Tag Archives: Retirement Planning

Rethinking retirement

By Robert Wright /February 04,2021/

If you were working towards a retirement date and Coronavirus has meant a change of plans, it can be hard to move the goal posts. Could you gradually reduce your hours to make stretching out your years at work more do-able?

If your work is stressful, consider whether you could reduce or change your responsibilities. For jobs that are physically demanding, do you have the option to shift into a role that is less hands-on – such as training others, workplace safety or compliance monitoring?

Or, if the idea of extending out your retirement date is unappealing, another option could be taking some time off. If you have accrued a lot of annual or long-service leave, then the financial impact may be negligible.

Three smart super strategies

Making changes to your super can help you get your plans back on track so you can achieve your retirement goals. Here are some strategies that can boost your super or minimise your tax in your final years of working.

Make additional contributions. You can add more to your super using either your before-tax salary or your take-home pay. The most common ways to do this are by salary sacrificing, making a tax-deductible personal contribution, using some of your unused concessional cap from previous financial years in a catch-up contribution, or using the bring-forward rule to make a large, one-off contribution to your super.

Transition-to-retirement (TTR) strategy. A TTR strategy lets you access some of your super while you’re still working. It’s only available for people who are aged 60 or above. The most common way to use this strategy is to continue working full-time and salary sacrificing into super while drawing a tax-free income from your TTR pension. So while you’re growing your super you’re also paying less tax in the lead up to retirement.

Review your asset allocation: Seek financial advice to review how your super is being invested to meet your retirement needs.

Try a different kind of work

If you’re not enjoying your work, or your work has finished up, then consider lifting your gaze towards something new:

Learn. Flexible learning options have never been more accessible or plentiful. They can also be very affordable, with low cost or free courses bringing easy learning within reach. The time it will take you to complete a course is a small investment for the benefit of undertaking more satisfying work.

Start a business. Business ownership is a popular option for 8% of Australians aged between 50 and 64. What’s more, if you start a business as an older person, you have a better chance of success than if you’d started at an earlier stage of life. This is because you’ve accumulated valuable work experience, built broad and deep professional networks, and developed life skills, wisdom and resilience that could help your business succeed. It’s important to remember that starting a business requires upfront capital investment and there are risks involved in running a business, so it’s best to seek professional advice before you do so.

Career coaching. If you want to change what you do for work, a career coach can help you explore your options and advise you on your next step.

Get a sounding board

When you have plans in place, it is unsettling when they are disrupted. Your financial adviser can explore your options with you, advise you on the impact of different strategies and recommend away forward. So it’s important to check in with them, especially before you make any changes to your super.

Source: Colonial First State

Why it’s important to think about insurance ahead of retirement

By Robert Wright /November 18,2020/

If retirement’s coming up on your horizon, you’ll be keen to make sure your plans stay on track. It makes sense to concentrate on things you can control, such as insurance.

Too-high premiums can chew away at the foundations of your savings, at a time when they’re more important than ever. Under-insure and one day your floor may collapse, undone by events you can’t foresee.

Cover for a changing life

As you get close to retirement, you may want to make sure you’re holding the right insurance for the lifestyle you want. Here’s a simple checklist that may help:

Ask yourself how much money your family would have if you were to pass away or become disabled.
Compare that with how much money your family might need in the same situation, including how they’d manage paying for day-to-day costs like child-care and mortgages.
The difference between the two can help you work out how much insurance you may need.

Many of us take out insurance and are done with it – it’s enough to know we have the proverbial rainy day covered off. However, with economic clouds gathering, now’s a good time to review what you’ve already got and assess if it’s still right for you and your needs.

So, dig out your existing insurance agreements, taking special note of when they’re due to expire and your continued eligibility for the policies they hold.

An important area for many Australians is insurance held inside superannuation.

Insurance inside super

Insurance inside super can help us out when we really need it. Like any type of insurance, it works best when you’ve got the right level of protection for your situation. As you head towards retirement and your life changes, so might your priorities.

