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When You Retire But Your Partner Doesn’t

By admin /April 27,2015/

Many couples dream of sharing a life of leisure together. But what happens when things get out of sync?

When we think of retirement, we often imagine a happy couple strolling hand in hand on the beach. But even if you and your partner are similar ages, chances are you won’t retire at the same time. And according to Clinical Psychologist Anna-Marie Taylor from the Australian Psychological Society (APS), that can be a source of conflict and frustration.

“The retired partner may become irritable, withdrawn, less supportive and unavailable. And one partner may be unconsciously jealous of the other, which can create conflict,” she says.

If the retiring partner doesn’t have a clear plan for life after work, there’s a danger they may get depressed.

“This can especially be true for men, as their sense of identity is often defined by work.”

But Taylor says there can also be real advantages in having one partner at home while the other continues to provide financial stability. The secret is open and effective communication, together with a willingness to cultivate new interests and an ability to structure your own time outside work.

We talked to two couples who have overcome the challenges to find a new sense of freedom and fulfilment in the next stage of their shared lives.

A new sense of freedom

Elisabeth Holmes retired from her part-time government job last year, while her husband Lindsay continues to run his home-based software consultancy business.

“My mother was in aged care and my daughter was interstate and about to have her first child. I wanted to be more available to them,” Elisabeth says.

While the transition was strange at first, Elisabeth is now finding her new role very rewarding. Having a clear sense of purpose has made a big difference.

“Because I’m not working I can visit my daughter and her new baby on my own, or Lindsay can come too as he can work remotely from a laptop,” she says.

Her retirement has helped make Lindsay’s life less stressful, as the demands of running his own business often mean he has to put in more than five days a week.

“Elisabeth was able to pick up tasks we’ve been sharing, giving me a bit more freedom,” Lindsay says. “And it’s also meant we can spend more quality time together, which has been good for us.”

Importantly, the couple spoke with their financial adviser before retiring to ensure that their super savings were on track to give them the retirement lifestyle they wanted. Elisabeth says that knowing her finances were in good hands allowed her to retire with confidence.

When retirement comes suddenly

Retirement came as a surprise for Sue Mackenzie, when she was unexpectedly diagnosed with breast cancer. Faced with a long period of treatment and recovery, she decided to leave her job as an occupational therapist while her husband, Greg, continued to work.

Initially, Sue and Greg were concerned about the financial impact her retirement would have.

“While Sue was only working part-time at the end, we were still used to living with two incomes,” Greg says. But careful planning helped them adjust, while using Greg’s income to boost their savings.

Happily, Sue is now cancer-free. With her health restored, she has decided to focus on renovating and running their home.

“Sue enjoys running the household, and she’s been able to devote time to creating a really great home,” Greg says. “It takes a lot of time and effort, but gives her a lot of enjoyment and a real sense of self-identity.”

Keeping your finances on track

Making the transition from two incomes to one can be challenging, but it can also bring new opportunities.

For example, depending on your situation, you may be able to draw on tax-free pension payments for your day-to-day expenses, while putting more of the working partner’s salary into super through salary sacrifice. That could help lower your overall tax burden while boosting your super at the same time.

A financial adviser can help you explore the options both before and after retirement, then identify the best choices for your situation.

Source: Colonial.

Estate Planning Essentials

By admin /April 24,2015/

We’ve all heard the terms “estate plan”, “will” and “trust”, however not everyone understands what they mean. Estate planning is the process of putting in place structures to ensure that the wealth you have accumulated over your lifetime is transferred to your beneficiaries in a tax-effective manner and in accordance with your wishes.

A will is an essential part of your estate plan. Your will is a legal document that outlines how your assets and possessions are distributed upon your death. It can cover a range of areas including making provisions for any children, assets that do not form part of your estate, as well as any charitable wishes you may have.

Your will should also nominate the executor of the estate. The executor is the individual who will be responsible for carrying out your wishes as outlined in your will.

Anyone over the age of 18 can be appointed and in most cases, they tend to be one of the main beneficiaries. The person appointed should be someone you trust, who will act responsibly, and who agrees to be your executor.

If someone has named you as the sole executor, it’s highly recommended to consult a solicitor due to obligations and responsibilities associated with the role. Administering an estate isn’t always straightforward, particularly if there are multiple beneficiaries. And as the executor, you can be held liable if you get it wrong.

Responsibilities of an executor may include:

  • Applying for the death certificate from the Registry of Births, Deaths and Marriages
  • Managing the funeral arrangements (if the will stipulates this, or if there is no next of kin)
  • Locating and identifying the assets of the deceased
  • Contacting all beneficiaries

What is a trust?

A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in a number of ways and can outline precisely how and when the estate’s assets will pass to the beneficiaries.

A properly constructed trust can help protect your estate from your heirs’ creditors or from beneficiaries who may not be able to manage money well. Instead of the assets passing to an individual beneficiary in his or her own name, they would pass to a legal entity controlled by, or on behalf of, the intended beneficiary.

As the assets are held by the trust on behalf of the beneficiaries, they are not treated as an asset of a beneficiary in the event of them being involved in any legal proceedings, such as divorce or bankruptcy. In addition, a trust can distribute income to certain beneficiaries, but the beneficiary doesn’t have any direct control over the assets held within the trust.

Powers of Attorney

A power of attorney is a legal document that allows another person to make decisions on your behalf. The person making a power of attorney is called the ‘principal’ and the person appointed by the principal is the ‘attorney’. There are two types of powers of attorney:

General power of attorney

A general power of attorney is where you appoint someone to look after your affairs for a specific period of time. With a general power of attorney, your appointed person can make financial or legal decisions on your behalf in your absence (i.e. if you are overseas for extended period of time).The general power of attorney can then make financial decisions on your behalf, such as paying bills or selling your house. It’s important to note that if you appoint a general power of attorney and you become incapacitated and are no longer able to make your own decisions, the general power of attorney ceases.

