Is FORO ruining your retirement?

Is FORO ruining your retirement?

Updated on Education, Finance, Retirement

FORO – the fear of running out. I’d never heard the expression until I met Mark and Susan. Of course I’d heard of FOMO, the fear of missing out, but never FORO. As the newly-retired couple sat across from me, explaining how they were so afraid of running out of savings that they were not enjoying the retirement they’d worked so diligently for, I grasped the meaning of FORO immediately. They rarely went out for dinner, bought anything new or – heaven forbid – took a holiday. After a lifetime of saving hard, paying off a mortgage and raising a family, Mark and Susan were naturally frugal, but FORO had left them feeling vulnerable and afraid of the future. After two decades as a financial planner, I’d come across this situation before, although, it is unfortunately becoming more common. Mark and Susan had never sought financial advice before and weren’t sure what I could do to help, but came to see me because they didn’t know where else to turn. When I assured them that there was plenty I could do to help, they visibly relaxed. I explained that the key to overcoming FORO was having a well-structured financial plan. After I outlined my 5-step strategy, they were eager to proceed. The steps we took were as follows: 1. Conduct a financial assessment By thoroughly assessing their current financial position (superannuation, savings, investment and social security entitlement), I formulated a picture of where they were at, and their future cash flow projections.  2. Establish a sensible strategy Working together, we identified essential living expenses and discretionary expenses, then allocated funding that balanced financial security with lifestyle goals. Next, we determined a retirement investment portfolio with a sensible withdrawal rate to support their retirement plans. 3. Create an emergency buffer In my experience, the what if factor is a major concern for retirees. What if…I become ill? What if…the fridge breaks down? What if…the car dies? These questions, and more, play on peoples’ minds to the point where they fall back into a FORO mind set. To ease their anxiety, I recommended they include a contingency fund in their portfolio to ensure that unplanned expenses were covered. That way, if something unexpected pops up, their retirement lifestyle strategy remains on track. 4. Enjoy the early years FORO had been holding Mark and Susan back for too long. I explained that hobbies, travel and social activities are crucial to mental well-being. So once we had established a responsible financial plan, I showed them how they could afford to spend, sensibly, and enjoy themselves. I especially encouraged them to make the most of their early retirement years, while they were fit and energetic. 5. Schedule regular reviews The final step in the process was my ongoing commitment to Mark and Susan. Retirement planning is not a set-and-forget strategy; it’s a journey through every stage of life – physical retirement being one of those stages. By regularly reviewing their financial position, I helped Mark and Susan monitor their spending and investment performance, and made portfolio adjustments that kept them in control of their retirement plan. Last week I bumped into the couple on the street. They were glowing with excitement and told me they’d just booked a Pacific cruise. Of course, I was thrilled for them – it was a big tick off the bucket list! But when Susan said they’d turned FORO into FOMO and were living their best lives, well, I’ll just say it was one of those moments when I absolutely love my job! The information provided in this article is general in nature only and does not constitute personal financial advice.  

