You get what you pay for…” – Wealth accumulation case study

Let’s compare the situations of Jenny and Liz:

  • Both are age 30, and both earn $100,000 a year in the same job in the same company
  • Both have the same amount of money contributed to their super funds by their employer
  • Both have surplus income of $300 per month

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Jenny pays a professional financial adviser to prepare a comprehensive financial plan.

As a result, Jenny commences a tax effective investment plan outside of superannuation (for which she uses her surplus income of $300 per month).

When Jenny retires at age 60, she has her super fund plus $325, 890 in her non-super investments. This is after taking into account the annual professional fee she paid to her adviser.

Jenny will have a very comfortable retirement because she engaged a professional adviser to prepare a comprehensive financial plan, as well as to monitor & manage her investments, optimise her tax position, ensure she is properly insured, and modify her financial strategies as her situation – and the legislative & economic environments – evolve.

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Liz doesn’t want to pay for professional advice – she would prefer to rely on her super fund for her financial security.

As a result, Liz does not commence an investment plan (instead she spends her surplus income of $300 a month).

When Liz retires at age 60, she has her super fund and no other investments.

Liz got what she paid for…

If you genuinely want to be financially secure, you should seek advice from a professional financial adviser.We think you will find your adviser’s fees are good value for money.

Assumptions: Jenny pays professional adviser fees equivalent to 1% p.a. of her non-super investments, and is paid out of the income that portfolio generates. Jenny invests outside super by buying a diversified portfolio of assets that suit her risk profile (no gearing is used). These assets gross on average 2.85% growth and 3.63% income (of which 30.9% is franked). Surplus income of $300 is indexed annually by 3%. Jenny re-invests dividends after paying tax on them. 2016/17 tax rates used. It is assumed that tax brackets will increase over time so that they both stay in the 37% tax bracket (plus Medicare) while they are in the workforce.

Disclaimer: This article is not legal advice and should not be relied on as such. Any advice in this document is general advice only and does not take into account the objectives, financial situation or needs of any particular person. You should obtain financial advice relevant to your circumstances before making investment decisions. Where a particular financial product is mentioned you should consider the Product Disclosure Statement before making any decisions in relation to the product. Whilst every care has been taken in the preparation of this information, Australian Unity Personal Financial Services Ltd does not guarantee the accuracy or completeness of the information. Australian Unity Personal Financial Services Ltd does not guarantee any particular outcome or future performance. Australian Unity Personal Financial Services Ltd is a registered tax (financial) adviser. Any views expressed are those of the author and do not represent the views of Australian Unity Personal Financial Services Ltd. If you intend to rely on any tax advice in this document you should seek advice from a tax professional. Australian Unity Personal Financial Services Ltd ABN 26 098 725 145, AFSL & Australian Credit Licence No. 234459, 114 Albert Road, South Melbourne, VIC 3205. This document produced in July 2016. © Copyright 2016