Posts Tagged ‘Planning’

Insurance in super – is your cover adequate?

Friday, January 5th, 2018

If you’ve got super, you probably have some life insurance included. It’s an easy way to get a basic level of cover, but is it enough to give you and your family true peace of mind?

More than 70% of Australians hold life insurance policies, and more than 13.5 million separate policies, through their super funds.¹ Yet despite this, under-insurance remains a huge problem in Australia.

Rice Warner estimates that the median level of life cover in super meets only 60% of the basic needs for the average household, and less for families with children. The position is even worse where total and permanent disability (TPD) and income protection cover are concerned. The median level of cover in super will provide just 13% of TPD needs, and 17% of income protection needs.

Of course, some insurance is better than no insurance, and insurance in super is convenient to set up and pay for. But it comes with a couple of points to be aware of, and this is where professional advice is invaluable.

Limited cover

Firstly, a portion of your super is used to pay the insurance premium. This can help your cash flow if money is tight, but it also means you may not be contributing as much to your retirement savings as you thought.

It’s also worth keeping in mind that super funds offer standardised ‘off the shelf’ policies that may not suit your needs. This helps keep costs down, but that’s no consolation if your policy falls short when you need it most.

Because the insurer pays your super fund which then pays you, it may take longer to receive the money. What’s more, unless you make a binding nomination, the fund trustees have the ultimate say in who receives benefits when you die. Your beneficiaries may also be taxed more heavily than they would if you held the insurance outside super.

A tailored solution

Your insurance needs are as individual as you are, and should be reviewed regularly along with your other financial affairs. Whenever your circumstances change – if you marry, have a child, or buy a new home for instance – your life insurance should be reviewed.

It’s easy to underestimate what it would cost to ensure your family is able to maintain their current lifestyle, come what may. It’s important not to forget partners who don’t earn an income and may not necessarily have cover in their super, particularly where dependent children are involved.

Take the example of Mark, whose wife Suzy, 43, passed away suddenly after an illness. Thankfully, the couple had arranged a full suite of insurance cover in and outside their super. Mark claimed on Suzy’s life insurance which covered his mortgage, credit card and car loan repayments; it also allowed him to hire a part-time nanny to help with their two children.

Getting additional insurance outside super can be a little more expensive, but you will have access to a wider range of policies that can be tailored to your individual needs. Some policies, such as Trauma insurance, can only be bought outside super.

Even if you have some level of cover inside super, it’s important to do your sums to work out exactly how much your family would need to maintain your current lifestyle if you or your partner were to die or become seriously ill. It may take a little time, but with so much at stake, guesstimates won’t do, and we would be only too happy to assist. 

¹ Ricewarner, Insurance through superannuation, 20 April 2016.

Article by TAL

The benefits of consolidating your super

Friday, January 5th, 2018

If you’ve had a few jobs over the years, it’s possible that you’ve got a few different super funds with small balances in each. It’s easy to forget all about them until the annual statements arrive, but the sudden influx of paperwork can often leave you feeling dazed and confused.

The Australian Securities and Investment Commission reports that there are billions of dollars sitting in unclaimed or “lost” superannuation accounts as at 1 January 2017, with thousands more accounts added to the list each month. Inactive accounts with balances of less than $6,000 are transferred to the ATO, so if you think you might have some old superannuation accounts, don’t hand it over the government, claim it!

This year, instead of ‘filing’ your statements in the bottom drawer and forgetting all about it until next year, take the plunge and consider consolidating your accounts. That way, you’ll be saving fees, reducing your paperwork, and making it easier to keep track of arguably one of the most valuable investments you’ll ever make – your retirement savings.

Here’s a few steps to get you on your way:

Choose your fund – talk to us so we can sit down and help you decide which super fund is best for you.

Check your insurance – before you start closing your accounts, we can help you make sure your insurance needs are covered in your chosen fund.

Advise your employer – make sure your employer knows where to pay your super guarantee contributions – speak to your payroll or HR about any paperwork they may need from you or your fund.

Rollover your other accounts to your chosen fund – you can do this online through the myGov website, or you can transfer your super by using a form and sending it to your chosen fund. Some funds have an online process for combining your super too, so it’s a good idea to check what’s going to be easiest.

