenticity and correctness of that information. Hence, we request you to ensure that
the data and facts given by you are complete and accurate. We also request you to
assess this SoA’s appropriateness in relation to your personal circumstances, before you
decide to act upon the advice given in it.
I also have noted the latest development in your and Anna’s careers. This, along with
the fact that you are planning to make estate planning arrangements when you move to
Perth, is an important financial aspect worth considering and which is discussed in this
SoA. I also noted that you do not feel comfortable in discussing details of social security
entitlements, hence I have tried to explain them in easy terms. The most important
aspect which is of concern for you at this stage is about your and Anna’s income
prospects post-retirement. I have paid special attention to this issue by providing most
relevant advice in the SoA.
Since the financial assumptions, benefits and gains which I have discussed in the SoA
have a short life, the validity of my advice is limited to a three month period. To further
discuss your long term future financial position, my advice will be to arrange another
meeting once you have thoroughly studied the attached SoA. Please feel free in
contacting if any further clarification is required of me.
Looking forward towards a long association in the coming years,
Yours Sincerely,
Jess Craig

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STATEMENT OF ADVISE
Executive Summary
Graham Sutton, a Mining Engineer by profession and his wife Anna
Sutton are seeking advice from an expert planning advisor about
managing their wealth for their post-retirement period which will be
nine years from now. Graham has plans start his own self-
managed super fund (SMSF) so that he can keep all their investments in
a composite investment plan earning them 6% net of taxes, fees and
charges. My advice to Graham and Anna is not to dispose off any of their
properties, which are giving them good income. With their current
investments in their own self-managed Super fund, giving them net of
6%. Their annual earning can be of $125,000 in the post-retirement
period and along with their super savings will add up to $2 million,
which at 6% net would give them $125,000 pa, which is more than they
plan to spend on post retirement living expenses.
Superannuati on and
Reti rement Advise

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Table of Contents
Personal Details...............................................................................................................6
Financial Details..............................................................................................................7
Client’s Future Objectives..............................................................................................8
Client’s Financial Plan....................................................................................................9
Dividend Income..........................................................................................................9
01. Dividends Earned on Stock..........................................................................9
02. Dividends Earned on Funds.......................................................................10
03. Closed End Funds.......................................................................................10
Client’s Current Situation............................................................................................10
Graham’s Redundancy..............................................................................................10
Graham’s Superannuation........................................................................................10
Anna’s Superannuation.............................................................................................11
Investment Properties................................................................................................11
Graham’s & Anna’s Insurances...............................................................................11
Client’s Investment Planning.......................................................................................11
Interest income...........................................................................................................11
Other Safe Investment Options................................................................................12
01. Savings Bank Accounts...............................................................................12
02. Money Market Funds.................................................................................13
03. Government Securities................................................................................13
04. Real Estate Investment Trusts (REITs)....................................................13
05. Preferred Stocks..........................................................................................13
06. Retirement Income Funds..........................................................................14
High Yield Investments.............................................................................................14

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Variable Investment Income.....................................................................................14
Guaranteed Investment Income...............................................................................16
Client’s Risk Profile......................................................................................................16
01. Conservative................................................................................................17
02. Cautious.......................................................................................................17
03. Moderate......................................................................................................17
04. Moderately Aggressive................................................................................17
05. Aggressive....................................................................................................17
Recommendation.......................................................................................................17
Client’s Strategy for Asset Allocation..........................................................................17
Client’s Estate Planning and Risk Management........................................................18
Conservative...............................................................................................................19
Moderate.....................................................................................................................19
Aggressive...................................................................................................................19
Client’s Cash Flow Projections....................................................................................20
Graham’s & Anna’s Retirement Plans........................................................................20
Anna’s mother Marie – Aged Care Considerations...................................................21
Advice on Goals and Strategies....................................................................................21
Goals to be achieved..................................................................................................21
Strategies Required....................................................................................................22
LIST OF REFERENCES..............................................................................................25

