Income: $60,000 net a year; other income: company loan repayment of $500 a week, with 60 weeks left to run.
Expenses: $3200 a month.
Assets: Small business, sale value $200,000 to $250,000; home valued at $160,000 (unrenovated); motorbike $13,000; car $7000; Telstra shares $8000; super $70,000.
Debts: None - credit card paid off each month.
Savings: $25,000.
Goal: To work out a retirement plan.
* Not their real names

"Our budget shows we are able to make repayments of around $2750 per month to either a mortgage or managed funds."

Ben and Antoinette want to know whether they have adequate super and whether they should invest in managed funds or real estate. They also wonder how early they can retire with their super as it is.

"What is our next step?" Antoinette asks. "We are not sure whether we should be updating our property so that it is worth $300,000 to $350,000, or doing something with managed funds - or both?"

They describe their financial habits as tidy.

"We are strict and use the credit card system for all expenses - paying all back in the month," Antoinette says.

"We lead a reasonably good lifestyle and do not go without too much on a daytoday basis."

Ben would like to semiretire at 55.

"We would both like to be only working casually, about two to three days a week, in seven years' time," Antoinette says.

Angus Robertson, certified financial planner with OzPlan Financial Services and member of the Financial Planning Association, replies:

Ben's and Antoinette's joint income includes a company loan repayment that will finish in a little over a year. When this loan is repaid, your income will fall to $5000 a month. As your expenses are $3200 a month, your capacity to repay a loan will fall to about $1800 a month from the current $2750.

If your current super of $70,000, plus contributions of $1300 a month, grows at a rate of 6 per cent a year, it will be worth $220,000 in seven years. Because of the difference in your age, only Ben will get access to his super at that time.

If you were to sell the business for $280,000 when Ben semiretires, you would have financial assets valued at $600,000 to support your retirement.You will have access to $490,000 immediately Ben retires and the balance when Antoinette retires at age 55.

Assuming inflation of 3 per cent, under your current spending pattern you will need $4000 a month, or a return on capital of nearly 10 per cent a year. Or you could continue to work and use some capital to meet living expenses.

If you both intend to semiretire in seven years, you need to build up your financial assets - that is, assets from which you can derive income rather than spend $140,000 on renovations to make your house worth $300,000 to $350,000.

You could consider using some of your savings to renovate your home and borrow against it to negatively gear into the sharemarket, property or managed funds.

If you borrowed $200,000 at 7 per cent a year and repaid it on a principal and interest basis for 20 years, your repayment schedule would be $18,600 a year.

If dividends were 4 per cent a year, you would have to find $10,600 a year cash, or $833 a month. This is well within your capacity to repay $1800 a month.

Alternatively, you could spend $140,000 on home improvements - which would be largely a lifestyle decision.

To have no debt on your home when Ben reaches 65, you will need to make monthly repayments of $1135 for 18 years on $140,000. This scenario assumes interest rates stay stable at about 7 per cent.

This means you will be close to the limit of your capacity to repay the loan.

You need to consult closely with a certified financial planner to establish your business and investment directions.

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