Tag Archives: Lifestyle

Investing for retirement pays off

By Robert Wright /October 06,2016/

More than half of Australians with investment properties or shares are proactively preparing for retirement, according to MLC’s Australia today report[1].

In comparison, only 15% of people without investment properties or shares feel prepared for retirement. It’s clear investing is one way to significantly boost confidence in retirement.

The “Retirement-ready” movement

We’ve all read the stories of the retirement funding or super gap, the shortfalls and the large sums of money required to retire comfortably. Rather than feeling overwhelmed by the savings needed and giving up, many Australians are now becoming ‘retirement ready’ by proactively investing in shares and property, well ahead of retirement.

Proactively investing earlier in life is a way to save the concept of a recreational retirement – that blissful hiatus after ceasing work, when you’re healthy and able to enjoy the rewards of your investments.

Re-defining retirement

Today, retirement means far more than ceasing work and/or relevance – it’s a third chapter in our lives where we can finally stop work, or reduce our work hours and pursue some of our dreams. As long as we have the savings and investments required to support our intended lifestyle.

Are you planning a recreational or partial retirement?

How much you’ll need to save and invest depends on the retirement you’re planning. If your primary goal for retirement is to enjoy leisure pursuits, travel and hobbies, you’re planning a recreational retirement, which will cost more in leisure expenses.

If your main retirement goal is to work part-time, commence an ‘encore career’, offer to regularly volunteer or study something new, you’re planning a partial retirement and you’ll be subsidised to an extent by continuing income and potential tax advantages of working beyond age 60.

Continuing work

Pre-retirees and retirees are clearly divided at the concept of continuing work. If you have enough super savings and investments, you can choose whether you want to continue working. But for many, that’s not an option. Many baby boomers don’t want to disappear into irrelevance and they don’t want to step into old age. If you have enough super, you have a choice whether you want to work or not.

Small savings today can give you more control later

Whichever retirement you’re planning, if you want the flexibility to make choices about your future, you’ll need a level of financial power to give you that freedom.

Small reductions in weekly spending can add up substantially over the long term. Increasing your contributions to super, investing in property and shares and seeking help from a financial professional can give you much more flexibility and control over your lifestyle when you retire.

Financial professionals help motivate you to invest

MLC’s Australia Today report found that people who use the services of financial professionals were much more likely to feel prepared for retirement, with a key factor being professionals motivating people to build their super balance.

In a hypothetical question, respondents were asked: “If someone gifted you with $50,000, what would you do with the money?” Those who used the services of a financial professional contributed significantly more to their super than those without professional financial advice.

Contributing more to super can be an effective way to save on tax and provide for a more secure financial future in retirement.

 

Source: MLC

[1] MLC and IPSOS, Australia today report, Aug 2016.

Financial scams target over 50s

By Robert Wright /June 28,2016/

Australians aged over 55 who may be looking for ramped up returns are most likely to fall prey to scams.

Over the last year 105,000 Australians have fallen victim to financial scams, collectively losing $85 million to fraudsters – an average of $26,408 per person. This represents a 15% rise in the incidence of scams over the previous year. But these figures are believed to be the tip of the iceberg because many people are too embarrassed to report being stung by fraudsters.

Sadly, Australians aged over 55 who may be looking for ramped up returns ahead of, or during, retirement are most likely to fall prey to scams. Two-fifths (40%) of scam victims are aged 55-plus.

It can be easy to blame the internet for the growth of scams. However a recent report by the Australian Competition and Consumer Commission (ACCC) found two out of five scam victims were contacted by fraudsters over the phone. This compares to 27% by email and 11% via the internet and social media.

In fact, over the last year one of the main types of scams reported to our investment watchdog ASIC, involved overseas cold calls about bogus investment opportunities.

You may think you’d easily recognise a scam. But make no mistake, today’s fraudsters employ sophisticated techniques that include call scripts, false paperwork and fake websites to convince their victims of a genuine opportunity.

The bottom line is that none of us are immune, so it pays to know the warning signs.

Typically, investment and financial scams promise high, quick returns and even tax-free benefits. Expect offers of big rewards for a small upfront payment coupled with discounts for early bird investors that create a sense of urgency.