Visit the SuperSeeker service at www.ato.gov.au or via your MyGov account at www.my.gov.au for more info.

As always, we’re here to help, you so if you’d like to talk this though, give us a call. We would love the opportunity to assist you in your journey to a better financial future.

Article by TAL

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

Economic Update August 2017

Monday, August 21st, 2017

Within this month’s update, we share with you a snapshot of economic occurrences both nationally and from around the globe.

Economic growth improves in key countries
– China economy shows strong signs of strengthening
– Australian employment data continues strength
– Rates on hold in Australia and the United States (US)

We hope you find this month’s Economic Update as informative as always. If you have any feedback or would like to discuss any aspect of this report, please contact Michael Berinson or his office.

There were some notable economic growth numbers released in July. After a few years of declining (but still stellar) growth numbers in China, the latest statistic was back up to 6.9%. The new China leadership team is about to be ushered in and the Chinese know how to throw a party. On top of that, the China Purchasing Managers Index (PMI) came in at 51.4 for manufacturing and 54.5 for services – both in the sweet spot. Throw in 11.0% for Retail Sales and 7.6% for Industrial Output and you have what Keating might call, ‘a beautiful set of numbers’.

Turning to the US, the anaemic growth in Q1 was overshadowed by the June quarter coming in at 2.6%. True it’s not the 3% that the Fed is aiming for or the 4% that Trump was dreaming of. But 2.6% is really solid. Unemployment is low at 4.4% and 222,000 jobs were created in June when only 180,000 new jobs were expected. It is true that wage growth was low at just 0.2% but you can’t have everything all at once can you?

Even Australia was looking good. We had some very nice jobs and unemployment data – against the trend of 2016. For whatever reason, the labour force data are looking better. But the RBA chimed in at the start of July saying that 3.5% is our ‘neutral’ interest rate. That is, rates should be at 3.5% when things are chugging along. Since we are sitting on only 1.5%, there are a lot of hikes in the pipeline!

It was a bit silly to advertise that opinion just now and an Assistant Governor had to come out and hose things down. Retail sales did come in at a biggish 0.6% for the month. We’re not cooking on gas but at least we are cooking again.

As we go around the world the United Kingdom (UK) is starting to struggle a little with its latest growth of only 0.3% for the quarter and Brexit looming large. Prime Minister Abe in Japan has gone from rock star status to a meagre approval rating of 29.9% in a few years. The Royal Bank of Canada bumped up rates to 0.75% from 0.5%.

So the dice are still rolling. Fortunes are rising and falling but there seems to be no basket cases anymore and there is lots of good news.

We became aware of a new expression this week. It’s been out but under the radar for a few years. It’s still worth sharing. On asking why stock markets – particularly in the US – remain strong – the new catch phrase is that it is a TINA market. Not as in Turner or Arena, but it is the acronym for ‘There Is No Alternative’. Money has to be invested somewhere when cash rates are so low.

TINA puts a safety net under markets for a while but we must be vigilant for when Tina starts singing.

So where to from her? Trump is floundering but his economy is doing well. The Australian economy seems to have stabilised. To us, it looks like a smooth ride ahead – until we see otherwise.

The current US reporting season has been unusually strong meaning that increases in earnings are supporting recent stock price strength. Can it go on? In a word, yes!

The big Tech Companies are having mixed results but they are looking strong. We should never be complacent but the second half of 2017 doesn’t look too bad at all. Perhaps we all deserve a break after the trials and tribulations of 2008 – 2015.

Asset Classes

Australian Equities

The ASX 200 was flat for the month of July. The Materials sector was the strongest on the back of some very strong commodity price movements. Healthcare took a beating at 7.5% with Utilities ( 5.3%), Telcos ( 4.3%) and Industrials ( 3.2%) not far behind. Financials (+1.2%) put in a creditable performance. A big sector rotation just took place.

Our August reporting season is just getting underway. As always, the companies’ outlook statements will be crucial for the future of our market. We have found some recent softening in broker forecasts of company earnings and dividends. At least that downgrade has resulted in our forecasts for capital gains to be only a tad under the long-run average.

Foreign Equities

The S&P 500 fared a bit better than us in July posting a solid +1.9% capital gain. The London FTSE also did well at +0.8%. Emerging Markets were particularly strong at +4.1% on the rising tide of commodity prices.

