Case Study: Using Government money to fund Life Insurance.

James 34 and Christina 32 , by their own admission are just average people who were lucky enough to buy their first home before they had their children who are now 2 & 4.

James earns an average salary and to help maintain a reasonable lifestyle he works overtime as often as he can and Christina works part-time as an admin officer.

Christina regularly sees car accidents on the side of the road on her commute to work and worries about what would happen to her family if she was unlucky enough to be killed in one. 12 Months ago she lost her best friend in this way and saw first hand the devastation it caused to her friends husband and family, both emotionally and financially.

Mortgage Payments, Childcare Expenses, Credit Cards. And there’s no way James would pick up those extra weekend shifts if he was the only parent left to care for their kids. He loves them too much to leave them with other carers that much.

James may even want to take a couple years off work to be a fulltime dad to strengthen their relationship.

Christina came to see The Super Guy because she wanted to make sure her family would be provided for if she was unlucky enough to die in a car accident.

She was also concerned about the amount of money her and James would have available for retirement as she had noticed how much less was going into her Superannuation now she was only working part time.

The problem is, she said, “We just don’t have much spare cash to buy lots of life insurance. What do we do?”

After much discussion, Christina decided that the following expenses should be covered

  • $300,000 to payout mortgage and other debts.
  • $200,000 to provide for household expenses and to allow James to take a career break.
  • $200,000 (50% of home value) to put in trust for kids in case James remarries.
  • $700,000 – costing $720 per annum

Because she only earns $30,000 per year in her part time role, Christina is under the threshold for the government co-contribution. So for every after tax dollar Christina contributes to her super, the government will add another dollar up to a maximum of $1,000.

Therefore if Christina has her employer take just $20 per week from her pay and put it in her super she’ll have $1,920 added to her super fund.

–          $960 from her pay ($20 a week for 48 weeks)

–          $960 from the government co-contribution

–          $1,920

Once the $720 for insurance premiums have been deducted, the remaining $1,200 per year will compound over time and increase her retirement savings.

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