What does it take to become a millionaire?

What does it take to become a millionaire?

Updated on Budgeting, Investing

There are three key components to a successful savings strategy. The first is some surplus cash; an amount of money you can regularly set aside in your quest to become a millionaire. Second, an investment return. This can be in the form of share dividends, interest income, rent from properties or a mix. You won’t be withdrawing any of these returns from your investment portfolio; you’ll reinvest the income so that you earn interest on your interest on your interest. This so called compounding of investment returns, when combined with the next ingredient, is what will really drive your growing wealth. That final ingredient? Time. So what might your path to millionaire status look like? Let’s say you’re in your 20s and you’re prepared to wait 40 years to achieve your goal. Plug the relevant numbers into the savings goals calculator at moneysmart.gov.au and it will tell you that, at an interest rate of 10% pa and starting with a $0 balance, you’ll need to save just $157 per month to hit your target, or around a cup of barista-brewed coffee a day. Your total contribution will be $75,360. The other $924,640 is from your investment returns. No wonder that some people view compounding returns as a form of magic. The benefits of starting early can’t be stressed enough. If you only have 20 years to devote to your get-rich plan, you’ll need to save $1,306 per month. If you can afford that you’ll still be a millionaire, but $313,440 of the total will be your hard-earned money. A real return Of course, a million dollars in 40 years time won’t have the same buying power as a million bucks today. You’ll also likely pay tax on at least some of your investment income and incur some investment management fees. After accounting for inflation, tax and fees, let’s say your real rate of return is 6% pa. This lifts the price of a ticket to the real millionaires club to $500 per month over 40 years. Going for growth With your timeframe and contribution rate settled you’ll need to design an investment portfolio that is likely to deliver your required return without taking on undue risk. With a long investment horizon, and particularly in periods of low interest rates, it’s appropriate to look to growth assets such as shares and property to provide the foundation of your portfolio. And don’t be daunted every time investment markets take a bit of a tumble. Instead see them as opportunities to pick up some bargains. A helping hand To make sure you make the most of your savings, understand investment issues and utilise the best tax structure talk to your financial adviser.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Super in your 30s: It’s important to squeeze it in!

Super in your 30s: It’s important to squeeze it in!

Updated on Budgeting, Superannuation

If you are in your thirties, chances are life revolves around children and a mortgage. As much as we love our kids, the fact is they cost quite a lot. As for the mortgage, this is the age during which repayments are generally at their highest, relative to income. And on top of that, one parent is often not working, or working only part time. Even if children aren’t a factor, career building is paramount during this decade. Are you really expected to think about super at a time like this? Well, yes, there are a few things you need to pay attention to. Short-term plans As careers start to hit their strides, the thirties can be a time for earning a good income. If children are not yet in the picture, but are part of the future plan, then it’s an excellent idea to squirrel away and invest any spare cash to prepare for a drop in family income when Junior arrives. Just remember that any savings you want to access before retirement should not be invested in superannuation. Long-term comfort Don’t be alarmed, but by the time a 35-year-old couple today reaches retirement age in 32 years’ time, the effects of inflation could mean that they will need an income of about $164,287 per year to enjoy a ‘comfortable’ retirement. If you are on a 30% or higher marginal tax rate, willing to stash some cash for the long term, and would like to reduce your tax bill, then consider making salary sacrifice (pre-tax) contributions to super. For most people super contributions and earnings are taxed at 15%, so savings will grow faster in super than outside it. Growing the nest egg Even if you can’t make additional contributions right now there is one thing you can do to help achieve a comfortable retirement: ensure your super is invested in an appropriate portfolio. With decades to go until retirement, a portfolio with a higher proportion of shares, property and other growth assets is likely to out-perform one that is dominated by cash and fixed interest investments. But be mindful: the higher the return, the higher the associated risk. Another option for lower income earners to explore is the co-contribution. If you are eligible, and if you can afford to contribute up to $1,000 to your super, you could receive up to $500 from the government. Let your super pay for insurance For any young family, financial protection is crucial. The loss of or disablement of either parent would be disastrous. In most cases both parents should be covered by life and disability insurance. If this insurance is taken out through your superannuation fund the premiums are paid out of your accumulated super balance. While this means that your ultimate retirement benefit will be a bit less than if you took out insurance directly, it doesn’t impact on the current family budget. However, don’t just accept the amount of cover that many funds automatically provide. It may not be adequate for your needs. Whether it’s super, insurance, establishing investments or building your career, there’s a lot to think about when you’re thirty-something. It’s an ideal age to start some serious financial planning, so talk to a licensed financial adviser about putting a plan into place.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Quarterly Economic Update: October-December 2021

Quarterly Economic Update: October-December 2021

Updated on COVID-19, Economy, Investing

Coronavirus Victoria and New South Wales saw their economies roar back to life as they emerged from lockdown just in time for a new kid to arrive on the coronavirus block. Omicron spread around the world seemingly within days knocking Delta off the front pages. Appearing to cause less severe disease than previous strains, and with Australia achieving high rates of immunisation, state governments held off resorting to lockdowns in an attempt to minimise financial carnage on businesses and workers.  All this battling against the virus comes at an enormous cost. The mid-year budget update forecasts annual deficits of around $100 billion for the next few years, no surplus over the next ten years, and gross debt of $1.2 trillion by 2024-2025. Jobs galore The unemployment rate dipped to 4.6% in November as an additional 366,100 people joined the ranks of the employed. The under-employment rate fell 2% to 7.5%, and many employers reported difficulties in finding staff. Homebuyer hopes Homebuyers gained a little power over sellers towards the end of the year as a surge in listings saw auction clearance rates in Melbourne and Sydney drop to 66% and 73% respectively. If this extra supply is maintained it should help to cool what has been a very hot property market. COP this The Covid-delayed climate change conference COP26 was finally held in Glasgow, and Australia joined the large number of countries aiming to reach net zero carbon emissions by 2050. Good progress was made in some areas, such as reducing methane emissions, ending deforestation and, for some countries, phasing down coal. However, modelling predicts that if all current commitments are fulfilled we will still see temperatures rise by 2.4 degrees. This is well short of the Paris Agreement goal to limit warming to 2 degrees, and preferably 1.5 degrees. The Glasgow Climate pact calls on nations to “strengthen their pledges to reduce emissions by the end of 2022.” Expensive energy Major energy users suffered from a big spike in the costs of both coal and natural gas during the quarter. Prices corrected abruptly in November, but still remained much higher than at the start of the year. Oil prices were also higher, nudging US$85 per barrel during October and November. Aside from hitting consumers’ petrol and home energy bills, high energy prices also led to an increase in the cost of, and shortages of urea – a chemical that is critical to the production of fertilizer (and therefore food) and to keeping diesel trucks on the road. Ups and downs The volatility in the value of the Aussie dollar against major currencies continued for the quarter. It traded between 70 US cents and 75 US cents in line with its long-term trend. We gained more than 3.7% against the Euro and Yen, and held ground against the British Pound. The local share market failed to excite, tracking sideways before putting on a small end of year spurt that saw the S&P ASX 200 close the quarter up 1.5%. It was a different story for US stocks. The S&P500 closed out the year at a record high after lifting nearly 11% for the quarter. The Nasdaq was close behind with a 9% gain.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Make this year a financially healthy one

