A highly experienced nurse, Mary has worked hard for decades and was looking forward to retiring.
But she was forced to reassess her retirement goals when the pandemic upended her plans and placed a strain on her marriage.
As Chief Nurse of a busy Sydney hospital, Mary is used to constantly being on her feet – so she was looking forward to a comfortable retirement. At age 60, and with her children grown up and moved out, Mary had plans to retire in 2020.
She and her husband Leo, an academic, were going to sell their home and spend the next couple of years travelling around the world. Then she was rocked by two events: first, Leo announced he wanted a divorce and moved out in January 2020, and then Coronavirus put an end to international travel.
Plans put on hold
Due to the breakdown of her marriage, Mary put off her plans of retirement for at least two years, hoping to build her retirement balance.
However, now that she is in her sixties, Mary is finding it difficult to continue working full-time in such a high-intensity environment – especially in the middle of a pandemic. She would like to cut down her hours due to the stress of her marriage ending and her fears about being exposed to Coronavirus.
Meanwhile, her husband Leo’s retirement plans unexpectedly accelerated. Over the past ten months, the university where he works had its finances severely impacted by a lack of international students, and they went through several rounds of job cuts. As he was close to retirement age, Leo decided to take voluntary redundancy.
Troubles at home
At the beginning of 2020 following Leo’s announcement that he wanted a divorce, Mary and Leo decided it would be best if they separated for at least 12 months – with Leo moving out into an apartment. Mary spent lots of time with her grandkids and started to question her desire to travel, even if Australia’s borders reopened. Meanwhile, Leo found himself stuck in his apartment without a job. As an esteemed and sought-after professor, he found the sudden change in circumstances very difficult to cope with.
Towards the end of 2020, Mary and Leo discussed their retirement and realised that they had very different ideas about how they might spend it. Unable to reach an agreement, they decided to separate permanently and begin divorce proceedings.
What did Mary do next?
With her life suddenly turned upside-down, Mary spoke to her friends and they recommended she talk to a financial adviser. The first thing she did was to work with Mary to set new goals for her retirement and calculate how much super she will need to achieve them. It was essential for Mary to make sure her own nest egg would be large enough to retire on.
Mary’s financial adviser put in place a transition-to-retirement (TTR) strategy so that she can gradually reduce her working hours over the next two years. As her salary reduces, Mary will start receiving a tax-free income stream from her super – making up the difference in her pay. That way, she will enjoy flexibility in her work life, without having to sacrifice her current lifestyle.
She and her financial adviser implemented a plan to sell the house so that Mary could downsize to a smaller apartment closer to her children and grandchildren. The proceeds from the sale will be split between Mary and Leo – which means Mary can use her share to make a downsizer contribution to super of up to $300,000 since they have owned their home for at least 10 years and Mary meets the eligibility requirements. An after-tax contribution under the bring-forward rule is another option, however the adviser said Mary may be better off using the downsizer contribution in 2020-21. That way, she will give herself more potential to contribute to super over the next two years. Her adviser also put arrangements in place to split Leo’s super with Mary upon their divorce.
Overall, Mary learnt that life doesn’t always go to plan – whether it’s on a personal or global level! The divorce was a shock but she was grateful she had managed to put her life back together after speaking to a financial adviser. Now she can look forward to travelling and spending time with her family and the grandkids.
Our financial advisers Bruno Tjelder and Damon Zischke and OBT Financial Planning Pty Ltd are Authorised Representatives of Lonsdale Financial Group Ltd ABN 76 006 637 225 | AFSL 246934.
This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek advice from a financial planner and seek tax advice from a registered tax agent. Information is current at the date of issue and may change. This information and certain references, where indicated, are taken from sources believed to be accurate and correct. To the extent permitted by the Law, Lonsdale, its representatives, officers and employees accept no liability for any person that relies upon the information contained herein. Information is current at the date of issue and may change.
Source: Colonial First State Investments