Navigating the reality of divorce after 50

Navigating the reality of divorce after 50

Updated on Budgeting, Education, Retirement

Adjusting to life after divorce, particularly later in life, is akin to navigating through some of life’s most challenging events, psychologists say. It’s a journey comparable to coping with loss, relocation, major illness or injury, or job loss. While these upheavals are often beyond our control, how we choose to manage them greatly impacts our recovery. Is grey divorce on the rise? Unfortunately, yes. Despite overall divorce rates declining since the 1990s, both the age at divorce and the rate of divorces among couples in long-term marriages are on the rise. According to data from Australian Seniors and the ABS, 32% of divorces now occur after the age of 50. What are some of the key financial impacts of divorce? Superannuation is typically regarded as part of the assets in any pre-divorce financial settlement. Understanding that superannuation can be divided without the need for fund withdrawals or meeting specific conditions is crucial if no prior agreement has been reached with your partner. While splitting it isn’t obligatory, ensuring its inclusion in the settlement is vital due to its significant role in overall wealth. However, dividing it can substantially diminish what was once a solid nest egg, potentially impacting retirement plans. Aside from the emotional toll of asset division, the process can be difficult. Factors like investment properties, primary residences, or self-managed super funds (SMSFs) with less liquid assets—such as business holdings, real estate, closed funds, or art—can further complicate matters. Selling assets without proper advice can trigger capital gains, while shifting assets from tax shelters like superannuation or trusts can result in hefty tax liabilities. Centrelink entitlements and thresholds will also alter with your changed circumstances. Seeking the professional advice of more than just a lawyer is the smartest thing to do. Divorce is also expensive Many shared expenses, such as utilities, become the sole responsibility of each party post-divorce. For instance, while the average monthly living expenses for an Australian couple total around $4,118 ($2,059 per person), for a single person living alone, it’s estimated at $2,835. In essence, each individual spends roughly 70% of what a couple would spend. After divorce, with each person potentially having only half of their assets but needing around 70% of their income to cover living expenses, budgets become tight. So, how can you rebuild financial stability post-divorce? In other words, review your financial plan and seek professional advice. A qualified financial adviser can help you learn to take control of your finances and plan your future. Remember, the benefits of compounding mean that the sooner you start, the better off you’ll be! The information provided in this article is general in nature only and does not constitute personal financial advice.  

Regaining financial control after a scam 

Regaining financial control after a scam 

Updated on Budgeting, Education, Retirement

A year before retirement, Tess’s superannuation plan was on track, and she was imagining her post-work life. With savings of $34,000 at the bank, she was looking to park it somewhere it could earn better interest while rates were rising.   Considering herself reasonably savvy with money, she began investigating her options.  After hearing about someone who’d made a fortune with cryptocurrency, Tess was intrigued and decided to look into it.   Tess researched crypto-companies and compared what was on offer. When eventually she made her decision, she believed she’d chosen the right investment – how wrong could she be!   Within hours Tess realised she’d been scammed.  Shocked and feeling ill, she reported it to ScamWatch, but over the following days the self-blame settled in.   How could she be so gullible? So naïve?  What was she thinking?! How could she have fallen for such an obvious fraud?   Who knew that financial shame was a thing? But there it was in the form of an empty bank account.  Deeply embarrassed, her financial security shattered, Tess lay awake every night berating herself; through her foolishness she’d lost all her cash savings! She became withdrawn, declined social events and refused to unburden herself, even to close friends.   Finally, in desperation, she decided to speak with a counsellor. Tess discovered organisations like Beyond Blue, ScamWatch and Lifeline offered advice and emotional support. She chose one that felt right for her.  Initially, it was difficult to open up and acknowledge her mistake, but the counsellor explained that part of her recovery was confronting her feelings head-on and realising that victims came from all cultures, backgrounds and levels of education. Feelings of humiliation and shame were normal, although unjustified, as the crooks were highly skilled criminals with access to the latest technology.  Heartened by the counsellor’s words, Tess learned to stop blaming herself and confided in her daughter Louise.  What a relief that was! Louise was gentle and supportive, and introduced Tess to her friend Jarrod, a financial adviser.  Throughout Jarrod’s career, he’d assisted innumerable people who’d fallen victim to scams. Most felt insecure and vulnerable, so his approach was to assist them with practical advice around getting their finances back on track.  He believed that Tess would benefit from a temporary, part-time job. She could rebuild her cash savings, and staying busy would distract her from her worries and help her move on.   When discussing her interests and skills, Tess mentioned she loved animals so Jarrod suggested she consider pet-minding or dog-walking, adding that he could setup the necessary insurance.  Then, Jarrod explained, that while her superannuation was on target, there was a difference between investing for retirement and investing for wealth.  Retirement investing was about saving to fund an income stream that met post-work lifestyle goals. Complying retirement funds offered tax advantages and focused on generating returns.   Conversely, investing for wealth involved accumulating assets beyond what is needed to provide retirement income.   For Tess, financial security was critical, so Jarrod considered her risk tolerance and structured a tax-efficient portfolio of growth assets to support capital appreciation and wealth accumulation.   It also meant that Tess could leave something behind for Louise – a legacy she hadn’t felt was important, until she realised how financially exposed the scam had left her.  Tess’s recovery wasn’t without its challenges. It took time and sacrifice, but along the way she developed a greater sense of independence and resilience.   She delayed retirement by a year, so she could recoup her lost savings and contribute the money from her new side hustle to her wealth portfolio.   In the end, Tess’s Dog Minding and Walking Service continued well after Tess’s retirement, for the sheer enjoyment she derived from hanging out with dogs.  The information provided in this article is general in nature only and does not constitute personal financial advice.  