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STATEMENT OF ADVICE
Personal Details
Graham Sutton and Anna Sutton, aged 53 and 51 respectively, were married some 25
years ago. They have two school going children, Sam, aged 15 years and Jodie, aged 13
years. Graham and Anna are keeping good health and are non-smokers. Both carry life
insurance from independent sources and also through their respective Super Funds.
Graham has been employed as a Senior Mining Engineer with BlueScope Steel for 26
years. He has been offered redundancy by BlueScope due structural changes in the
company and has already been offered employment in Pilbara Port Corporation in
Western Australia as Site Engineer on same salary. Anna, who has been devoting
herself to fulltime care of their two children, has also taken the offer of employment
from All Brains Inc. in Perth as Personal Assistant to the Development Manager of the
company and will be joining in three month time.
Presently aged 53 and 51 years respectively, Graham and Anna plan to retire when
Graham reaches 62 years of age. They are seeking professional advice about their post-
retirement life so that they lead a secure and comfortable future for themselves as well
as their children whom they wish to support till they attain age of 24 years.
Personal Details of Mr. Graham Sutton and Ms. Anna Sutton
Name Graham Sutton Anna Sutton
Date of birth 06 October 1965 18 September 1963
Family Self, Wife & Two Children Self, Husband & Two Children
Marital Status Married Married
Occupation Salaried Employee-Engineer Personal Assistant
Employer Pilbara Port Corporation All Brains Inc.
Date of Joining 01 November 2018 1 December 2018
Salary Income $195,000 per annum (Gross) $52,000 per annum (Gross)
Interest Income $2,500 (On-line Savings Account) $2,500 (On-line Savings Account)
Income from
Rental Property $53,400 (Gross) $15,600 (Gross)

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Financial Details
Assets and Liabilities of Graham and Anna Sutton as at 30 June 2017
ASSETS and LIABILITIES
Particulars Current Value in $
Owner Loan
Graham Anna Joint Liability
St. George Bank (Online Account) 150,000
St. George Bank (Savings Account) 8,000
Colonial First State Index Australian Share
Fund 31,000
BlueScope Steel Superannuation Fund 370,000
CareSuper Industry Fund 43,000
Industrial Property – Brisbane 445,000 340,000
Investment Property – Gold Coast: Unit 1 155,000 135,000
Investment Property – Gold Coast: Unit 2 245,000 205,000
Wollongong – Family Home 685,000 217,000
Car 25,000
Home Contents (At Insured Value) 65,000
TOTAL ASSETS and LIABILITIES 1,240,000 74,000 908,000 897,000
Estimated Annual Gross Income Details of Graham & Anna Sutton
Graham Anna
Amounts in $
Gross Salary Income 195,000 52,000
Gross Rental Income – From 4 Properties (including the Wollongong Home) 53,400 15,600
Interest Income – From Online & Savings Account 2,500 2,500
Managed Fund Income – 5% income (Excluding Fully Franked Credits) 1,550
TOTAL 250,900 71,650

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Annual Expenses – Joint
In $
Annual Rent 33,800 Expected Rent in Perth
Annual Living 42,000
Holidays 10,000
Deductible Outgoings (interest) 44,000 Annual Interest Only of 4 Rental Properties
Children’s Education 20,000
Life Insurance (Outside Super) 5,200
Motor Vehicle Running Costs 3,000
TOTAL 158,000
Client’s Future Objectives
During my assessment, I have concluded that Graham is having the objective to invest
all the surplus cash which the couple generates into a managed fund in order to have a
secured and regular income to meet their expenses during post-retirement life. Our
suggestions for the client’s future goals and objectives, as detailed below, has been
evaluated on the basis of the data and facts provided by the client, asserts Brunhart,
(2008).
1. Graham and Anna have the desire of retaining their current lifestyle and living
standard even after retirement. This means that they will continue with their
current major expenses, including maintenance and insurance of their car.
2. Graham and Anna are not expecting an increment in their salaries nor are they
planning of changing their jobs after this change to Perth. In my assessment,
they will like their income to keep pace with Average Weekly Ordinary Time
Earnings (AWOTE) index till they retire in another 9 years.
3. This means that they will be keeping their salary income fixed at $195,000 and
$52,000 per annum till they retire. Although, in my assessment, Graham would
like that their income from the rental properties rises at an annual rate of 5%.
4. The couple is effectively covered for life insurance and Total and Permanent
Disability (TPD) and are not interested in taking any new cover.
5. Both are maintaining fine health and they do not require medical services in near
future. Although I would suggest Graham to get his medical check-up and
submit a fresh report showing his change to non-smoker category.