Make this year a financially healthy one

Updated on Budgeting

Another year is over. Did you achieve everything you’d hoped? Are you better or worse off financially than you were this time last year? With a new year in front of you, what can you do to make the most of every moment? January to March Make a start by turning wishes into goals. Some might be long-term like becoming debt-free, saving a home deposit, or retiring in a few years’ time. What can you do this year to support those goals? Write it all down and give it a name. At the same time, don’t forget living for now. Prepare a month-by-month budget that makes room for the fun times – holidays and celebrations – as well as covering the necessities. Anticipate spikes in your spending. Do your car, home and life insurance premiums all seem to be due at the same time putting pressure on your cash flow? Investigate monthly premium payments or spreading renewal dates across the year. April to June It’s time to prepare for the end of financial year (EOFY). By June 30 you will want to have made any intended additional superannuation contributions (make sure you stay within relevant limits) and finalised donations to your favourite charities. Is there any other tax-deductible expenditure you can bring forward? June is also the month for EOFY sales – an opportunity to grab some bargains on early Christmas shopping and birthday gift purchases. Don’t forget to include these in your budget. July to September If you’re expecting a tax refund for the financial year just finished, lodge your tax return early. What are you going to do with the windfall? Whether you put it toward one of your goals or blow it on a big night out is up to you. Just make sure it’s part of the plan. With your tax return out of the way, the third quarter is a good time to start a bit of financial spring-cleaning. Review your super and savings, insurance and Will, loans and credit cards, Power of Attorney, and overall financial strategy. Is everything up to date? How’s your super doing? Would salary-sacrificing help? Can you consolidate debt or refinance at a lower rate? October to December Into the final quarter and how are you tracking? Are you ‘on plan’? Maybe the plan you came up with back in January wasn’t realistic. It’s not too late to adjust both your strategy and your expectations. If things are looking good, it’s important to stay focused. Christmas is looming with its temptations to over-spend. Once the turkey and plum pudding have settled, it’s time to review the year just gone and to give yourself a pat on the back for what you’ve achieved. Then take a deep breath, check your goals, and update the plan for the coming year.   The information provided in this article is general in nature only and does not constitute personal financial advice.

The ‘what, why and how’ of contributing to super

The ‘what, why and how’ of contributing to super

Updated on Superannuation

Despite frequent changes to its governing rules, superannuation remains, for most people, a tax-effective environment in which to save for retirement. Here’s a quick Q&A on the ‘what, why and how’ of contributing to super from this point on. Why should I contribute to super? Some super contributions and the investment earnings within super funds are taxed at 15%. As this is lower than the marginal tax rate for people earning more than $18,200 per annum, less tax is paid on the money going into super than if it was paid to you as normal income. The higher your marginal tax rate, the greater the benefit. What types of contributions can I make? Concessional contributions. These are contributions on which you or your employer has claimed a tax deduction. They are taxed at 15% within the super fund. If you earn more than $250,000 pa you will be taxed an additional 15% on the concessional contributions above this threshold. Concessional contributions include: Compulsory employer (Superannuation Guarantee) contributions. Your employer must pay 10.0% (10.5% as from 1 July 2022) on top of your ordinary time earnings to your super fund when you earn more than $450 per month. Salary sacrificed contributions made from your pre-tax income. Personal contributions on which you claim a tax deduction. Cap: $27,500. The unused portion can be carried forward and used in future years if your total super balance is under $500,000. Non-concessional contributions. Contributions on which a tax deduction has not been claimed, including: Personal contributions on which you do not claim a tax deduction. Spouse contributions. These can generate a tax offset of up to $540 if your spouse earns less than $40,000 pa. Government co-contributions. Worth up to $500, co-contributions are available if your taxable income is less than $56,112 and you make a non-concessional contribution. Caps: $110,000 pa, or $330,000 if a further two years of contributions are brought forward. Note: you cannot make non-concessional contributions if your total superannuation balance exceeds the general transfer balance cap (the amount that can be transferred to pension phase), currently $1.7 million. Who can contribute to super? You can make personal contributions to super if: you are under 67 years of age; you are aged between 67 and 75 and were gainfully employed (including self-employed) for at least 40 hours over 30 consecutive days during the financial year. You can claim a tax deduction for these contributions, but make sure you don’t exceed the $27,500 annual cap for concessional contributions from all sources; or the $110,000 cap on non-concessional contributions.  Spouse and government co-contributions can only be received up to age 70 provided you pass the work test. You are eligible for mandated employer contributions, including Super Guarantee payments, regardless of your age. Get it right A successful super contribution strategy can mean the difference between looking forward to retirement and dreading it. Talk to your qualified financial planner and get the right advice on the best ways to boost your super.      The information provided in this article is general in nature only and does not constitute personal financial advice.

Unlocking the mysteries of your super statement

Unlocking the mysteries of your super statement

Updated on Superannuation

Superannuation statements. Boring, right? But if, like many people, you toss your annual super statement in a drawer or hit delete, you could be depriving yourself of many thousands of dollars just when you need it. So, it’s worth the small effort to take a closer look at your superannuation statement. A quick check of your statement may reveal some of the common problems that occur with super; and the sooner these are fixed the quicker your savings can increase. What to look for The layouts of statements vary between super funds, but there is standard information that must be provided. Some items may appear in summary form, with a detailed breakdown shown elsewhere. Here are the key things to look for: Contributions or funds in This will cover employer and personal contributions, government contributions and rebates, plus any rollovers. If you’re an employee earning more than $450 per month, your employer should be paying 10% of your ordinary time earnings to your super fund. Payments can be made either quarterly or monthly. Funds out Most commonly this comprises administration and investment management fees, and any insurance premiums. Excessive fees can place a real drag on the performance of your savings, so check that they are competitive with other funds. Investment earnings This covers interest and share dividends, along with any capital growth in the value of your investments. Be aware that depending on your specific investment mix and the performance of markets, this figure may sometimes be negative. Insurance cover Your super fund may provide death and/or disability insurance. If so, check that it is appropriate and adequate for your needs. Maybe you are paying for insurance cover you don’t need or are inadequately insured. Investment options This will show what your money is invested in, and in many cases the performance of each investment. Your investment choices will be one of the main influences on the ultimate value of your retirement savings. Professional advice in this area is strongly recommended. Other things to check Have you provided your tax file number? If not, the fund will be deducting too much tax from your contributions and earnings. Have you made a binding death benefit nomination? This allows you to choose, within applicable rules, who your superannuation is paid to upon your death. Is your name and address up to date? Is it possible you have ‘lost super’? This occurs when a super fund can no longer contact you. The Australian Tax Office can help you find lost super. Start here https://www.ato.gov.au/forms/searching-for-lost-super/ More than one statement? Ideally, you should consolidate all your superannuation into one fund. This will avoid duplication of fees and insurance premiums and make your super much easier to manage. Invaluable advice Super is one area in life where professional advice can really pay off. If you need help with understanding investment options, consolidating multiple super funds, finding lost super, or ensuring you have the right insurance cover, talk to your financial adviser. The sooner you do, the sooner you’ll be on track to growing your super pot of gold.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Building financial resilience