Roadmap to retiring young

Roadmap to retiring young

Updated on Budgeting, Retirement

The dream of retiring young is one that captivates many peoples’ imaginations. The freedom to live life on your own terms, doing what you want, when you want is undeniably appealing, but is it attainable? We say yes! It doesn’t just happen, though. As with any goal, it takes planning and dedication along with a clear understanding of when and how you expect to achieve that goal. Early retirement, as a concept, means different things to different people. Therefore, the first step on the road to your early retirement is to be clear about what it will look like, starting with: With an understanding of what retirement means to you, you can begin the process of charting a course to achieving it. Develop a roadmap to early retirement by considering: Attaining any financial goal requires discipline. Coach yourself to say ‘no’ to indulgences in the present, remembering that with the right roadmap and financial know-how, you really can make your dream of early retirement come true. The information provided in this article is general in nature only and does not constitute personal financial advice.  

Why millennials should be mapping their retirement today

Why millennials should be mapping their retirement today

Education, Retirement, Superannuation

While millennials have for decades been treated like ‘the children of Neverland, who never grew up’, reality is fast catching up with this generation, who are now young adults between the ages of 24 and 40. Like generations before them, they are now buying, or at least trying to buy, homes and starting families of their own. And with this, the stark reality is that their retirement is looming just around the corner in the early years of 2050. For all too many, planning for their retirement is just something they don’t want to face. But the reality is that the sooner they start ‘mapping’ or preparing for their retirement, the better off they will be. According to Investopedia, if you are a 26-year-old millennial, you should aim over the next four years to have at least one year’s worth of income in your superannuation fund. If you are a 40-year-old millennial, you should already have three times your annual income in super. They suggest millennials should contribute at least 15 per cent of their gross salary, including the 10 per cent compulsory super guarantee contribution, to superannuation each year if they have any chance of achieving a secure retirement. This seems a pipe dream for Marion, who is 29 and earns $95,000 a year as a successful professional accountant. While her employer contributes 10.5 per cent of her income to super, she has less than $100,000 in super, and is more focused on boosting her non-super savings of $75,000, so she can buy a small apartment. She is not alone. Most millennials, burdened by HECS debts and increasingly casual employment arrangements, will find the need to boost their super contributions a challenge, especially as most millennials, like Marion, are also struggling to save a deposit for an ever more expensive home of their own. They know they will live longer than previous generations and that health and living costs will be much greater for them in retirement, while social security entitlements will be much less than what their grandparents received. Nonetheless, when asked, millennials want to retire earlier than previous generations and are looking for a different type of retirement. One where they can travel more while still enjoying doing so and keep working on a casual part-time basis, but only if they enjoy the work. All of this means that amongst all the competing demands on their time and money, superannuation has to become part of the landscape of Neverland. For Marion, it has meant searching for a better superannuation fund with lower fees and better investment options while scaling back her plans to buy an apartment and perhaps relying more on the Bank of Mum and Dad to help her do so. As previous generations have done, millennials need to take control of their superannuation, and the sooner, the better. The first step is to consolidate any multiple super accounts into one and then, wherever possible, boost their contributions to the magic 15 per cent mark. Happily, most millennials, including those who are self-employed, will have a super fund and will only need to add an extra 5 per cent to take their total contributions to 15 per cent of their prevailing salary. Then they can leave compound interest to work its magic and, like a snowball rolling down a hillside, build the balance within their super. It’s then a matter of working closely with our advisers who can ensure your superannuation stays on track and help you to achieve the best possible outcomes when you do start thinking seriously about retiring.   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.