Adding to the credibility of the scam, you may be given phone numbers for referees. Disregard these. The so-called referees are likely to be part of the scam network.

ASIC is warning Australians not to send money overseas for an investment offer that has come out of the blue. If you are cold called about an investment the best thing to do is hang up.

If you’re not sure about the legitimacy of the person or company making the call, ask if the company or scheme has an Australian Financial Services Licence (ASFL) or an Australian Credit Licence (ACL). In particular, ask what the licence number is. You can check this against the Professional Registers on ASIC’s website (www.asic.gov.au).

Scams are ever-evolving and it pays to stay up to date by regularly checking the government’s Scamwatch website (www.scamwatch.gov.au). If you think you’ve been scammed, contact your financial institution immediately.

 

Source: AMP

The new Australian lifestyle isn’t so average

By Robert Wright /June 28,2016/

Overseas holidays, new cars and having the latest technology aren’t considered luxuries anymore, but are standard lifestyle expectations of the new ‘average’ Australian, according to research by MLC.

It’s all about what we define as average, and it’s not so average anymore, with Australians’ perceptions of a middle class standard of living shifting significantly upward in recent decades. The majority of Australians now believe that being ‘average’, or middle class, means having a decent house, a professional job and children in private schools.

People also believe the average Australian should be able to afford overseas travel once a year and extra-curricular activities for their children, such as dance or music lessons.

From hills hoists to landscaped gardens

It’s a far cry from ‘average’ as our parents knew it: a fibro-cement or basic brick house, children in shared rooms, a kitchen with laminated bench tops and an upright stove. Back then, the concept of landscaping was the concrete path your dad laid from the back door to the hills hoist, which stood proudly in the centre of the backyard. Family holidays were often a road trip or camping. If you went on a plane before the age of 18 you were considered pretty well off.

That was then. One generation on, we’ve rendered and extended our homes and installed stone bench tops in the kitchen. We’ve cut down the hills hoists and landscaped our backyards with sandstone bordered garden beds, but we’re out and about so often – holidaying overseas, dining out, or driving kids to extra-curricular activities – that we don’t often use them.

Ultimately we’ve redefined what we now perceive as the average standard of living – and it’s well above average.

So what do we think the new average Australian has today, in terms of assets?

Some believe the average Australian has assets of more than $1 million. Many also agreed you need an above-average salary to be considered middle class, with the consensus being you need a salary of at least $100,000 or more, potentially also be a white collar worker, have an investment property or the house paid off, and be living in a major metropolitan area.

Are we really better off than most?

But how does our standard of living really compare? Across many measures of wellbeing, Australia performs very well relative to most other countries as measured by the OECD Better Life Index.

Australia ranks above the average in housing, personal security, jobs and earnings, education and skills, subjective well-being, environmental quality, health status and social connections, but below average in work-life balance.

Money, while it cannot buy happiness, is an important means to achieving higher living standards. In Australia, the average household net-adjusted disposable income per capita is US$31,588 a year, more than the OECD average of US$25,908 a year.

Good education and skills are important requisites for finding a job and in Australia, 76% of adults aged 25-64 have completed upper secondary education, close to the OECD average of 75%.

In terms of health, life expectancy at birth in Australia is around 82 years, two years higher than the OECD average of 80 years. Life expectancy for women is 84 years, compared with 80 for men.

In general, Australians are more satisfied with their lives than the OECD average. When asked to rate their general satisfaction with life on a scale from 0 to 10, Australians gave it a 7.3 grade, higher than the OECD average of 6.6.

We’re working longer, and living beyond our means

So what’s the problem, if any? In short, we’re struggling with cash flow, working longer hours and living beyond our means.

Forty-six per-cent of people surveyed said they’re living pay-cheque to pay-cheque to support their lifestyle, while 14% of employees work very long hours, higher than the OECD average, with 21% of men working very long hours compared with 6% for women.

An astounding 85% of people agree that people today live beyond their means. There are also longer-term impacts on retirement savings and confidence, which we will explore in upcoming articles.

In one decade, our perceptions of what comprises an average lifestyle have changed enormously and with that, so has the reality of Australian life. In short we’re living far more for today’s luxuries, than for tomorrow’s certainty.