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6. My advice to Graham would be to pay-off their Wollongong home loan balance
of $217,000 before the couple retires as this decision will make their post-retired
living more comfortable.
7. The couple’s decision of buying a home in Perth as their main residence, after
converting their Wollongong residence into a rental property, is a good move.
8. I have also assessed, after talking to Graham, that he has the desire to fix his
income at a minimum of 6% during his post-retirement period.
9. I suggest that the couple should achieve this by investing in good market
oriented funds. This will allow the couple not only in having secured earning in
their post-retirement life but will also help to adjust their expenses with
inflation.
Client’s Financial Plan
After making an assessment of the couple’s requirements and also keeping in mind the
couple’s balanced and stable approach towards growth for their investments, I suggest
the following investment options for the growth of the couple’s investments and for
providing them a steady income in their post-retirement life, as per Ashhurst, (2009).
Dividend Income
Although it is not considered mandatory, listed companies still prefer to pay dividends
to their shareholders. Below are some of the best options in the prevalent system which
can earn good income through these managed funds and dividend paying stocks, as per
Ezra, Collie & Smith, (2009).
01. Dividends Earned on Stock
An investor calculates the ‘Dividend Yield’ as the income from a stock and from my
experience I know that this income will depend on market price of the stock. All
investors chose stocks for their investments which offer a high dividend yield. Since the
yield depends on the share’s market price, in case the price falls, the dividend payment
also falls, assert Hallman & Rosenbloom, (2003). An increase in the dividend yield will
show that more investors have started investing in that particular stock and hence there
is an increase in its market price. Keeping this theory in mind, many companies have
started paying fixed dividends but still, the fluctuation in the share price in market
dictates the dividend yield of the share, as explained by Lange & King, (2009).

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02. Dividends Earned on Funds
Payment of dividends by listed companies has always depended on their share’s market
value. On the other hand, dividends payments of Managed Fund are always calculated
on the market value of ‘A Basket of Stocks’. On these basis, the Managed Funds are
paying their dividends either on a ‘Variable’ or a ‘Fixed’ rates to the investors who
invest in their portfolios of ‘Basket of Stocks’, explain Hallman & Rosenbloom, (2003).
On these basis, the Managed Funds are in a position to pay steady and regular dividends
to the investors and have been seldom found in failing on the payment system, as the
payment is based on distribution of an ‘Average Yield System’ income earned by them.
However, I still advise all my clients to carefully read the terms and conditions before
making any investment in Managed Funds, since the investor is required to authorize
the management of the Managed Funds for selling any stock or bond, which is owned
by the Managed Fund on behalf of the investor, to fulfil their minimum payment
guarantee condition, as detailed by Gitman, Joehnk & Billingsley, (2010).
03. Closed End Funds
Those Managed Funds which have the strategy to actively trade only in stocks and
bonds which pay dividend are called Closed End Funds. A Listed Companies pays
dividend on a quarterly basis, but a Closed End Fund pays dividend on annual basis,
asserts O’Shea (ed.), (2004). In this way, a Closed End Fund earns quarterly but pays at
the end of the year. The fund earns four dividends in one financial year but pays only
one to the investor. My advice to my clients is not to invest in these type of funds as
they have a high risk factor, as per Vice, (2010).
Client’s Current Situation
Graham’s Redundancy
It has been stated by Graham that his redundancy payment, after tax, from BlueScope
Steel will be $175,000. He would seek a suitable investment strategy for this money, so
that his money is safe and secure and yields him good returns post-retirement, as per
Alexander & Fogarty, (2009).
Graham’s Superannuation
After his retirement from BlueScope Steel, Graham is also expecting release of about
$370,000 from the BlueScope Steel Employer Fund. According to Graham, this current

