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Recently, a client I’d worked with for almost 20 years passed away. Peter, who was 64 years old, was robbed of many well-earned retirement years, but about a decade ago, he met a lovely lady, Jenny, and they had some great years together.
Having both been married before and having children from those marriages, they chose to keep their finances separate, so I first met Jenny only a few weeks before Peter passed away. In his will, Peter left some money to Jenny, and so this week Jenny and I sat down to discuss what she would do with this generous gift.
While in a black-and-white, emotionless setting, some solutions can be fairly straightforward, the challenge comes in the complexity of us as individuals.Credit: Dominic Lorrimer
Jenny has never had a lot of money. She owns a small home in Melbourne and for the last eight or nine years has been a full-time carer for her elderly parents. In this capacity, she has received a carers pension. As Peter’s health deteriorated, she wasn’t able to simultaneously care for her parents and him, and so her parents shifted into an aged care facility. As a result, after a period of time, her carers pension ceased.
Jenny’s immediate problem then was: Where would she find the money to pay the bills and live?
Being in her early 60s, and having been out of the paid workforce for so long, Jenny was not optimistic about her chances of finding paid employment. Indeed, she was quite fearful of the prospect.
We started then with determining how much income she needed to live a comfortable life. She had tallied up her bills and other common expenses before our meeting, so that gave us a good start. From there we were fairly quickly able to arrive at a reasonable estimate of her living costs. We rounded that figure up a little, and this became our income target.
Next, we looked at her various financial assets, including the inheritance that she is to receive. It became clear that a solution was to be found by boosting her superannuation savings and then creating an income stream from this source. Isolated, this boosted superannuation account would likely not be enough to last her lifetime, but we would anticipate an aged pension entitlement in the future, which would allow her to progressively draw down less from her savings, thus stretching out their life.
As someone who looks at this sort of thing every day, the solution was fairly straightforward. But interestingly Jenny wrestled with the idea of spending down her savings. It was hardwired into her brain that savings were hard come by, and once squirrelled away, weren’t to be disturbed for anything short of an absolute catastrophe.
We had to have a conversation about the purpose of savings. We are now in the process of producing some projections to give her confidence that using these savings to live off is prudent and sensible. It also completely aligns with Peter’s intention in the inheritance that he provided.
It will take several months to fully implement the strategy, and probate is still working its way through the legal system. But for me, this case was interesting in reflecting on the human elements of money.
In a black-and-white, emotionless setting, the solution here is fairly straightforward. Nothing particularly technical or complex about it. The challenge comes in the complexity of us as individuals. Our upbringing, our life experiences, our financial literacy, and our dreams for the future.
These sorts of challenges are no less valid or in need of addressing than the textbook financial planning repertoire.
Paul Benson is a Certified Financial Planner, and the host of the Financial Autonomy podcast.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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