Archive for the ‘Debt Management’ Category

Are you over 30? You need to read this…

Monday, August 21st, 2017

Superannuation is, and will continue to be, a hot topic in the financial advice industry. No matter what your age, once you begin your working life superannuation should be in the back of your mind, but MoneyTalk magazine have uncovered some confronting statistics that it’s worth thinking about if you’re around the age of 30.

If you’re 30 years old today, you have 35 years left in the workforce and need to save enough superannuation to fund you for 35 years of retirement. Now, many of you may be thinking – ‘Hold on a minute, I don’t need to save for that many years!’ well, with the ever increasing medical improvements you just might. The median age of death is increasing by 0.6 years every year, and currently sits at age 84. If this rate continues, by the time today’s 65 year old’s reach their mid 80’s, life expectancy could have been bumped up to around 94 years old!

If you’re in your 30’s or 40’s today, it’s not unlikely that you could need to fund your retirement until the age of 100 – an intimidating prospect for many. If you’re going to live to 100, and only work until you’re 65 it is estimated that you’ll need a nest egg of $3,000,000 – but how are you going to achieve this?

1. Review your superannuation fund now

When reviewing your superannuation fund, take a detailed look at the investment returns and any fees to be paid. Take special notice of tax being deducted from your account before payment needs to be made, this can equate to thousands of dollars’ worth of lost investment returns over the years.

2. Consider making extra contributions

The younger you start contributing extra funds to your superannuation account, the better off you will be. However, there are strict limitations of how much money you can contribute to your fund, and in what capacity you can contribute- familiarise yourself with these rules so as to avoid any mistakes.

3. Build up non-superannuation investments

Think about bettering your financial situation as a whole, rather than focusing solely on your superannuation. Think of how best to build your investments outside of your superannuation, with a view to eventually transferring them into your super in the most tax efficient way. You Financial Adviser can help you to plan this out.

4. Consider gearing

Borrowing to invest money is not suitable for everyone, be sure to speak to you Financial Adviser if you are considering this as an option to boost your superannuation. If done correctly, gearing can be used both inside and outside superannuation.

No matter what your current age, you must consider and plan for your financial future – invest your time as well as your money into superannuation planning.

Source: Money Matters Magazine, December 2016.

An article by Infocus Securities

Make your super last

Friday, November 18th, 2016

3d-person-getting-it-right

Australians enjoy one of the highest life expectancies in the world, which means you can look forward to a long and healthy retirement. Here’s how to make sure your super lasts.

Did you know that Australia is now one of just four countries in the world where both men and women can expect to live into their eighties?¹ While that’s fantastic news, it also makes saving for retirement more important than ever.

Almost half of Australians over age 40 are worried about outliving their retirement savings, while many are confused about the best way to achieve the retirement lifestyle they dream of.² But by getting good advice and planning ahead now, you can take control and enjoy the peace of mind that comes from knowing your future may be secure.

Work out how much you need

The first step is to figure out how much income you want to receive each year in retirement, and how much you may need to save in order to get there.

Plan for different stages of retirement

It’s also important to think about how your spending patterns may change during your retirement, to plan ahead accordingly.

For example, in the early stages when you’re at your most active, you’re likely to need more funds for travel, sports and recreation. Then, as you enter a more relaxed phase of retirement, you’ll need to be ready for possible health issues, so you can afford the care you need as medical treatments are becoming more sophisticated and more expensive every year.

When you crunch the numbers, you may find you’re facing a super gap. An effective way to grow your super savings while potentially paying less tax may be via salary sacrifice.

You may also want to keep your options open for the later years when you may need more intensive health support, including specialised accommodation.

Also don’t forget to factor in lump sum spending on big ticket items, such as home renovations or a new car. Because, as retirements grow longer, our cars and appliances are increasingly likely to fade away before we do.

Boost your super

When you crunch the numbers, you may find you’re facing a super gap. An effective way to grow your super savings while potentially paying less tax may be via salary sacrifice.