What can you do?

Consider developing a household budget and reviewing what unnecessary luxuries you could take out that would make a big difference over the long term and may help with your financial security and retirement age.

 

Source: ‘Australia Today’ report. MLC 2016.

Common Myths about Life Insurance

By Robert Wright /March 08,2016/

Most of us like to think that insurance is a set and forget proposition that we pay for without too much consideration.  However no one can predict the future. Illness or injury can strike at any time with potentially devastating consequences. Australian Bureau of Statistics data shows that medical illnesses are the leading causes of deaths in Australia[1]. Topping the list are several types of cancer, Ischemic heart disease, stroke, Alzheimer’s disease and dementia. The health risks are clear yet many Australians are manifestly ill-prepared for these life events.

According to Rice Warner’s ‘Underinsurance in Australia’ report[2], an average Australian couple around 40 years of age with children would require life insurance cover of approximately 10 times their annual earnings to repay debt and maintain their current living standards. However very few Australians have anywhere close to this level of insurance cover.

It’s common for people to have an “it won’t happen to me” mentality, but unfortunately the facts speak for themselves. Taking some time to understand more about life insurance is worth its weight in gold as it could protect the financial stability of those you care for if you can no longer work or pass away.

Here we look at some common myths about life insurance.

Myth One: ‘I’m young and healthy. I don’t need life insurance.’

It’s easy to think you don’t need life insurance when you’re young, fit and healthy. But life has a funny way of ‘just happening,’ and if you are about to experience a significant life event such as getting married, having a baby, or buying your first home, you need to consider what could happen if the unexpected were to occur. For instance; if you were left without an income, how would you and your dependents cope financially?

It’s also important to consider what your health may be like in the future. Although you may be young and healthy now, unfortunately deteriorating health is a natural part of life. It’s a good idea to consider taking out life insurance early on in life, when you’re less likely to have any pre-existing medical conditions, as these could make you ineligible for life insurance cover or attract higher premiums when you’re older.

 

Myth Two: ‘I’m single and I don’t have any dependents. I don’t need life insurance.’

According to the Australian Institute of Family Studies[3], the number of Australians living alone is as high as it has ever been with one in four people living in a single person household. And that’s been the case for more than a decade now. While many of us are happy living alone, many of us also have financial responsibilities that aren’t linked to having a partner or a child.

 

Myth Three: ‘Life insurance is only worth it if you pass away.’

One main objective of life insurance is to provide financial security for your loved ones should you pass away. However life insurance also provides protection should you become critically ill, injured in an accident, or permanently disabled.   Should this occur and you are no longer able to work, life insurance can help you to pay for out-of-pocket expenses such as the cost of medical treatment and other household bills.

 

Myth Four: ‘My superannuation fund includes life insurance cover. I don’t need any more.’

Many super funds offer some form of life insurance for members. However it’s often just a very basic level of cover and may not take into account your individual circumstances nor the amount of cover you would really need to maintain your standard of living if you could no longer work.  This is where professional advice can help.  Your financial adviser can tailor an insurance plan that’s designed specifically for you.  This includes a review of any existing insurance policies you may have, an analysis of your financial obligations, and the level of financial support you want for your dependents; both now and into the future.

 

Myth Five: ‘I have private health cover. I don’t need life insurance.’

There’s no denying that private health cover can be immensely beneficial if you require urgent or costly medical treatment. However in many cases it won’t provide cover for ongoing post-operative costs such as any rehabilitation, or those financial obligations that continue while you’re unable to work, such as household bills and your mortgage repayments.  Personal insurance can help by covering these additional expenses, and help protect your family’s financial situation should you be unable to return to work.

Reviewing your insurance arrangements with your financial adviser makes good sense.  Even if it simply confirms that your existing insurance cover is fine. To find out more, contact your adviser.

Source: Capstone

[1] Australian Bureau of Statistics, 2009, Causes of death, released May 2011

[2] Rice Warner ‘Underinsurance in Australia’ report (July 2014)

[3] Australian Family Trends No. 6. Australian Institute of Family Studies, March 2015.