As well as life insurance, you might have total and permanent disablement (TPD) inside super. TPD cover may provide you with a lump-sum payment if you suffer a disability that prevents you from ever working again.

TPD could help you pay for ongoing medical expenses, alterations to your home to make day-to-day life easier and help provide future financial stability.

Total salary continuance, also known as income protection, is designed to pay a monthly benefit of up to 75% of your pre-disability regular income if you’re unable to work due to injury or illness.

Typically, within super, income protection provides you with cover either for a two-year or five-year period or until you turn 65, depending on the terms in your employer plan.

What to look out for

There are pros and cons of insurance within super. Things to think about if you’re approaching retirement include:

Cover through super may end when you reach a certain age (usually 65 or 70). That’s generally different to cover that’s outside a super account.
Taxes may be applied to TPD benefits depending on your age.
Claim payments may take longer, as the money is normally paid by the insurer to the trustee of the super fund before it’s paid to you or your dependants.

Don’t double up and stay flexible

As part of your review, it’s also a good idea to check insurance you hold inside super against other policies you might have outside super.

Then compare your cover, check whether you have any insurance double ups – if you have more than one super account with the same type of insurance, you may be paying for more insurance than you need.

As well as comparing the level of cover you get, consider any exclusions, such as the treatment of any pre-existing medical conditions, and waiting periods. Remember that if you do cancel your insurance, you might lose access to features and benefits and may not be able to sign back up at the same rate.

It’s also important to disclose your situation to your insurer honestly. Otherwise, the insurer may be entitled to refuse your claim.

Any change calls for flexible thinking, whatever age you are. The lead up to retirement is a great time to review your insurance and adapt to changing circumstances.

Source: AMP

Many Aussies in the dark about retirement

By Robert Wright /November 18,2020/

There’s always been a lot of unknowns when it comes to retirement but throw a global pandemic into the mix, and we’re feeling more uncertainty than ever before. Things we once thought of as quite certain– like being employed, getting decent returns on investments and savings, and a continual rise in house prices – seemingly changed overnight.

And while that’s all led to a whopping 76% of us believing it’s more important than ever to plan for a secure financial future, we still don’t know what that means when it comes to retirement.

The first step is figuring out how much you need. Once you know the figure you’re aiming for, how much you currently have, and how many years you are away from finishing work, you can put a plan in place to help you reach your retirement savings goals.

Ways you might consider doing this include:

Topping up super with additional contributions. (Be aware of contribution caps).
Replacing any super that’s been accessed through the COVID early release of super scheme.
Paying down personal debt like loans or credit cards.
Making additional home loan repayments so you own your home sooner.

Consolidating your super accounts so you aren’t paying multiple fees. (Check you don’t lose important insurance benefits or won’t be charged an exit fee first).

Plan to protect retirement savings

COVID has made us pay closer attention to how our retirement savings are invested and some people may have seen their super balances drop. If you’ve got 15 or more years before you retire, chances are, your balance will likely have time to recover with the usual long-term market movements. But there’s no guarantee, and it doesn’t mean you can just sit back and relax.

It’s worthwhile checking what type of superannuation investment product your retirement savings are invested in. Diversified or balanced options can help offer some protection against volatile market swings because they’re made up of assets other than shares, like buildings and other infrastructure (although these are still susceptible to fluctuations).

One of the most important things to do is avoid making hasty decisions. Do your research, and if possible speak to your financial adviser if you’re wondering whether it’s the right time to switch investment options or move your super from one fund to another. There may be a risk of locking in losses or unfavourable tax components that could have a significant impact on the kind of retirement you’d like.

Don’t bank on working for longer

Given what we’ve seen with COVID and the economy, it’s hardly surprising 30% of people said they were worried about sequencing risk – a market crash or downturn which significantly reduces the value of super savings. And if that happened, over 50% of us say we’ll work for longer to build our retirement savings back up.