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.

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.

It’s time to get focused on super in your 40s

It’s time to get focused on super in your 40s

Updated on Budgeting, Education, Finance, Investing, Retirement, Superannuation

Typically your forties is a time of established careers, teenage kids and a mortgage that is no longer daunting. There are still plenty of demands on the budget, but by this age there’s a good chance there’s some spare cash that can be put to good use. A beneficial sacrificeAt this age, a popular strategy for boosting retirement savings is ‘salary sacrifice’ in which you take a cut in take-home pay in exchange for additional pre-tax contributions to your super. If you are self-employed, you can increase your tax-deductible contributions, within the concessional limit, to gain the same benefit. Salary sacrificing provides a double benefit. Not only are you adding more money to your retirement balance, these contributions and their earnings are taxed at only 15%. If you earn between $90,001 and $180,000 per year that money would otherwise be taxed at 39%. Sacrifice $1,000 per month over the course of a year and you’ll be $2,880 better off just from the tax benefits alone. It’s important to remember that if combined salary sacrifice and superannuation guarantee contributions exceed $25,000 in a given year the amount above this limit will be added to your assessable income and taxed at your marginal tax rate. What about the mortgage?Paying the mortgage down quickly has long been a sound wealth-building strategy for many. Current low interest rates and the tax benefits of salary sacrifice, combined with a good long-term investment return, means that putting your money into super produces the better outcome in most cases. One caveat – if you think you might need to access that money before retiring don’t put it into super. Pay down the mortgage and redraw should you need to. Let the government contributeLow-income earners can pick up an easy, government-sponsored, 50% return on their investment just by making an after-tax contribution to their super fund. If you can contribute $1,000 of your own money to super, you could receive up to $500 as a co-contribution. Another strategy that may help some couples is contribution splitting. This is where a portion of one partner’s superannuation contributions are rolled over to the partner on a lower income. Your financial adviser will be able to help you decide if this strategy would benefit you. Protect what you can’t afford to loseWith debts and dependants, adequate life insurance cover is crucial. Holding cover through superannuation may provide benefits such as lower premiums, a tax deduction to the super fund and reduced strain on cash flow. Make sure the sum insured is sufficient for your needs as default cover amounts are usually well short of what’s required. Seek professional adviceThe forties is an important decade for wealth creation with many things to consider, so talk to us and we’ll help you make sure the next 20 years are the best for your super.   This is general information only

How does Australia’s pension plan stack up?

How does Australia’s pension plan stack up?