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value amount from the Super Fund carries a Tax Free Component of $22,000 and a
Taxed Component of $348,000. He is also seeking advice on how to securely invest this
amount for a secure and better yield in his post-retirement life, assert Nethercott, Devos
& Richardson, (2010).
Anna’s Superannuation
Till the time Anna was in service, she had accumulated a Super Fund balance of
$43,000 in CareSuper Industry Fund. Now, since she has decided to undertake
employment again when the couple shift to Perth, Graham and Anna are interested in
safe investment of this amount with a high-yield source during their post-retirement
period.
Investment Properties
In the income year 2011-12, Graham and Anna had invested in three rental income
properties, over an 18 month period. Two of these are residential properties, located in
Gold Coast and the third is an industrial property in Brisbane. Now that they are shifting
to Perth, the couple is interested in letting-out their residence in Wollongong, thus
creating their fourth rental property. The couple has declared the following as the
purchase price of these four properties.
1. Gold Coast: Unit-1 $159,000
2. Gold Coast: Unit-2 $268,000
3. Brisbane Industrial Property $385,000
4. Wollongong Residence $310,000
Graham’s & Anna’s Insurances
Graham and Anna have life insurance cover through their respective Super Funds. They
have also got cover of life and Permanent Disability Cover (TPD) through private
insurance companies. The couple is assured that their insurance coverage is adequate
and they do not wish to have any further guidance on this subject. However, they would
welcome advice on how the insurance policies perform.
Client’s Investment Planning
Interest income
I suggest to my client’s that compared to the dividend paying bonds or stocks, certain
managed funds also pay interest on the funds invested by the investors. In certain cases,

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some companies and government agencies also promise fixed interest amounts on the
investments made through bonds issued by them. Provisions of Australian Securities
and Investment Corporation (ASIC) also put certain restrictions on such
companies/agencies under which they are obliged to pay amount of interest before they
declare dividend on their stocks. Hence, the investments of our clients is more secure
under this interest paying option, both from view point of income earning and secure
investment, as per Barkoczy, (2011).
A ‘Certificates of Deposit’ (CD) is also issued by some companies and financial
institutions. This is an instrument which, when placed for a fixed period of time, gives
the investor a guaranteed interest income, which is higher than any other rate of interest.
If my clients wish to play safely (such as conservative investors), then in my opinion,
with this type of investment they can have a regular income, although it may be a low
one, as per Barkoczy, (2013). But I would surely recommend these securities for their
peace of mind. This type of investment is also good for the moderately aggressive
investor, who has the desire of investing their funds for a longer period and also re-
invest the interest they earn, with the aim that their investments grow steadily over a
period of time, say ten years, and their money also remains safe, asserts Barkoczy,
(2013).
Other Safe Investment Options
In my opinion, dividends and interests are not the only two options available for safe
returns in stock market. In my log career as an investment advisor, I have come across
the many options which are available to investors, and I am discussing them below for
your perusal, as detailed by Barkoczy, (2015). I have seen that these investment options
give a clear advantage to investors over other regular investment options in the stock
market as the investor can withdraw their investment at a comparatively short notice,
and without foregoing any part of their investment as loss for making a preponed
withdrawals, as per Barkoczy et al, (2010). I am of the opinion that these options are
most suitable for conservative as well as moderate investors, as these investors keep
their aims focussed on not:
 losing a part of the principal investment;
 Entering for shorter periods in the stock markets; and
 linking their investments with the inflation effect.