Financial Success: More Than Just Money

Most people can choose to own life insurance themselves or to hold this insurance in their superannuation fund. But it’s not a simple decision – the way these policies operate and are taxed may vary depending on whether they are held inside or outside super. A key benefit of having life insurance within your super fund is that the premiums are deducted from your super account, rather than your personal account. The disadvantage is that it can reduce the amount of money you have available in retirement. In some circumstances, the super fund can claim a tax deduction for the cost of the premiums. So it’s tax-efficient because the premiums are effectively paid with pre-tax money. However, it’s important to realise that not every superannuation fund offers every type of life insurance cover. Few super funds offer trauma cover because they can’t claim a tax deduction for these premiums. It may not be possible to get the amount of cover that you need, and the terms are sometimes less comprehensive than a policy owned directly. Another disadvantage is that it’s not always possible to immediately withdraw the money from your super fund. This is because superannuation is designed as a retirement savings vehicle subject to a strict set of rules controlling access. As a result, a beneficiary must satisfy a condition of release as defined in the legislation before receiving any lump sum payment from a Total and Permanent Disability policy held within a super fund. Anyone can own or be a beneficiary of a life insurance policy owned directly, but the options are narrower for policies held in super because the person must be considered a beneficiary under the super, and may end up paying tax on the payout. Another option is to take out cover both through super and directly, and in fact, this combination may sometimes offer the best solution. To find out what would work best in your circumstances, please contact us today.   This is general information only  

Many of us would like to think that ‘older’ means ‘wiser’, but when it comes to money that isn’t always the case. The complexity of Australia’s superannuation system doesn’t help. The upshot is that there are a number of common mistakes that retiring and retired Australians make. What are those mistakes and how might you avoid them? Underestimating how much you need The Association of Superannuation Funds of Australia’s (ASFA) Retirement Standard calculates that a “comfortable” retirement for a couple costs $60,843 per year. For singles the figure is $43,200 per year. To fund these levels of income, the ASFA calculates that a couple will need a nest egg of $640,000, and a single $545,000 at retirement. Retiring too early. Australians retiring today can expect to live until their mid-80s. For retirees in their mid-50s, that means finding a way to pay for a further 30 years of life. The obvious solution to retiring too soon is to work longer. This provides a double benefit: it extends the savings period allowing a greater sum to be saved, and delays the point where withdrawals start to eat into accumulated funds. Not topping up super. Making additional contributions into superannuation can really boost super savings. Strategies involving salary sacrifice, spouse contributions and government co-contributions should all be in play well before retirement. Withdrawing super as a lump sum. Superannuation can be withdrawn as a lump sum after retirement, and if you are over 60 it’s all tax-free. But then what? Common choices are to take that big trip or renovate the home. If you’re thinking of dipping into your savings in a big way, make sure you understand the potential implications for your future lifestyle. Carrying debt into retirement. It can be hard enough keeping up mortgage, car finance or credit card interest payments even when you’re working. It can become a real burden in retirement. Where possible, do your best to pay down debt. Paying for unnecessary insurance. Free of debt and without financial dependants, you may not need to maintain the same level of life and disability insurance you once required. Also, premiums can become expensive as you get older. The run up to retirement is an ideal time to review your insurances, a task best done under the guidance of your financial adviser. Invaluable advice. While the expectation may be that life should get less complicated as you get older, this short list reveals that’s not always the case. Many of these mistakes come with a high price tag but can be avoided by seeking professional advice. Your financial planner will be able to assess your specific circumstances and help you develop a plan for your retirement. But don’t wait until you actually retire. As you can see, it’s never too early to start planning. Contact us today!   This is general information only  

Far from being the realm of the rich, building an investment portfolio is something that most people can do. It can start as a simple savings plan – a few dollars in the bank – before expanding into a diversified portfolio containing a range of asset classes. Getting started may be easier than you think, so let’s look at some of the basics. How do my goals influence investment choice? Your goals have a big bearing on how you invest. If you are saving for a specific purpose such as an overseas trip, a car or a home deposit, you’ll most likely have a relatively short investment time frame and will want your savings to grow in a predictable way. In this case an interest-bearing bank account or term deposits will provide the greatest certainty of meeting your savings goal. With no upfront costs you really can get started with a few dollars. If you have a longer timeframe and the desire for your investments to deliver higher returns, you’ll be looking to include asset classes that can provide capital growth as well as income. These include shares and property. For small investors the most practical way to access property may be via a managed fund. Shares can also be purchased through managed funds, or directly via a share broker. Taking into account minimum brokerage costs on shares and minimum investment amounts set by fund managers, you’ll probably want to have $1,000 to $2,000 available to make the move from ‘saver’ to ‘investor’. What are the risks? Shares, property and even fixed interest investments can all rise and fall in value. In other words, they carry greater risk than cash investments. Spreading your money across a range of asset classes and specific investments, and sticking to a long-term strategy decreases investment risk. But fluctuating markets also create opportunities. If you regularly contribute new funds to your portfolio, you’ll get more for your money during down times than you will when markets are booming. What about costs? Fund managers may charge entry fees, management fees and exit fees, and it’s important to be aware of all of the specific fees that apply to you. All other things being equal, the higher the fees the lower your investment returns. Tax can also be considered a cost, and depending on the complexity of your investments, you may also incur fees for accounting and financial advice. Should I start with a lump sum or with a savings plan? This depends entirely on you circumstances and desires. Receiving a lump sum such as an inheritance or a tax refund is often the catalyst for someone to start investing. But without such a windfall, it’s still possible to build a great portfolio. Many managed funds offer the option of starting with a relatively small initial deposit followed by regular or irregular additional contributions. How do I start investing? Over long time frames, decisions made now can make a big difference to the performance of your portfolio. If you’re new to the field one of the best investments may be to consult a financial adviser. An adviser can help you clarify your goals, understand the jargon and determine your tolerance of risk. They can also recommend specific investments and point out the potential tax implications of different investment choices. Excited by the possibilities? Getting started is as easy as making a phone call. Contact us today to get started!   This is general information only