Building financial resilience

Updated on Budgeting

Resilience is the ability to quickly recover from setbacks, and while setbacks can come in many forms most of them will have a financial component. So what can you do to build financial resilience? Expect the unexpected Rarely do we get advance warning that something bad is about to happen to us, so the time to develop your resilience strategy is now. And while we don’t know the specifics, we can anticipate events that would throw our finances into disarray. A house burning down or a car being stolen. Not being able to work due to illness or injury. The death of a breadwinner or caregiver. With some idea of the type of threat we face we may be able to insure against some of them. If you have taken out any type of insurance policy you’ve already made a start on your resilience plan. Create buffers You can’t insure against every possibility, but you can build financial buffers. This might simply be a savings account that you earmark as your emergency fund that you contribute to each payday. If your home loan offers a redraw facility you can also create a buffer by getting ahead on your mortgage repayments. Buffers can be particularly important for retirees drawing a pension from their super fund. Redeeming growth assets for cash in order to make pension payments during a market downturn can lead to a depletion of capital and reduction in how long the money will last. By maintaining a cash buffer of, say, two year’s worth of pension payments, redemptions of growth assets can be deferred, giving time for the market to recover. Cut costs The Internet abounds with tips on how to cut costs and save money. In difficult economic times cost cutting can help you maintain your financial buffers and important insurances. Key to cost cutting is tracking your income and expenditure and yes, that means doing a budget. Find the right budgeting app for you and this chore could actually be fun. Invest in quality There are many companies out there that have long track records of consistently pumping out profits and dividends. They may not be as exciting (i.e. volatile) as the latest techno fad stocks but when markets get the jitters these blue chip companies are more likely to maintain their value than the newcomers. This is important. The more volatile a portfolio the more likely an investor is to sell down into a declining market. This turns paper losses into real ones, depriving the investor the opportunity to ride the market back up again. The other key tool in creating resilient portfolios is diversification. Buying a range of investments both within and across the major asset classes is a fundamental strategy for managing portfolio volatility. With a well-diversified portfolio of quality assets there is less need to regularly buy and sell individual investments. Unnecessary trading can create ‘tax drag’ where the realisation of even a marginal capital gain triggers a capital gains tax event and consequent reduction in portfolio value. Take advice Building financial resilience can be a complicated process requiring an understanding of a range of issues that need to be balanced against one another and prioritised. Your financial planner is ideally placed to assist you in developing your own, personalised plan for financial resilience.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Investing: How to reduce concentration risk

Investing: How to reduce concentration risk

Investing

Concentration risk. No, it’s nothing to do with thinking too hard about something. In fact, it’s more likely to be a result of not paying enough attention. Concentration risk is the increase in investment risk that comes about from not sufficiently diversifying your portfolio. In other words, too much money is concentrated in too few assets, sectors or geographical markets. This can happen: Intentionally, because you have a strong belief that a particular share or sector, such as resources, banks or property, is likely to outperform in the future. Unintentionally, through asset performance. One or two shares deliver spectacular gains, making the entire portfolio more sensitive to moves in just a couple of assets. Or maybe shares as a whole enjoy a period of strong growth. Even though you hold a large number of different shares, the increased exposure to one asset class increases the risk to your portfolio. Accidentally, through poor asset selection. As at December 2020, nine of the ten top companies that make up the MSCI World Index also appear on the top ten list of the main US index, the S&P 500. Investing in two funds, one that tracks the world market and one that tracks the US market won’t deliver the level of diversification you might expect. Managing your risk The solution to concentration risk is our old friend, diversification. Appreciate the importance of asset allocation, the art of spreading your money across the main asset classes of shares, property, fixed interest and cash. Ensure your asset allocation matches your tolerance to investment risk. Diversify within each asset class. Holding the big four banks is not a diversified share portfolio. If property is your thing, buying four one-bedroom apartments in the same building, or even in the same area, creates a huge concentration risk. Understand each investment and its role in your portfolio. Does share fund A hold similar shares as share fund B? Do they both have the same strategy? Get a professional opinion. Even if you are confident in making your own investment decisions it’s wise to run them by a licensed adviser. It’s surprisingly common for investors to develop an emotional attachment to particular shares or properties they own. Concentration risk can also increase over time due to lack of attention. Your financial planner will assess your portfolio for hidden concentration risk and help you achieve a better balance of investments.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Economic Update: July-September 2021

Economic Update: July-September 2021

COVID-19, Economy

COVID here to stay The third quarter of the calendar year brought with it the third and by far the biggest wave in COVID-19 infections. Largely restricted to NSW and Victoria the outbreak was driven by the highly infectious Delta variant. Such was its speed of spread it forced a change in strategy from one of elimination to learning to live with the virus, supported by a massive vaccination campaign. By quarter’s end vaccination rates were closing in on key targets that will allow a slow and selective lifting of the severe lockdown conditions that have prevailed for months. Time to chill You know Australia has a housing problem when the head of one of the big banks, in this case Matt Comyn at CBA, calls for action “sooner rather than later” to stop the property market overheating. This was on the back of CoreLogic data showing house prices in Melbourne and Sydney rose 15.6% and 26% respectively over the 12 months to August. The International Monetary Fund (IMF) also called on Australian regulators to cool the market. Don’t expect this to happen through the usual instrument of increased interest rates. Rather, look for reduced lending in specific sectors, such as investors, higher deposit requirements, or testing loan serviceability at higher interest rates. Pop goes iron ore Iron ore’s price bubble eventually popped as China instructed its steelmakers to cut back on production. Over the quarter the ore price fell 45%, with major miners taking an equivalent hit. BHP, Rio and Fortescue saw their shares tumble 33%, 26% and 44% respectively. Hot topic In August the Intergovernmental Panel on Climate Change (IPCC) released its latest report. It warned that “unless there are immediate, rapid and large-scale reductions in greenhouse gas emissions, limiting warming to 1.5°C or even 2°C will be beyond reach”. The report paints a grim picture of what that warmer world will look like and returned climate change to the front pages of the world’s newspapers. The numbers Equity markets experienced a bit of a rollercoaster ride over the quarter. All the major indices posted record highs, but most ended up within 1% of where they started. The Aussie dollar also had a volatile quarter, trading between 71 and 75.4 US cents and finishing at 72 cents. It was a similar story against the other major currencies. In both cases the late-quarter sell-offs were blamed on expectations of higher US interest rates. On the radar Many of the world’s leaders will come together in Glasgow at the end of October for the 26th UN Climate Change Conference (COP26). If they heed the warning from the IPCC, and if they agree to take the necessary steps to limit warming to 2°C (and preferably 1.5°C), it will set the scene for a dramatic economic transformation, with huge opportunities for those who can sort the winners from the losers. Of more immediate concern, Chinese property company China Evergrande appears to be on the brink of collapse. Heavily indebted to the tune of US$300 billion, if it is allowed to fail it is likely to have global ramifications, not the least for Australia. China’s construction boom has been a huge driver of demand for our iron ore.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Who gets your super?