Enduring power of attorney

An enduring power of attorney is where you appoint someone to make financial or legal decisions on your behalf if, in the future, you lose the capacity to make decisions yourself. Enduring powers of attorney are useful for estate planning – if you become incapacitated due to illness or injury, or develop dementia, for example. Your enduring power of attorney can then legally manage all of your financial affairs.

How do you get started?

Estate planning is a complex area that requires careful consideration and assistance from qualified professionals such as an accountant, solicitor and financial adviser.

A well-structured estate plan will ensure your wishes are carried out once you are gone, and help protect the financial wellbeing of your dependants.

To find out more, contact your financial adviser.

Source: Capstone Financial Planning

Funeral Insurance: A Morbid Idea or a Smart Strategy?

By admin /April 24,2015/

It’s difficult to watch television these days without being bombarded with advertising from insurance companies, the latest trend offering low cost funeral insurance. It seems so easy, pick up the phone and within a matter of minutes you can be covered for the cost of your funeral. None of us want to pass on financial burdens to our loved ones when we die and the possibility that we can pre arrange to cover this cost ourselves is quite tempting. But is it really worth it?

The emotional pressure that features prominently in these commercials targeting younger seniors has attracted the attention of the Australian Securities and Investments Commission (ASIC).

In order to gain an insight in the public’s understanding of the options available to cover funeral expenses, ASIC’s Consumer Advisory Panel (CAP) conducted research1 to explore consumer awareness and understanding of three common products that consumers typically use to pay for future funeral costs. These are:

  1. Prepaid funeral plans – where consumers choose and pay in advance for their funeral.
  2. Funeral bonds – investment products that enable consumers to save for funeral expenses, with the funds withdrawn after death to pay for the funeral.
  3. Funeral insurance – where consumers pay monthly or fortnightly premiums in return for a fixed amount of cover to be paid upon their death.

ASIC’s research found that:

  • Many people do not have a sound understanding of the costs associated with a funeral.
  • People were not aware of the alternative ways to meet funeral costs, such as prepaying by installments or buying funeral bonds.
  • The term ‘funeral plan’ was often used to describe the three different funeral products in advertising and marketing material, which makes it difficult for consumers to differentiate between them.
  • Many people did not understand some of the key features of funeral insurance: increasing premiums, the total cost of funeral insurance in comparison to the real cost of a funeral, and the consequences of missing payments.

There are a number of risks associated with funeral insurance products that you need to be aware of. The initial premiums for funeral insurance may seem low to start with and are often touted as being less than a daily cup of coffee. However, many of the funeral insurance products on the market could see you paying much more than the actual cost of the funeral in the long run.

Funerals in Australia can cost anywhere from $4,000 to $15,000 depending on whether they are simple or elaborate. However according to a study conducted by Rice Warner2, you could end up paying over $80,000 for a $6,000 funeral if you took out the policy at age 60 and did not die until you reached 90. Furthermore, if you were to miss out on paying a premium payment at any stage – all your previous payments would be forfeited.

1ASIC Report 292: Paying for funerals: how consumers decide to meet the costs

2Rice Warner Actuaries, Pre-funding funerals, September 2010

While it can be a delicate subject, it is one that requires considerable thought. There are a number of ways to save for your future funeral expenses. To find out which option is the most appropriate for you, speak to your financial adviser.

Source: Capstone Financial Planning

Low Interest Rates – Both Friend and Foe

By admin /April 24,2015/

They are a boon for those with mortgages but not entirely good news for everyone.

Interest rates are now at record lows in Australia. The most recent rate cut announced by the Reserve Bank of Australia (RBA) was made on the back of weak economic growth, low inflation and a rising unemployment rate. The move is designed to stimulate the economy, business activity, and household spending in the face of slowing growth, sluggish investment and low commodity prices. That’s the theory anyway.

Low interest rates can be perceived as a double-edged sword for people looking to invest in property. On one hand it’s never been cheaper to borrow money, which is great if you’re looking to buy your first home or purchase an investment property. On the flip side, easy borrowing enablement increases competition for the properties on the market and ultimately pushes property prices up. Also, there’s always the additional risk of RBA potentially increasing the interest rates if the economy heats up.

Low interest rates can also have a negative impact on those who are saving or living off their savings such as self-funded retirees. This means that investors and savers, particularly those in retirement, are going to have to make their money work harder in order to receive a similar return and typically this involves taking on more risk.

Interest rates also have an effect on the value of a country’s currency. As interest rates go down, so too does the value of the currency, making exports more competitive and imports more expensive. As a result we may see the cost of imports increase over the next few months. This includes a whole raft of imported goods such as electronics, clothing and cars. So if you’re thinking about buying a new TV or computer, you should consider these effects before purchasing.

For those shoppers accustomed to buying overseas goods online, the price impact will be more immediate. Naturally, a fall in the value of the Australian dollar is bad news for those travelling overseas, but may well have a positive effect for the local tourism industry as Australians begin to realise that it may be cheaper to spend their holidays within Australia rather than venturing overseas.

Lower interest rates can also lead to greater investment in the share market as more people search for a better yield in shares. This in turn can have a positive impact on many super funds. Asset values may increase as savers may be prompted to include more assets with higher expected returns in their portfolios.

If you are unsure about how low interest rates may be affecting your retirement savings it doesn’t hurt to get in touch with your financial adviser. They will be able to review and assess your position and ensure that your financial wellbeing is protected now, and into the future as your needs and circumstances change.

Source: Capstone Financial Planning