super fund Archives

Navigating the reality of divorce after 50

17 June, 202418 June, 2024 Updated on18 June, 2024 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. 

Why millennials should be mapping their retirement today

14 March, 202314 March, 2023 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.

Pay attention to super in your 30s

24 February, 202117 September, 2021 Updated on17 September, 2021 Education, Superannuation

If you are in your 30s, chances are life revolves around children and a mortgage – not super. And 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. 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 $150,000 per year to enjoy a ‘comfortable’ retirement. To support that level of income for up to 30 years in retirement they will want to have built a combined nest egg of about $2.7 million! 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. 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. 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 contact us today about putting a plan into place. The information provided in this article is general in nature only and does not constitute personal financial advice.

Super in your 20s: Boring? Doesn’t have to be!

10 February, 202117 September, 2021 Updated on17 September, 2021 Education, Superannuation

Superannuation is for the oldies, right? In some ways that’s true, but even in your twenties there are good reasons to take a bit more interest in your super. The average 25-year-old has around $10,000 in super, but the decisions you make now, even with relatively small sums of money, could earn you hundreds of thousands of extra dollars over your working life. Are you getting any? Earn more than $450 in any given month? Then every three months your employer should be paying 9.5% of that into your super fund. Usually you can choose your fund; if you don’t, it gets paid into a super fund of your employer’s choice. If you don’t know if your super is being paid, or the fund it’s being paid into, ask your employer. If you think you’re missing out, search ‘unpaid super’ on the tax office website (ato.gov.au) to see what you can do. This is your money. Where have you got it? Had more than one job? If you have a lot of little super accounts the money can disappear in a puff of fees and insurance premiums. Simple fix – combine your super into one account. Is it working for YOU? Your money is going to be stuck in super for a long time, so you want it to be working hard for you. Most funds offer a range of investment choices and some will do better than others. What do you want? Buying a new car. Travelling, Having fun. Let’s face it, there are lots more exciting things to do with your money than sticking it into super. The choice is yours but think about this: If Mum and Dad retired this year, they would need a minimum of around $61,909 per year to enjoy themselves. If that doesn’t sound like much now, by the time YOU retire inflation could have pushed that annual amount to around $214,248. That means you will need to have at least $3.71 million in savings! Sure you’ve got 40-plus years but that’s still a lot of money to save up! It can be done if you start early enough – and you don’t need to miss out on enjoying life now. Starting early and adding a bit extra when you can makes a big difference. Let’s work on another 40 years before you can retire. If you start now by making an extra post-tax contribution of just 1% of your annual income to super, ($350 from a $35,000 salary – and the government could add to that with a co-contribution) at an 8% investment return could add an extra $149,000 to your retirement fund. If you wait 20 years before starting to make that extra contribution, you’ll only get a boost of $49,000. $100,000 less! Continuing this small extra contribution as your salary increases will turbo boost your super fund balance. Imagine your retirement party?! So, still find super boring? That’s okay; you’re not alone. But instead of finding the time to organise all this yourself, contact us today and we will review your current super, any insurance required, the investment choices and prepare a strategy to get your super into shape – then you can get back to enjoying life! The information provided in this article is general in nature only and does not constitute personal financial advice.

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