Who gets your super?

Updated on Superannuation

Who decides what happens to your superannuation savings when you die? You may think that you do, but that isn’t always the case. The ultimate decision may be made by someone you don’t even know – the trustee of your superannuation fund. Let’s look at how you can have greater control. Binding death benefit nominations The most certain way to direct payment of your superannuation death benefit is by making a binding death benefit nomination. The nominated beneficiaries must be ’dependants’ – a spouse, de facto spouse, child or financial dependant – or a legal personal representative (i.e. the executor or administrator of a deceased estate.) If the nomination has been properly signed and witnessed, and is still current at the date of death, then the trustees of the superannuation fund must pay the death benefit to the nominated beneficiaries. Unlike Wills, valid binding superannuation nominations are unlikely to be overturned by a court, so they provide great certainty. It is up to the trustees of each superannuation fund to decide whether or not to allow binding nominations, so they aren’t available to everyone. Although some funds offer non-lapsing binding death benefit nominations, most are only valid for three years, so it’s important to check yours and ensure it remains up-to-date. Trustee’s discretion The trustee is under a legal obligation to pay a death benefit to the member’s dependants, and in most cases, benefits will be paid in a way that is consistent with the wishes of the deceased member. However, it is possible the trustee may recognise a wider range of dependants than the member would have liked – including a separated spouse. In some cases, the member’s preferred beneficiary may not meet the legal definition of a dependant. This may apply to parents. In the absence of any dependants and a legal personal representative, the trustee may exercise their discretion, and pay the benefit to a non-dependant. While dependants receive lump-sum death benefits tax free, the rate of tax payable by non-dependants can vary from nil to 30% depending on the components of the superannuation payment. Superannuation pensions The situation is a little different if the member has already retired and is drawing a superannuation pension. With pensions, it is common to nominate a surviving spouse as a reversionary beneficiary. This means the pension payments will continue to be paid to the nominee, either until their death, or until the funds run out. If the reversionary beneficiary dies, any remaining balance is then paid out as a lump sum death benefit according to the type of nomination they have made. Good advice required Increasing levels of wealth being held via superannuation and the nomination of beneficiaries should be made in the context of a comprehensive estate plan. This includes taking into account the way superannuation death benefits are taxed when paid to different types of beneficiaries. We can help you make the right decision.   The information provided in this article is general in nature only and does not constitute personal financial advice.

DIY insurance – is it right for you?

DIY insurance – is it right for you?

Updated on Insurance

Research shows that Australians are underinsured which has led to the proliferation of television advertisements promoting personal insurance cover. Are these quick and easy plans suitable for your family? Research undertaken by Rice Warner in 2017 revealed that on average Australians had Life and Income Protection insurance meeting only 61% and 16% of their needs respectively. Cover for Total and Permanent Disability was as little as 13% of people’s needs. The cause may be attributed to peoples’ uncertainties surrounding medical examinations, probing application forms, costly plans and persistent salespeople. Companies advertising on television attempt to eliminate some of these fears and often advertise products where: cover will generally be accepted without a medical examination, policies are easily arranged on-line or via a single telephone call, and premiums are competitive. For some people, these plans offer a practical solution; particularly older people, perhaps without dependents, who no longer have large financial commitments. But if you have dependent children, a mortgage and other monetary obligations, and you wish to plan ahead for your family’s financial future, would a do-it-yourself product suit your needs? Ask yourself the following questions: How can I know how much insurance I really need? How do I ensure my family won’t be financially worse off after an insurable event? Would the family home need to be sold if the household income was reduced? How do I ensure my children can afford the right education to start them off in life? What if I became sick or injured and was unable to work for a significant period? If these issues concern you then it’s likely that you need a more tailored risk management plan. Discussing your circumstances with your financial adviser will ensure that your particular needs and goals are addressed. And as your situation changes, for example, welcoming a new child, your adviser can review your plan and update it as necessary. Most people recognise the importance of car or home insurance, but neglect to consider their lives or their ability to earn an income. Given this, off-the-shelf insurance products fulfill their purpose as it can be said that encouraging people to take out some insurance is better than having no insurance. But if a risk management plan specific to your family’s future security is important to you, it might take more than a short phone call to arrange, while the peace of mind it brings will last a lot longer.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Mistakes new investors should avoid

Mistakes new investors should avoid

Updated on Education, Investing

You’re young, expecting a satisfying future brimming with friends, family and a comfortable lifestyle. You’re a Next Generation Investor, likely aged between 18 and 25, and you’re starting to think about financial security. According to an Australian Stock Exchange study, nearly a quarter of all investors over the past two years were Next Generation Investors. Additionally, some 27% of surveyed people under age 25 intend to invest over the next year. The excitement of embarking on a journey toward financial freedom is common, as is confusion, after all, in the rush of enthusiasm, how can you ensure you get the decisions made for the future, right today? What are the rookie mistakes to watch out for? Here are a few that can be easily avoided. Not clearing debt first Loans and credit cards have a knack for eating away income. It is recommended that you clear as much debt as possible before committing to serious investments. Track your spending to spot potential savings, then channel that cash towards your debts. Every little bit helps. No strategy Desire to build wealth through investment is not a strategy. The end game determines which investments will be most suitable. Consider how you feel about risk and whether you’ll need access to your money. Successful investment strategies are planned. If it feels overwhelming, seek professional advice to help you build your strategy. You’ll be surprised at how inexpensive a financial adviser can be. Not diversifying Generally speaking, the higher the potential return, the higher the potential risk. Market-linked investments, like shares, can be big-earners, but you’ll have to ride economic ups-and-downs to get there – sometimes for ten years or more. If this worries you, consider lower-risk investments. Conservative in nature, their returns are generally lower. Decide how much risk you’re comfortable with. You may be better off minimising exposure to high-risk assets by diversifying your portfolio with a variety of investment types. Trying to predict the market Investment markets are notoriously unpredictable. Buying shares at the wrong time can mean you pay more than you should, similarly, selling at the wrong time can result in losses. Short-term buying and selling might seem exciting, but it’s a fast-track to losing money. The way around this is, research, diversification and being prepared to stay the distance. Review No investment is a set-and-forget scheme. Always keep track of your savings and your ongoing investment plan, ensuring that it continues to align with your goals, particularly as they change over time. A new car may be your priority today but fast-forward a couple of years and perhaps marriage and children are your priorities. As your goals change, so must your investment strategy. A few other things… Fees and taxes are unavoidable and various investments attract different expenses and tax structures. Find out what you’re up for before making financial decisions. Feeling lost? The Australian Stock Exchange offers free online courses and the Government’s MoneySmart website has a free info Starter Pack to get you underway. Of course, nothing beats professional advice tailored to your needs. The Financial Planning Association of Australia will put you in touch with a qualified adviser suitable for you. Strategic investing sets you up financially and helps create a savings habit for life. Your financial future begins today.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Personal Insurance FAQs