Our expectations for Wall Street are for a good finish for the year despite the strong first seven months of +10.3%.

Bonds and Interest Rates

With the “Fed” (US Federal Reserve) on hold again in July, the next chance for a hike is at the September meeting. But most forecasters are not expecting another hike this year. The odds of a rate hike by December are priced in at a little under 50%.

The Fed is widely expected to start its balance sheet repair in September. This amounts to gradually lowering the $4.5 trillion bond debt down to $2.5 trillion over a number of years. Since this policy will gradually raise long rates on its own, there is no reason for the Fed to also raise the underlying Federal Funds rate at the short end.

The RBA kept rates on hold again in July and August. The majority of pundits are expecting the next move to be up but not until at least the middle of 2018 – and possibly 2019.

Our view of needing a cut at home is on the back burner for the moment. We need a little more data to change our call. It all depends upon the next GDP growth number to be posted on September 6.

Other Assets

Commodity prices were on a flier in July. Iron ore was up +15.2%, Brent Oil up +9.8% and Copper up +6.2%. Our dollar was up +3.8% against the greenback.

The volatility index called the VIX was down 3.7% in July. This fear index is around all-time lows.

Since we are a commodity producing and exporting country, the restoration of solid commodity prices bodes well for our total exports and GDP growth.

However, not everyone wins from this sectoral rotation. Healthcare and a number of Industrials names are finding stronger headwinds after a good first half to 2017.

For example, our Healthcare sector is up +13.0% for the year-to-date including the poor 7.5% for July.

Regional Analysis

Australia

Our headline CPI inflation came in at only +0.2% for the quarter or +1.9% for the year. Since the RBA’s target range is 2% to 3%, this read gives the RBA no motive to raise rates anytime soon.

With total employment up around 170,000 in the first half of 2017 – with nearly all of them full-time jobs – we are back on track. During that period, the unemployment rate has been stuck at around 5.6% and wage growth is non-existent.

Europe

The focus in Europe is on what the implications of Brexit are for employment and trade. It will be nearly two years before we find out the full story so we cannot expect much good news from that region in the medium term.

However, the underlying economies are so much stronger than in recent times. We don’t have to waste much energy worrying about Greece and the other ‘PIGS’ countries anymore. Can you remember what PIGS stands for? Those days are gone!

China

The China data have been on a roll for quite a while. Without taking sides, it is hard to conclude after recent data that China is not undoubtedly doing well at the moment. Yes, there are political problems with the US and who would want North Korea as a neighbour – let alone an ally.

But what seems to be forming is a view that China has regained its role as a lead player in the world – as solid and dependable – at least in an economic sense.

US

Trump is hiring and firing quicker than he did on “The Apprentice” – but the West Wing is for real.

The US is facing a number of problems in a month or so but these ‘episodes’ on TV have not stopped US jobs and growth.

We don’t think anyone can reliably predict how this scenario will play out but, as annoying as the tweets and press releases are, the economy is marching on!

Rest of the World

With sanctions on Russia being on the front burner, and the woes of the Venezuelan leadership also up there on many news wires, some instability in oil pricing is likely. Both countries are big exporters.

Article prepared by Infocus Securities

New year, new start

Monday, March 13th, 2017

how to make New Year’s resolutions that stick

How many of last year’s New Year’s resolutions did you keep? If you can’t even remember them all a year later, let alone whether you stuck to them, you’re not alone. One survey found that 58% of Aussies break their resolutions within the year. And 15% of those do so because they forgot what they promised they’d do in the first place.i

That doesn’t mean that you can’t set and achieve things you actually want. You just have to be smart about the way you do it.

Turn visions in to goals

When someone asks you to picture your ideal lifestyle, what you see in your head is actually a collection of dozens of different goals. It’s important to break it down and articulate those goals if you want your vision to become a reality.

This is easier than it sounds. Just say you want to ‘enjoy life more’. To make a start on this, you could write down a list of social activities and hobbies you love doing or would really like to try. Then turn each one in to a task that fits with your schedule and can be planned ahead of time, like ‘Make a date with a friend twice a week’ or ‘Book in for an evening class every month’. If your schedule is jam packed, set corresponding time management goals like ‘Leave work on time at least 3 out of 5 days’.

