Jacqui and Jim's Story: Permission to Stop Working
When most people think of the word wealthy, they probably don't picture a couple like Jacqui and Jim.
Jim is a tradie who has been self-employed his whole working life and is now easing back to seasonal work. Jacqui works in the not-for-profit sector, where she's the person everyone goes to because she knows where everything is and how it all works. Neither of them has ever earned a big income, and they've always lived simply. Their kids have no idea how much money their parents have, and Jacqui and Jim would like to keep it that way.
But they've done very well for themselves. They own their home outright, they both have healthy super balances, and over the past thirty years Jim has built up a share portfolio worth more than $2 million.
How they got there
For most of their working lives, Jacqui and Jim put their kids first. School, hobbies and some fairly expensive sports all came out of the family budget, and they kept a tight rein on everything else to make it work.
They're also genuinely interested in money. They listen to several finance podcasts, join in on online forums, and know more about investing than most people we meet. Jacqui knows the super rules well and has been making contributions for years.
Jim was never keen on super. He didn't like the idea of his money being locked away, so he invested on his own instead. He bought solid, dividend-paying shares, held onto them, and had every dividend reinvested. He also used a margin loan along the way.
Their retirement plan was straightforward. They'd draw a pension from their super to live on, and treat the dividends from the shares as a bonus for holidays and helping the kids. Whatever was left would go to the children one day.
If they had never come to see us, they would have been fine. We just thought they could do better than fine.
What we found
When we went through the share portfolio with them, it became clear that most of its growth had come from Jim's savings and reinvested dividends, rather than from the shares themselves rising in value. It paid good dividends, many of them franked, but all of that income was taxed in their personal names, and any future capital gains would be too.
That mattered, because they were never going to spend this money. On our numbers, there would likely still be more than $2 million left for the kids by the time they reached life expectancy, and it would be taxed year after year in the meantime.
There was also the margin loan, which they weren't sure whether to pay off or keep, and a lot of small holdings that needed tidying up after thirty years of buying.
The trickier part wasn't financial at all. The portfolio was Jim's. He had built it, he enjoyed managing it, and he saw it as his contribution to the family. Jacqui told us early on that it was probably something we couldn't touch. They were still open to looking at the options, though, so that's what we did.
Working through the options together
We don't like presenting people with an answer and asking them to sign. Over several meetings, we walked Jacqui and Jim through the different paths open to them, including the ones we wouldn't recommend, and explained what each would mean for them.
In the end, we:
Sold down a large part of the share portfolio in one year, with the margin loan factored in, and set up a plan to sell the rest gradually over the following few years.
Moved the proceeds into super through contributions, where the earnings will be tax-free once they're in retirement phase.
Made sure Jim could keep the same investments if he wanted to, since the same shares can be held inside super.
Rebalanced and simplified their investments, moving from direct shares into ETFs, which Jim had already started doing himself.
Reviewed their super funds, which saved them around $10,000 in fees.
Jim came around quickly once he saw the numbers. He liked the tax savings, and once he understood he could take money out of super whenever he needed to, his worry about it being locked away disappeared. He's also still involved in his investments, which was important to him.
Because they'd been part of every conversation, there were no surprises when we presented the formal advice. They knew exactly what was in it and why.
The outcome that mattered most
The tax savings were significant, but they weren't the biggest result.
For a while, Jim had been trying to convince Jacqui that she didn't need to keep working as hard as she was. She was doing far more than her role required, including a lot of travel, and they clearly had more than enough to live on. Even so, she didn't have the confidence to stop. She had spent so long being the person everyone relied on that it was hard to picture walking away.
Seeing their whole situation laid out simply gave her that confidence. During our meetings, she told us she would retire within twelve months. Work might need her, she said, but this was about her now.
About three weeks after we presented the advice, she resigned. Her employer asked her to stay, so she agreed to go part-time on her own terms, with set hours, none of the extra responsibilities, and a firm end date. With Jim already partly retired, they're looking forward to a lot more time together.
How it helped Jacqui and Jim
They have a clear picture of what they've built and what it's for.
Much more of their wealth is now growing in a lower-tax environment, with a plan to move the rest over time.
Their investments are simpler and their super fees are lower.
Jim is still hands-on with his investments.
Jacqui has a retirement date, and the confidence to stick to it.
Jacqui and Jim were already doing almost everything right. What they needed was someone to help them see that, and to give them the confidence to start enjoying what they'd worked so hard for.
Know someone like Jacqui and Jim?
A lot of the people we help are financially savvy and a little wary of advice, and that's fine with us. If you have a client who has done well but can't quite bring themselves to slow down, we'd be happy to have a chat. Click the links below to get in touch.
This case study is general information only and doesn't take into account anyone's objectives, financial situation or needs. Names and some details have been changed to protect our clients' privacy. Please seek personal advice before acting on anything here.
P.S. Want to read more client case studies? Start with Jillian’s Story about life after bereavement or James’s Story about the challenges of deciding to put your parents into aged care.