Personal Insurance FAQs

Updated on Insurance

Personal insurances are designed to provide protection from the financial consequences of death or disability. They therefore form an important part of most financial plans. Here, in brief, is how they work. What are the different types of personal insurance? Life insurance. This pays a lump sum benefit if you die. Total and permanent disability insurance (TPD): This pays a lump sum benefit if you meet the definition of being totally and permanently disabled. It is often bundled with life insurance. Trauma insurance: Also referred to as recovery insurance, trauma insurance pays a lump sum benefit if you are diagnosed with or suffer from one of the specified illnesses, such as cancer, heart attack or stroke. Income protection insurance: If you are unable to work due to illness or injury, income protection insurance will pay you a regular income, usually capped at 75% of your pre-illness income. You can select the waiting period before benefits become payable, and the length of the benefit period. How much life insurance should I have? For life and TPD cover, one rule of thumb is to work out how much is needed to pay off debts and provide for current and future family living expenses. Subtract from this total the value of current investments, including superannuation, to arrive at an approximate value of the insurance cover you require. Of course, individual circumstances vary widely. Your financial adviser will be able to help you assess your needs and resources and perform the relevant calculations for you. How often should I review my cover? Your personal insurances should be reviewed whenever there is a major change in your personal situation. Key events to look out for include: • Taking out a home loan• Getting married or setting up house with someone • Starting a family• Receiving an inheritance• Retirement Generally, as savings increase and debts decrease, the level of cover required reduces over time, but again, much depends on your individual situation. How do I understand my insurance contract? It’s important to understand what is and isn’t covered by your insurance. This will be detailed in the Product Disclosure Statement, so it’s important to read and understand this. If you are unsure about anything, ask your adviser for an explanation. How do I choose the best insurance? While pure life insurance is pretty straightforward, the other personal insurances may differ significantly from policy to policy. Definitions of diseases may vary. There may be a range of optional extras – some valuable, others more of a gimmick. With TPD insurance, you may have the choice of ‘own occupation’ or ‘any occupation’. Insurance companies vary in the speed with which they process claims, and beyond that is the question of which insurances should be held via a superannuation fund and which should be held directly. All this complexity means that selecting the best insurance cover is best done with the help of an experienced financial planner. More than one third of Australian families have no life insurance cover. Many more are under-insured, even though the financial impact of not being adequately insured can be severe. Put your mind at rest. If you have any concerns about the level of protection provided by your current personal insurance policies talk to us today.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Economic Update: April-June 2021

Economic Update: April-June 2021

Updated on COVID-19, Economy

Employment surprise JobKeeper was a cornerstone of Australia’s response to the coronavirus pandemic. It provided millions of Australians with an ongoing income and kept thousands of businesses afloat, so when it came to an end in March expectations were that there would be a sharp spike in unemployment. One estimate was that 150,000 workers would lose their jobs. Happily, that wasn’t what happened. From March to April the unemployment rate dropped from 5.7% to 5.5%, then fell to just 5.1% in May. That’s below the 5.2% that applied in January 2020 before the pandemic hit, and an amazing outcome given the damage that COVID-19 continues to inflict on a virus-weary world. Housing continued to sizzle… Aspiring homeowners and upsizers endured another quarter of woe as home prices continued to soar. Nationally, dwelling prices were up 6.1% for the quarter and 13.5% for the year, with houses outperforming units. Of course, on the other side of the equation are homeowners, many of whom are delighted by the significant boost to their wealth. Continuing low interest rates remain the key driver, but other issues have played a part, including stamp duty discounts and households redirecting the cash they would otherwise have spent on overseas holidays. Lockdowns last year also affected the normal supply of property leading to pent-up demand. As subsidies are rolled back, supply and demand normalise and if population growth remains low, property price growth may well come back to ‘normal’ levels. And despite the RBA not expecting to raise interest rates until at least 2024, some economists are pointing to the low unemployment figures to predict that interest rates may begin to rise by the end of 2022. There is also growing speculation that the RBA and APRA will lift lending standards (e.g. requiring lower loan to valuation ratios) in order to rein in galloping price growth. …as did share markets Global markets performed strongly over the quarter with many setting record highs. Locally the S&P/ASX200 rose 7.7%, beating the MSCI All-Country World Equity Index, which was up 6.9%. Tech shares were back in the lead with the NASDAQ gaining 11.2%, while the S&P500 rose steadily to gain 8.6%. The Aussie dollar fell slightly against the major currencies weakening late in the quarter following talk that the next move in US interest rates may be up. Also… – Workers receiving the minimum wage will see a boost to their pay packets from July, with the minimum wage rising by 2.5% to $772.60 per week or $20.33 per hour. – Most people will see the superannuation guarantee (SG) payment from their employers rise by 0.5% to 10% of normal wages. This is one step on the path to raising the SG to 12% by 2025. – According to Credit Suisse, nearly one in ten Australians are now millionaires. Twenty years ago the figure was less than 1%. Of course a million dollars today doesn’t have the buying power it did 20 years ago, but only Switzerland has more millionaires per capita than we do. – Massive infrastructure projects and home renovation booms have caused a global shortage of building materials. An indicator, perhaps, that some COVID-19 stimulus measures have been a tad overdone?   The information provided in this article is general in nature only and does not constitute personal financial advice.

When was the last time you paid cash?

When was the last time you paid cash?