Tell people

Think of your friends and family as your cheerleaders and supporters in reaching your goals. If you tell them what you’re aiming for and why, they’ll be better able to help you. They might even be able to join you on your way. For example, if you decide you want to lose weight and get fitter, ask around for a gym buddy or someone to join you on walks. Or if you’re ready to make a change in your career, start putting the word out amongst your network, that you’re open to new opportunities.

Give yourself (the right amount of) time

Yearly goals, especially ongoing ones, can be hard to keep track of. Try to work out a reasonable time frame for your goal. Some small things might be quicker, and feel less significant – but you can always build on your results. And some things just take time. For example, you’re unlikely to save up for a new car or lose 20 kilos in a month. But you might lose two kilos, or save X-percent of the amount you need. Consultant Todd Herman reckons the ideal time frame for the brain to plan around is 90 days, and that it’s better to do a series of goals ‘sprints’ rather than one long marathon.

Keep track of your progress

If you’re the kind of person who uses to-do lists – on paper, in an app, or in project management software – you’ll know how satisfying it is to tick something off. If you’re not in the habit of keeping lists, now is the time to start. Your list shouldn’t just be one point – your resolution with a check box next to it. Break it down in to smaller milestones. Say you’ve resolved to improve your diet – set yourself little achievements like ‘went a whole week without eating favourite junk food’. To make it fun, try a smart phone game like Habitica.ii

Don’t wait ‘til December 31st

It might be a New Year tradition, but you don’t have to wait for one particular time of year to set goals and resolve to change your life. With the right attitude and a bit of planning, you can start working your way towards a goal any time.

Speaking of this, we’re here to help you set and achieve your money-related goals. Don’t wait for an annual appointment to chat; drop us a line any time, we’d love to hear from you!

i. finder.com.au, Be a geek and live in Tasmania: How to win at New Year’s resolutions

ii. Habitica

General Advice Warning This information is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. Michael J Berinson Pty Ltd strongly suggests that no person should act specifically on the basis of the information contained herein but should seek appropriate professional advice based upon their own personal circumstances. Although we consider the sources for this material reliable, no warranty is given and no liability is accepted for any statement or opinion or for any error or omission.

Give yourself more flexibility in the lead up to retirement

Thursday, November 10th, 2016

take-control-your-retirement

Nowadays, we’re living for years longer than ever before. 60 is no longer old age! So it makes sense that you want the flexibility to approach retirement in a way that suits you. A transition to retirement strategy enables you to access part of your super while you are still working and has a number of benefits.

Boost your super and supplement your income

There are two main benefits of a transition to retirement strategy:

Maximising your super – You can continue to work while drawing an income from an account-based pension. By doing this you can salary sacrifice as much of your pre-tax salary to super as possible while receiving an income from your pension. This allows you to increase your retirement savings without reducing your income. This can also be extremely tax-effective because pension payments are generally taxed at a lower rate than your salary.

Supplementing your income – If you want to move into part-time work before you retire but don’t want your income to drop you can use your pension to supplement your salary.

Ease yourself into retirement

You can choose different transition to retirement strategies depending on what is most important to you. If you believe you have enough retirement savings you could still benefit from a transition to retirement strategy. For example, if you wanted to renovate your home before retirement you could keep working full-time and use the extra income from your transition to retirement pension to pay for the work. That way you get your home improvements done before retirement without taking on any debt.

Are you eligible?

You can take advantage of a transition to retirement strategy if you meet the following conditions:

You are aged between 56 and 65 years of age
You are still working
You transfer some, or all, of your super account to a transition to retirement pension

Important considerations for high income earners

It you earn a high income it’s important to consider the concessional contributions cap before deciding to salary sacrifice as part of a transition to retirement strategy. If you exceed the concessional contributions cap, which is currently $35,000 for the 2015-2016 financial year, you may be taxed an extra 31.5% tax on any contributions above the cap.

Set it up right from the start

Transition to retirement strategies can provide significant tax savings and benefits, but they can be complicated. For this reason we strongly recommend that you talk to us in the lead up to retirement, so that the strategy you put in place is right for your personal situation. Come in and have a free, no obligation initial chat, and then take it from there. 

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