Penguin Wealth Financial Planning Max and Susan Case Study

Max & Susan’s Story

How Financial Planning and Cash Flow Modelling enabled us to help Max and Susan

One of the most common challenges individuals and couples face are competing priorities. The need to balance the here and now with the longer-term.

We found this quandary was present when we met and helped Penguin clients, Max, 55, and Susan, 59.

At the time we met, Susan was not working. Max was working for a major retailer, with a company pension due to be paid to him at age 62.

Their key financial goals were to maximise Max’s pension and to clear their mortgage as quickly as possible. To meet these goals they thought Max needed to keep working through to his retirement age of 62, plus significantly overpay on the mortgage each month to make sure this was cleared by then. Max’s job involved a long round trip commute daily.

However one of their key lifestyle goals was to spend more time together now and have more income available in the shorter-term for leisure. Like so many people, they were looking to the future trying to ensure a comfortable retirement but were challenged by the thought they should be together more and enjoying the here and now, whilst they are relatively fit and well.

There were so many factors they needed to weigh up – amongst other things, when to pay the mortgage off, how much income would they need in their retirement, what would happen with the pension if Max retired earlier than the company pension date, when would the state pension lock in, how much would it be, how to invest or deal with their other small pensions and savings?

The series of questions and all the possible answers created too many variables for Max and Susan to properly evaluate a pathway which they could trust would work for them and meet their goals. They just felt like they had to continue as they were.

However, we were able to tackle this head on through the use of the Cash Flow Modelling software we use so often when helping clients with their Financial Planning. We used the Cash Flow Modelling to start looking at their different possible pathways and doing this produced some surprising and pleasing results. Options Max and Susan felt were not available until they saw this laid out across the longer-term.

One route forward, which we were able to demonstrate could work for them, involved Max reducing his working hours by 20%, effectively giving them a day a week together which they currently do not have. This does have the impact of reducing his future pension, but not by too much and not to an extent that it would upset their retirement goal (of being debt free and having a set level of income for life which would meet their needs). We were able to pinpoint a slightly different timing around when to pay off the mortgage and to show how they could do this without overpaying now, which means they have the extra day and some extra short-term spending (enjoyment) money.

The Cash Flow Modelling was the key – by linking Max and Susan’s position to their goals, both financial and lifestyle, and modelling different future scenarios we could see a way ahead which met their needs and balanced the short-term and the long-term perfectly. The sense of clarity this gave them was also a sense of relief, something that had seemed difficult, complex and not achievable had been successfully tackled.

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