Updated on Budgeting, Education

Prior to COVID, we were steadily moving towards a cashless world. Post 2020, even the most resilient of us has made the leap to tap-and-go payments sooner than we expected. From the morning coffee to filling up the petrol tank, we wave that plastic with little thought to the impact on our account balances. In fairness to us, many retailers are now adopting the ‘no-cash please’ trading regime, but we Australians have a reputation for embracing technology and touchless shopping is no exception. According to the Organisation for Economic Co-operation and Development (OECD), Australian household debt is currently sitting at around 210% of net disposable income. That places us fifth in the world, behind Denmark (257%), Norway (240%), Netherlands (236%) and Switzerland (223%). Compared with countries with spending habits similar to our own – the USA with (105%) and the UK (142%) – we’re quite high. If your debt level is pushing northwards of your preferred limit, here are a few ideas for getting, and staying, on track: – Pay your full card balance off every monthSure, it’s an oldie but a goodie. You know what you need to do; if your current balance is too high, pay more than the minimum amount. The first step in breaking the credit cycle is to get off it, which leads into our next point: – Create a realistic budgetThis will identify where your money is going and how much extra you can pay off your credit cards. The government’s Moneysmart website has a free budget planner to help you. Alternatively, chat with your financial planner and work with them to develop a payment strategy to get your debts under control, and stay that way. – Keep your tap-and-go receipts and reconcile them against your account each weekThis is one of the best ways to see exactly how much you’re shelling out, and on what. You’ll identify areas of unnecessary spending, and you’ll spot any errors or dodgy transactions. – Instead of a credit card for your touchless transactions, consider using a pre-paid cardAvailable from banks and other financial institutions – even Australia Post offers one – you load it with your own money and use it for in-person or online shopping. It’s just like a credit card but without the risk of getting into debt. – Consider your subscriptionsYou know, streaming services, magazines and memberships, etc. Many renew automatically and the first you’ll know about it is an unexpected – often expensive – transaction on your card. Do a stocktake to see what subscriptions you have and decide if you really need them. For those you no longer need, change your subscription settings so they don’t automatically renew. Don’t worry, they’ll alert you when the renewal is due in case you change your mind! We’re definitely living in an interesting time. Our lives have altered in ways we’d never have imagined and we Australians, in our typical way, are adapting to these ‘new-norms’. This is a good thing, just as long as we stay in control!   The information provided in this article is general in nature only and does not constitute personal financial advice.

EOFY is coming – Have you thought about …

EOFY is coming – Have you thought about …

Updated on Superannuation, Tax

The end of another financial year is looming, and with that may come thoughts about your tax return and how your wealth has tracked throughout the year. Whether you’re nearing retirement, a high-income earner looking to reduce your taxable income, or you’re on a lower income and looking for ways to maximise your super contributions; there are a few things you can consider at tax time. Nearing retirement? Maximise your super contributions If you’re nearing retirement, putting as much money into your superannuation account now is a good way to make sure you build up a healthy nest egg to live off in your golden years. To maximise your super contributions, consider salary sacrificing to put more money into your super account. Salary sacrificed super payments take money out of your pre-tax income. These are called concessional contributions and are taxed at 15%. This rate is lower than most taxpayers’ marginal tax rates, so it can be an excellent way to reduce your taxable income while increasing your superannuation savings. The maximum employer and salary sacrificed contributions that can be made each financial year is $25,000. And remember, if you’re self-employed, your concessional contributions are a tax deduction. Non-concessional contributions of up to $100,000 can also be made each financial year. These contributions come from your after-tax income. Consider a one-off contribution to lower your income tax Let’s say you’re on an income of $170,000. If you haven’t opted to salary sacrifice, your employer contributions to super will be $14,748.86 in the financial year. Therefore, your taxable income will be $155,251.14. To lower your taxable income, you could make a one-off concessional contribution of $10,000. This will reduce your taxable income and still come in under the concessional contribution cap of $25,000. Are you eligible for the Government co-contributions to super? If you earn less than $54,837 per year (20/21 financial year) before tax, you could be eligible for the Government’s co-contribution on after-tax super contributions. Those who earn under the threshold can make an after-tax contribution, and the Government will calculate your co-contribution amount when you submit your tax return. The co-contribution will be deposited directly to your superannuation account. Review your records now Now is the time to check you’ve been keeping good records. Have you got a record of relevant receipts and policy statements for items such as income protection policies you have outside superannuation? Understanding the paperwork you require now to maximise your deductions will save you time when it comes to completing your tax return. If you haven’t got all of your records organised, review your spending throughout the year, identify transactions that may be a tax deduction, and put aside those receipts for tax time. Looking for more help? If you’re looking to maximise your tax return and get ready for a successful financial year ahead, talk to a financial adviser about your options. It doesn’t matter your circumstances; there are options available to help you boost your super savings and get the best tax return possible.   The information provided in this article is general in nature only and does not constitute personal financial advice.

What does a good financial adviser do?

What does a good financial adviser do?

Updated on Aged Care, Budgeting, Economy, Finance, Insurance, Investing, Retirement, Superannuation

Some people may think that a financial adviser’s role is to forecast the direction of the share market from month to month and invest clients’ money accordingly. This is not the reality, of course. Investments are only one small part of what your financial adviser can provide for you. Consider for a moment the number of websites, newsprint and broadcast time dedicated to financial topics these days. Australians seem to have an insatiable appetite for understanding finance. Whether it’s the latest share market activity, economic news or the constantly changing tax and superannuation rules, a licenced financial adviser can help answer your burning questions and save you the hassle of finding it yourself. Usually, the benefit you receive from a financial adviser can be spelt out in dollar terms. It might be the income tax you have saved by re-structuring your salary, or a new concession from the Australian Tax Office (ATO) or Centrelink that you didn’t know you could get. The finance section of your newspaper or online magazine probably includes a regular “advice” or “Q & A” column. By law, these columns must warn readers that the advice does not consider your personal situation or needs, and you should consider its appropriateness before acting. In setting your financial strategy, a good financial adviser will take the time to get to know you and your circumstances. This means that everything recommended to you—the investment portfolio, super contribution strategies, savings plans and insurance advice—is tailored to your personal needs, goals, and tolerance to risk. As the years go by, your financial strategies will need adjusting due to changes in the broader environment or something closer to home. Whatever the case, your adviser is there to help you make the most of the good times and the bad. And a regular financial review doesn’t always mean major changes, but at least you’ll know that you’re on the right track – and not having to do it alone. Quality, knowledgeable advice is critical, and wherever you are on your financial path, now is always the best time to talk to us.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Can you afford to retire early?

Can you afford to retire early?