Updated on Aged Care, Centrelink, Retirement

One in six people will be over 65 years old by 2050. With the world’s population ageing quickly, it is natural to think about how pension systems around the world will cope, particularly in Australia. Fortunately, Australia’s three-component retirement income system means our age pension system is well-equipped to support older Australians now and well into the future. Is Australia’s age pension adequate for retirement? Comparisons of age pensions around the world are generally made based on three key factors — adequacy, sustainability and integrity. The balancing act is tough, but essential for countries to get right. It is no use having an overly generous age pension if the current funding measures (typically tax revenue) aren’t adequate to maintain the system long-term. Integrity is also critical, ensuring an age pension system adequately protects a country’s older people. What payment types are included in Australia’s age pension? Age pension rates in Australia are based on an income test, assets test and your relationship status. For example, the normal maximum fortnightly rates for an eligible single person are: Maximum basic rate $860.60 Maximum Pension Supplement $69.60 Energy Supplement $14.10 Total $944.30 The Pension Supplement is an extra payment to help eligible retirees pay their utilities, phone, internet and medical expenses. Similarly, the energy supplement is an additional payment which assists pensioners with their household energy costs. What are the means tests for Australia’s age pension? There are two tests to determine age pension eligibility in Australia — the income test and the asset test. The income test assesses all sources of you and your partner’s (if applicable) income, including financial assets. The asset test assesses the value of you and your partner’s assets (excluding your principal home). How does Australia’s age pension stack up against other countries? Australia is typically ranked amongst the best in the world for age pensions, trailing just behind the Netherlands and Denmark. In the Netherlands, for example, the maximum age pension is 50 per cent of the minimum wage for couples, and 70 per cent of the minimum wage for single people. Denmark differs slightly, though their system is still adequate, providing pensioners with a minimum of 40 per cent of a person’s average earnings along with support through the country’s universal healthcare and housing benefits. Despite the Netherlands and Denmark consistently holding the top spots for their respective age pension systems, Australia’s age pension comes quite close. Australia is fortunate to have a stable, well-funded age pension system, with the maximum age pension equating to around 60 per cent of the national minimum wage. Is Australia’s age pension adequate for your desired retirement lifestyle? When planning for your retirement, it is important to consider your desired retirement lifestyle and what this will cost. Your ongoing costs in retirement will be impacted not only by your day-to-day living expenses but also by the value of your assets and any outstanding debt, such as a mortgage. Seeking tailored advice from a financial professional as you plan your retirement will ensure you have adequate income to fund your desired lifestyle. Contact us today to get started.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Super success for women

Super success for women

Updated on Retirement, Superannuation

While women earn less and spend less time in the workforce than men, sharply reducing their super contributions throughout their working lives, there are some simple steps women can take to boost their retirement savings. The Simple Facts This inequality is simply due to women earning and working less. Women in full-time work earn on average 18 per cent less than men, while almost half of all women in the workforce work part-time with an estimated 220,000 women missing out on any super contributions each year simply because they earn less than $450 a month – the lower threshold for super guarantee contributions. Women also miss out on super contributions because they are often absent from the workforce for extended periods while on maternity leave or looking after loved ones, be they children or other family relatives. When they do return to the workforce, it is frequently in casual positions or working for themselves, where the need to make super contributions is so often overlooked. Check your super fund fees and charges The solution lies with women taking control of their super and choosing the best possible super fund, which typically means low fees and good, low-risk investment options. Regularly check what, if any, personal insurance premiums are paid from your precious super savings. While insurance is essential while you are raising a family, as you get older, you might find your need for insurance diminishes. You may be able to reduce your coverage and with it the cost of premiums from your super. (Remember to always check with your adviser before cancelling any insurances.) Make sure you take the time to consolidate your super accounts into one low cost super fund. Visit the Australian Tax Office website to consolidate your super or ask your adviser to do this for you. Wherever possible, ensure you continue to make contributions throughout your working life, starting as early as possible and not neglecting your superannuation during periods when you are out of the workforce, working on a part-time basis or self-employed. Maximise Your Contributions Make sure you speak to your adviser to maximise your contributions, and in doing so, minimise your tax bill at the end of the financial year. If you expect your income to be less than $52,000 in a financial year, make sure you take advantage of the Federal Government’s co-contribution scheme. By putting just $20 a week of after-tax income into super, you will receive up to $500 from the Government directly into your super account as soon as you lodge your tax return. That’s a guaranteed 50 per cent return on your money and the best investment you will ever make. If you are earning less than $37,000 a year, you should receive the Federal Government’s low-income superannuation tax offset of $500. Both payments happen automatically, meaning you don’t have to apply or complete additional paperwork to receive them. Still, you should check your superannuation account to make sure these payments are there. If you need more advice about your super, talk to us today.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Turbo boost your retirement savings