Even a small contribution can make a big difference over time, as you earn returns on your contributions. When you invest pre-tax income through salary sacrifice, you may also benefit from the 15% concessional tax rate on super contributions, putting you even further ahead.

Currently you can contribute $30,000 a year up to the age of 50 in concessionally taxed super contributions (which include employer super guarantee contributions), or $35,000 if you’re aged 50 or over. Note – changes to super come into effect in 2017.

Finally, if there is a large sum you will like to contribute to super, you will need advice as there have been dramatic changes to how contributions are made.

Review your investment option

Our super is one of our most valuable assets, so it’s not surprising many of us seek to protect it by investing in a low risk option. But it’s also important to remember that trying too hard to avoid risk today could expose you to a greater risk — running out of money tomorrow, when your savings don’t produce the returns you need for a comfortable retirement. So it’s important to choose the right investment option for your goals and investment time-frame.

That’s where personalised advice from a professional adviser can make a difference. Your adviser can help you calculate how much super you’ll need, then find the best strategy to reach your goal. Talk to your adviser today, call our office to book a meeting.

¹Australian Bureau of Statistics, Aussie men now expected to live past 80, 2014.
² Investment Trends, Retirement Income Report, December 2013.
Article by Colonial First State

Being prepared for surprises – good and bad – is a smart financial strategy

Wednesday, November 2nd, 2016

worried-man-with-hands-on-head

While none of us can predict the future, we can do a lot to lessen the shock that can arise from unexpected events and emergencies at any time of life. For retirees relying on investments for day-to-day living, having a contingency plan means you’ll be prepared for any surprises that could derail your financial security and lifestyle goals.

Your financial plan has you on the right foot, but it can be a good idea to make sure you have a sufficient safety net to protect your retirement income, and other long-term investments, from one-off or cascading personal life events that can crop up at any time, which especially affect people at or after retirement. Examples include sudden illness, an accident or disability, the death of a spouse, or those same events affecting close family members such as children, siblings or aging parents. It’s also not unusual for changes to superannuation benefits or pensions to affect retiree expenses.

Other surprise expenditures that can interrupt your income stream might be emergency repairs to your home and investment properties due to everyday wear and tear or a severe weather event; maintaining the family car; or if a beloved pet racks up a large bill from the veterinarian. Having a savings safety net can also come in handy should you need to help out a relative, such as a son or daughter losing a job, or suffering unexpected health or life costs.

Your financial plan may already include a savings safety net – if so, that’s great news. However if you set your plan in place some time ago, you may want to consider talking to your financial planner to ensure that you have enough flexibility in case of a rainy day. Insurance provides another form of safety net, helping you to deal with unexpected losses.

From general insurance covering fire, flood and theft of property and vehicles to life insurance that provides important financial support to a family, many of us take a set and forget approach to our policies. But take the time to review your protection, checking that values are still up to date, perhaps organising for new quotes on policies, and making sure that you are covered for the events of concern to you.

Mind the gap

Preparing for events that may never happen can be overwhelming, but it’s really a matter of managing the gap between enough funds to cover your retirement goals, and a safety net of savings to protect those funds. That’s the ideal scenario, but many retirees and those approaching retirement are carrying more debt than ever before. Average mortgages and other property loans held by people approaching age 65 have more than doubled since 2002, and credit card debt is up 70 per cent, according to a report by Kellyresearch. 1

The report also shows that “increases in wealth through rising asset values, easy credit, and higher earnings” have led to a higher standard of living for working households.2 But a higher standard of living based on debt is unsustainable. That’s why retirees need to be careful about debt liability and having a focus on building up superannuation to the detriment of other forms of saving, because both approaches lock up funds that may need to be accessed quickly. That’s where contingency planning comes in.

1. Household savings and retirement: Where has all my super gone? A report on superannuation and retirement for CPA Australia by KELLYresearch, October 2012.
2. Ibid.

SOURCE: Colonial First State Investments Limited