Updated on Retirement

Many Australians caught in the nine-to-five grind of working for a living, dream of the possibility of taking early retirement and spending their days travelling or playing golf or doing nothing much at all. There’s even a name for it these days. The Financial Independence, Retire Early (FIRE) movement is prompting more and more young Australians to question exactly what it takes to retire early. Yet, without winning Tattslotto or suddenly inheriting a fortune from a long, lost relative, how possible is it to structure your finances so you never have to work again? According to the Australian Bureau of Statistics, the average Australian retirement age is just 55.4 years, which makes it seem that early retirement is somewhat the norm for Australians. However, this number is dragged down by partners who stop work while their spouses support them financially, and people forced into early retirement by redundancy or medical issues. So, how plausible is it to stop working sooner rather than later? The answer depends on the type of retirement you dream of, where you are hoping to live, and whether you have children or other dependents you need to support. It’s also more achievable if you can structure your life so you are still earning at least some money, albeit from a hobby or something you love doing and would do anyway. The Association of Superannuation Funds of Australia (ASFA) suggests a couple requires $62,000 a year ($640,000 in savings), in addition to owning their own home, to live a comfortable retirement in Australia. That’s a number that can seem unachievable. Yet many people are eager to retire overseas to a country like Indonesia, where living expenses can be a fraction of what they are at home and enjoy a high quality lifestyle for $300 a week ($15,600 a year), requiring invested savings of as little as $300,000. Others have spent years travelling the world on a strict travel budget of $100 a day, which puts them in a great position to only require $36,000 a year, or $600,000 in invested savings. Against this, industry analysts estimate that for an individual to be truly financially independent, they need to be earning $50,000 a year from invested funds, in addition to owning their own home, requiring millions in retirement savings. The key, however, to decide whether you can retire early depends on just how determined you are to achieve it. You need to think through your lifestyle requirements and determine if you need a simple caravan and campsite, or whether you require a five-bedroom home in leafy suburbia. You’ll also need to ensure your retirement savings are invested in quality assets that will continue to generate a strong, consistent level of income, as well as capital growth. A good financial adviser can help you with this. A good tip is to keep your options open and your skills up to date, in case you have a change of heart and decide you do want to go back into the office, even if only on a part time basis. In fact, you might be better off taking what is increasingly referred to as a mature age ‘Gap Year’ and try out what it’s like living overseas or spending all day on the beach before you quit your job. While being permanently retired and free to live each day as you choose does sound wonderful, remember to still ensure you have purpose in life. Happy early retirement dreaming!   The information provided in this article is general in nature only and does not constitute personal financial advice.

Working from home? How to boost your next tax return

Working from home? How to boost your next tax return

Updated on Tax

With the range of technology and software available today, it’s become easier than ever to work from home. Employees can efficiently complete calls using teleconferencing software, many collaboration tools are now cloud-based, and work devices, including laptops and tablets, are light and portable. If you’ve been working from home, you’ve likely also set up a dedicated work area, and you’re using your own electricity and resources to power your workday. But which of these items can you claim in your next tax return to ensure you maximise your return? How many Australians work from home? Working remotely has become more common as companies began providing the technology to enable employees to work from anywhere. Research from Roy Morgan found that in early-2020, at the height of the COVID-19 pandemic shut down, 32 per cent of Australian workers were working from home. This equates to over 4.3 million people. It’s easier for employees in certain industries to work from home, such as finance and insurance, public administration and defence, and communications. In contrast, more “hands-on” industries such as retail, manufacturing, transport and storage and agriculture still require staff to be present in-store. Tax deductions available if you work from home Home office expenses you may be able to claim include: – electricity; – cleaning costs for your dedicated work area; – phone and internet expenses; – computer consumables – such as printer paper and ink cartridges; – stationery; and – home office equipment – including computers, printers, phones, furniture, and furnishings. The Australian Taxation Office (ATO) provides a complete list of the available deductions and how to calculate each on its website. How to calculate your home office expenses There are three methods employees can use to calculate their home office expenses: – Shortcut method: 80 cents per work hour – only available from 1 March 2020 to 30 June 2021 – Fixed-rate method: 52 cents per work hour – Actual cost method Be careful with home office expenses If you include home office expenses in your next tax return, ensure you calculate and apply your deductions correctly. For example, you can claim the full cost of home office equipment up to $300, but you need to claim the decline in value (depreciation) for any items that cost over $300. Regardless of the method you use to calculate your expenses, you will need to have records. You’ll need to keep receipts for any purchases you’ve made and a record of relevant utilities and bills. You’ll also need to keep a timesheet, roster or diary that shows the hours you’ve worked from home. If you can, keep your relevant records and receipts aside and updated throughout the year to save yourself a significant administrative workload at tax time. Have a professional prepare your tax return to maximise your refund With the range of deductions that may be available to you, plus the different calculation methods for home office expenses, having a registered tax professional prepare your tax return can be worth the investment. Quite often, your maximised refund will more than cover the cost of having a professional prepare your return. If you’re unsure about the home office deductions you’re entitled to, contact an accountant or qualified financial professional for advice.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Six super hacks to retire richer

Six super hacks to retire richer

Updated on Retirement, Superannuation

While it’s easy to be discouraged by superannuation and fear you will never have enough money saved to stop working, remember even a modest superannuation balance can make a big difference in retirement. For every $100,000 saved in superannuation, you can expect these funds to generate a return of 6%, or $6,000, a year. When this is paid out as a pension, it equates to $500 a month tax-free. Of course, this is doubled if both you and your partner have $100,000 each in super. Depending on your overall financial situation, this can be paid in addition to you receiving a full age pension. Here are six super hacks to help you maximise your super balance: Hack 1. Consolidate your accounts Consolidate all your superannuation accounts into one account best suited to your needs. The Australian Tax Office says some 6 million Australians have multiple super accounts, wasting millions of dollars in duplicated charges. These unnecessary fees will needlessly erode your super balance. Consolidating multiple accounts is easy. Simply log on to the ATO’s website and with one click, choose one account to accept all your funds. This alone could save you thousands of dollars. Hack 2. Review your super contributions Check your employer is contributing the right amount to superannuation from your wages each week. If you believe there is a shortfall, contact the ATO to investigate on your behalf. Hack 3. Take advantage of co-contributions If you earn less than $52,697 a year, consider making additional after-tax super contributions to take advantage of a matching contribution from the government, called a co-contribution. Under this scheme, you can contribute up to $1,000 of after-tax money and receive a maximum co-contribution of $500. This is a 50 % return on your investment. The government will determine how much you are entitled to when you lodge your tax return, and if you are eligible, the government will then pay the co-contribution directly to your fund. You don’t need to do anything more than make the original contribution from after-tax savings. Hack 4. Benefit from spouse contributions Review whether you can benefit from making additional contributions to your partner’s super. If you do make contributions to your partner’s super and they are on a low income or not working, you may be able to claim a tax offset of up to $540 a year. Hack 5. Contribute any long-term savings to super There are rules concerning how much you can contribute to super, and when, but any savings put into superannuation will be held within a tax benign environment. While your fund is in accumulation mode, these assets’ income and capital growth are taxed at 15%, rather than your marginal tax rate. Once you start receiving an income stream, these assets are held within a tax-free environment, making your superannuation your own personal tax haven. Hack 6. Seek professional guidance Of course, there are a raft of rules around superannuation that you must be aware of. To maximise your retirement nest egg, be sure to seek expert advice from a financial adviser or qualified accountant. While it is never too early to start making additional contributions to super, it is also never too late. Even small steps towards the end of your working life can and will make a difference to the way you live in retirement. Contact us today to get started.     The information provided in this article is general in nature only and does not constitute personal financial advice.