Turbo boost your retirement savings

Updated on Retirement, Superannuation

Once your mortgage and other financial commitments are manageable, it is usually time to put the pedal down on your super. Those prime income years, between age 40 and 50 in particular, should be used constructively. However, the task may not always be easy. Many couples choose to have children later and as a result, parents’ financial responsibilities can now often extend well into their 50s, even 60s. Furthermore, the earning opportunities for many people over age 50 often begin to decline. Other factors can also disrupt retirement savings planning – time out of the workforce to raise a family, periods of unemployment or extended illness are but a few. Is there a logical solution? Usually, the least painful (and most disciplined) option is to use a superannuation salary sacrifice arrangement. For most employed people on high incomes this can represent a useful and straightforward method of bolstering retirement provisions. It works like this You agree to forego a specified amount of future salary and in return your employer makes additional future super contributions for an equivalent amount. This means your extra long-term saving starts to accrue faster, pay by pay. “Sacrificing” salary to super is also a tax-effective form of remuneration because if the arrangement is put together correctly, no personal income or fringe benefits tax is payable on the extra amount of contribution. You do need to keep in mind the impact of superannuation contribution limits however we can provide guidance on this issue. Consider this case study: Michael is 45 and he and his wife Marie have been working away at their mortgage for some time. Now they are beginning to see light at the end of the tunnel. Michael’s employer has been contributing 10% of his $110,000 remuneration package to superannuation ($11,000 per annum). Michael thinks that he may now be able to afford more, but he is not all that happy with the employer’s fund investment options. He discusses the situation with Marie and their adviser. Together they agree that Michael should set up a new super fund with a different provider and increase his contribution to 15% of salary. From the next fortnightly pay, Michael’s pre-tax salary is lower by $211.54 but the amount he actually receives will be lower by only $129.04 (since he will pay $82.50 less personal income tax as well). The $211.54 pre-tax amount was paid directly into Michael’s new super account. This means that his total after-tax super contributions for the next year will be $14,025 net instead of $9,350 and he has been able to select a fund that meets his needs. Salary sacrifice to super is just one way in which you can enhance your retirement provisions. If you would like more information about the options, talk to us today and we can assist you in determining what is right for you.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Reviewing your insurance as you get older

Reviewing your insurance as you get older

Updated on Insurance, Retirement

So, you are seriously starting to think about your retirement. The kids are finally more independent, the mortgage is less than it was, and the super is more than it was. You look at your monthly bank statements and one particular debit is always there. The insurance premium. You have been paying it diligently for years now, maybe decades. But, for what? You’ve not claimed and ‘gained’ anything so far. At this stage and age, it might be very tempting to cancel your policies and save a few dollars. Before you do, just consider what you could be losing in a future that’s not yet written. It could be hundreds of thousands of dollars. More to the point it could be your home, your lifestyle, or your health – the very thing you are hoping to protect. Statistically you are more likely to claim the older you get. Look at these figures:   Type of cover Average age people cancel policy Average age people make a claim Income Protection 45 46 Total & Permanent Disability (TPD) 49 48 Trauma Insurance 44 49   People often don’t realise an insurance policy is not an ‘all or nothing’ concept and there are options available. For example, as you get older and your debts and commitments reduce, so might the level of cover you require. When cover is reduced, so is the premium. Take care though, once a policy is in place it’s easy to reduce the cover but much harder to increase the amount, particularly as you get older. It often only takes a phone call to lower the amount but countless medical tests to increase it or apply again. Before you rush off and reduce your cover, it’s important to tailor the amount of cover to your potentially changing circumstances, and this is where we can help. There are many other options available including requesting a temporary freeze on the premiums; paying annually instead of monthly; moving your cover into your super fund (this is not applicable to all insurance however); or given that your adult children will usually be the ones who will eventually benefit, ask them to share the cost of the premiums! The basic idea of insurance is not to put you in a better position than you were – it’s there to protect what you have. Regardless of what age you are, think twice about cancelling insurance completely. There are always other options available. Ask us for guidance before you make any decisions.     The information provided in this article is general in nature only and does not constitute personal financial advice.

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