However, that might not be a failsafe backup plan. ABS data shows that of the people who retired in 2018-19:

21% had to stop working due to sickness, injury or disability
11% retired because they were made redundant or couldn’t find work

Add to that the average retirement age was just 55.4 years, working for longer to top up your super isn’t an option for everyone.

Educating yourself and taking control of your financial future can help alleviate concerns about retirement. Having a plan and feeling financially prepared can give you peace of mind. You spend your life working hard, and deserve to feel excited, not anxious, about retirement.

Source: AMP

How to make a financial plan

By Robert Wright /November 03,2020/

A financial plan can help you build wealth over time, aiding the protection of your financial future. If that sounds like a good idea, it could be good to find a trusted financial adviser who can help you on this journey.

Australians are increasingly recognising the value of financial advice with 27 per cent having received financial advice and 41 per cent of us intending to seek the expertise of a financial adviser in the future.

But that’s not all.

According to research by the Australian Securities and Investments Commission (ASIC), Australians are seeking financial advice for a multitude of reasons, including expertise in areas they might not have, their access to investments that are hard to find, as well as their assistance in helping to create a financial plan to build and protect wealth.

A financial plan helps to set out your future goals and outlines strategies to help achieve them. It’s a way to map your financial path to important events such as planning for a wedding, having a family, saving for a house or having a comfortable retirement – to name a few. Regardless of why you’re in need of one, a financial plan will be different for everyone, depending on life stage, priorities or financial goals.

Financial planning building blocks

The first part of the financial planning process is to find a financial adviser you’re comfortable with. A good place to start is the Financial Planning Association of Australia’s (FPA’s) Find a Planner web site, which hosts a range of different options in your local area, along with their specialisation to help you choose what’s right for you.

When choosing which financial adviser you’d like to work with, it’s a good idea to factor in their expertise and costs, as well as references from other clients or testimonials on their website.

Starting the journey

Once you’ve found a financial adviser you’d like to build a relationship with, sit down and discuss your goals, aspirations and attitude to money. This important fact-finding exercise will give your adviser information to help build out your financial plan.

During the financial planning journey, your adviser may give you advice on potential investments, as well as ways to increase your super balance when planning for retirement. They may also help pull together a budget or recommend insurance policies to suit you, and your family’s, needs.

Since that’s a lot to get through, for your initial meeting, it’s good to come prepared with basic information such as details about your salary, the superannuation you have already accumulated, as well as any debts or assets you have. If you can, also bring along your monthly budget and expenses so they have more visibility of your comings and goings.

It’s important this meeting is also a two-way flow of information, so you can ask questions such as:

The adviser’s own philosophy on wealth creation
How they will communicate with you, and, give you information about how your investments are performing
How and when they will review your plan
Any fees or charges.

After this initial meeting, the adviser may prepare a statement of advice, which will include a strategy for how you may be able to meet your personal goals and objectives. This will include:

A summary of your existing financial position and your life goals.
A list of recommended investments and an explanation for why they have been recommended.
Suggested insurance policies
Fees and charges, you will pay to the adviser.

It’s also a good idea to go through this with your adviser so you understand the consequences of accepting or rejecting their advice.

Protecting your position

Part of developing your financial plan is working out how to protect your assets and your income sources along the way. This will often involve taking out different insurance policies including:

Life insurance: to protect you and your family if you die.
Total and permanent disablement insurance: which may pay out should you suffer an injury, accident or illness that means you are unable to work.
Trauma insurance: which may provide cover should you be unable to work due to conditions such as cancer or heart attack.
Income protection insurance: which may replace your wage if you are unable to work due to illness or injury.
Insurance can help you meet your mortgage repayments and other obligations if you suffer an accident or illness or protect you and your family if you are unable to work.

It’s important to consider the right cover for you, your family and your circumstances as part of your financial plan.

Key considerations

It’s easy to assume you don’t need a financial plan because you don’t yet have substantial wealth or assets, or, even because you are too young. But the sooner you start taking control of your wealth, the more confident you will feel about your future and the financial steps you need to take to get there.

Source: BT