Quarterly Economic Update: January-March 2021

Quarterly Economic Update: January-March 2021

Updated on COVID-19, Economy, Investing

The global COVID-19 jab-fest gathered pace with some countries, including Israel and the United Kingdom, achieving high rates of immunisation. However, the rollout has had some issues. Rare side effects linked to the AstraZeneca vaccine saw a number of countries suspend its use for a period of time, and Australia was slow off the mark with its immunisation rollout. The longer it takes to vaccinate the world, the slower the economic recovery. Hot property Pushing COVID-19 off the front pages was the big jump in residential property prices. Nationally, CoreLogic’s home value index jumped 5.8% for the quarter. Sydney led the jump with a 6.7% lift. In March alone the index rose 2.8%, the biggest rise in 32 years. Most of the action was on the first home and owner-occupiers front, though investor purchases were also up. The main fuel being added to the property price fire is ongoing low interest rates. With the RBA indicating rates will most likely remain low for years, that could continue to inflate property values and see more people priced out of the market. Helping to fuel the market was good employment numbers. Seasonally adjusted, the ABS reported an unemployment rate of 5.8% in February, down from 6.3% in January. However, this counts people on JobKeeper as employed. Taking this into account, Roy Morgan put unemployment at 13.2% in February, with 21% of the workforce either unemployed or under-employed. Blocked artery In late March the container ship Ever Given provided a graphic example of how small things can have a huge impact. Strong wind gusts saw the giant ship wedge itself bank to bank across the Suez Canal, one of the world’s main shipping arteries. Suddenly 30% of world container shipping ground to a halt. Fortunately, the ship was freed after a few days, and the backlog of ships was cleared a few days after that, but it was a stark reminder of how vulnerable large parts of the economy are. Key numbers The pace of recovery in the local and international share markets slowed during the quarter as prices crept close to or exceeded their pre-pandemic levels. The S&P/ASX200 rose 3.1%, trailing the MSCI All-Country World Equity Index, which was up 4.2%. Tech shares ran out of puff with the NASDAQ only gaining 1.4%, while the S&P500 surged late in the quarter to gain 6.1%. The outlook Many countries are experiencing third and fourth waves of COVID-19, and it’s a fair bet that the virus will continue to dictate the way we live for some time to come. But it’s not the only game in town. US President Joe Biden has taken climate change off the back burner and moved it front and centre. That means our government and businesses will need to pay it a lot more attention too. Expect carbon tariffs to become a hot topic. On the local front, with interest rates all but ruled out as a tool for managing the residential property boom, talk is turning to the use of regulatory methods to dampen demand. These could involve requiring bigger deposits or limiting the rate of credit growth. And with JobKeeper now wound up employment figures will come under close scrutiny. Expect to see a jump in unemployment this current quarter.   The information provided in this article is general in nature only and does not constitute personal financial advice.

It’s not too late for super planning in your 60s

It’s not too late for super planning in your 60s

Updated on Education, Retirement, Superannuation

For most Australians, their 60s is the decade that marks retirement. For some this means a graceful slide into a fulfilling life of leisure, enjoying the fruits of a lifetime of hard work. However, for many it means a substantial drop in income and living standards. So how can you make the most of the last few years of work before taking that big step into retirement? How are we tracking as a nation? In 2015-2016, 50% of men aged 60-64 had super balances of less than $110,000. For women the figure was a more alarming $36,000 – not even enough to provide a single person with a ‘modest’ lifestyle. Last minute lift If your super is looking a little on the thin side there are a few ways to give it a boost before retirement. – Make the most of your concessional contributions cap. Ask your employer if you can increase your employer contributions under a ‘salary sacrifice’ arrangement. Alternatively, you can claim a tax deduction for personal contributions you make. Total concessional contributions must not exceed $25,000 per year. – Investigate the benefits of a ‘transition to retirement’ (TTR) income stream. This can be combined with a re-contribution strategy that, depending on your marginal tax rate, can give your retirement savings a significant boost. – Review your investment strategy. A common view is that as we near retirement our investments should be shifted to the conservative end of the risk and return spectrum. However, in an age of low returns and longer life expectancies, some growth assets may be required to provide the returns that will be necessary to support a long and comfortable retirement. – Make non-concessional contributions. If you have substantial funds outside of super it may be worthwhile transferring them into the concessionally taxed super environment. You can contribute up to $100,000 per year, or $300,000 within a three-year period. A work test applies if you are over 65. – The 60s is often a time for home downsizing. This can free up some cash to help with retirement. The ‘downsizer contribution’ allows a couple to jointly contribute up to $600,000 to superannuation without it counting towards their non-concessional contributions caps. Get it right This important decade is when you will make the key decisions that will determine your quality of life in retirement. Those decisions are both numerous and complex. Quality, knowledgeable advice is critical, and wherever you are on your path to retirement, now is always the best time to talk to your licensed financial adviser. Contact us today for a chat.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Push the super pedal down in your 50s

Push the super pedal down in your 50s

Updated on Education, Retirement, Superannuation

If 50 really is the new 40, then life has just begun. The kids are gaining independence or may have left home, and the mortgage could be a thing of the past. Bliss. But galloping towards you is… retirement! Here are some ways to boost your retirement savings. Increase your pre-tax contributionsYou can ask your employer to reduce your take-home pay and make larger contributions to your super fund. If you are self-employed, you can increase your level of tax-deductible contributions. This strategy is commonly known as ‘salary sacrifice’. If you are earning between $120,001 and $180,000 per year, any income between those limits is taxed at 39%. Salary sacrifice contributions to your superannuation fund are only taxed at 15%. Sacrificing just $1,000 per month to super will, over the course of a year, see you better off by $2,880 on the tax differences alone. Plus, the earnings on those super contributions will be taxed at only 15%, compared to investment earnings outside of super being taxed at your marginal rate. Don’t overdo it though. If your salary sacrifice plus superannuation guarantee contributions add up to more than $25,000 this year, the excess is added to your assessable income and taxed at your marginal tax rate. Retiring slowlyOnce you reach your preservation age you might start a ‘transition to retirement’ (TTR) pension from your superannuation fund. The idea is to allow people to reduce working hours without reducing their income. Keep your money workingThere is a tendency to opt for more secure, but lower-return investments as we approach retirement. However, even at retirement your investment horizon may still be decades. With cash and fixed interest producing some of their lowest returns in history, it may be beneficial to keep a significant portion of your portfolio invested in growth assets. Insurance and death benefitsWith the mortgage paid off or much diminished and a growing investment pool, your insurance needs have probably changed. This is a good time to review your insurance cover to ensure it continues to be a match for your changing circumstances. It’s also a good idea to check the death benefit nomination with your super fund. By making a binding nomination you can ensure that your death benefit goes to the beneficiaries of your choice, and may mean they receive the money more quickly. Get a plan!Superannuation provides many opportunities for boosting your retirement wealth. However, it is a complex area and strategies that benefit some people may harm others. Good advice is absolutely essential, and the sooner you sit down with a licensed financial adviser, the better your chances of having more when you reach the finishing line. Contact us today to get started.   The information provided in this article is general in nature only and does not constitute personal financial advice.

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