Tag Archives: superannuation

6 ways to get the most out of a financial windfall

Received a large sum of money? Lucky you! By taking practical steps, you can ensure your newfound wealth goes much further…

Research has shown that on average, people who receive an inheritance spend about half of it.1  So how can you be that amazing and eminently sensible one who makes sure your windfall doesn’t just vanish but helps you build a secure financial future? Here are six smart ways.

1. Set money aside

To avoid the temptation of spending it impulsively, rashly and super quickly, you could put the money away temporarily in a deposit account or short-term investment. Leaving the sum aside for one or two months may give you more time to plan, have a think about what you’d like or to engage a professional financial adviser for guidance on using the money wisely.

2. Settle debts

Using a windfall to clear debts can put you on a better financial footing. Consider working with your financial adviser to create a budget that considers all your debt obligations, income and windfall. This can also be a good chance to discuss the opportunity to invest and grow your money.

3. Grow the emergency fund

Building up your emergency fund – or creating one if you haven’t got one – can be another way to make good use of the funds. By increasing the emergency stash to cover expenses for six months, you may be better positioned to handle unexpected events such as a job loss, illness or accidents.  Working out where best to put that can also be done with the assistance of an adviser.

4. Beef up retirement savings

Making extra contributions to your superannuation may help you optimise your windfall. Whether you make non-concessional contributions or, if you are employed, arrange to have a portion of your pre-tax salary paid to your super, increasing your retirement savings can help you secure your financial future.  And don’t get me started on how compound interest can help you out here over all those years to retirement too!

5. Fund your goals

Take the opportunity to build savings for some of your personal goals, such as higher education or travelling to places on your bucket list.  Maybe consider doing this only after you’ve paid off debt and built up that emergency stash!

6. Give to others

Receiving a large windfall can be a chance to help others in need. If you decide to give some money away to those less fortunate, consider donating it to an organisation that’s entitled to receive tax-deductible gifts, so you can claim a tax deduction.  Being philanthropic feels good too!  Websites now also have to tell you how much of the money actually gets to where it’s needed and what is spent on administrative purposes.

Chances are, your future self will be pretty chuffed with you doing such great ‘adulting!’

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1. The Ohio State University, 2012, ‘Most Americans Save Only about Half of their Inheritances, Study Finds’. Available at: https://news.osu.edu/most-americans-save-only-about-half-of-their-inheritances-study-finds—ohio-state-research-and-innovation-communications/.

Here’s why you need income protection

Your ability to earn an income is usually one of your biggest assets, so why not protect it?

Income Prot

A sudden illness or injury can keep you from working and leave you in financial difficulty. You may get help from a worker’s compensation payout or personal savings, but are they enough to help you meet your expenses and financial obligations?

Taking out an income protection (IP) plan may help provide peace of mind that you’ll be able to meet your financial responsibilities and focus on recovering. IP cover may provide a monthly income while you’re unable to work as a result of illness or injury. It generally replaces up to 75 per cent of your income for a set period of time.

Standalone or through super?

Getting your IP cover through your superannuation fund may be a good idea if you want to avoid paying for your insurance out of pocket. But keep in mind that the policies offered through super may not cover all your financial obligations for an extended period of time.

A standalone IP policy may provide more adequate coverage. It may also offer you tax benefits – IP premiums are usually tax deductible when you fund your cover outside super.

Making your policy affordable

If cost is a concern in taking out a standalone plan, there are a few ways you may be able to make your premiums more affordable. One of them could be choosing a longer waiting period before you receive benefits after being unable to work due to illness or injury. Generally, the longer you wait, the lower the premiums you have to pay.

Opting for indemnity cover may also help you keep your insurance costs down. You’ll have to choose between indemnity and agreed-value cover for your IP plan. Under an indemnity policy, your insurer bases the monthly benefit you would be paid on your income at the time you make a claim. For an agreed-value policy, the benefit is based on your income when you apply for coverage. Premiums for indemnity cover are usually lower than for an agreed value policy.

But indemnity policies may vary among providers, so speak to your adviser about which cover may suit you. Your adviser may also help you tailor your plan to meet your income protection needs.

Saving for retirement: Hacks for parents with dependents

You can build your retirement savings while supporting your dependants.

Providing for the kids doesn’t have to come at the expense of stashing funds for retirement. There are ways you can build a sufficient nest egg while supporting your children.  And chances are, you’ll be spending a lot longer in retirement than previous generations… who knew?

Saving for retirement

Forced saving can be your best ally in building your retirement fund. Making voluntary contributions to your super through salary sacrifice can seriously boost your nest egg.  You can make concessional super contributions of up to $25,000 each financial year (which includes your employer’s super guarantee contributions.) The government will tax your salary-sacrificed contributions at 15% which may be much lower than your marginal tax rate.

It may also be worth looking at how and where your super fund invests your money. Choosing a different investment option may help you earn better returns and grow your super.  Do you know what your Investor Risk Profile is?  Conservative?  Balanced?  Aggressive?

Super can be a difficult subject to get your head around. Have a chat with your adviser about how you can boost your super by making voluntary contributions or changing your investment options. Your adviser can also knows about retirement saving options beyond super.

Protecting your income

While you’re building your fund for retirement and still supporting those eating you out of house and home, it’s important to protect your current income in case you’re unable to work due to an illness or injury. Taking out income protection insurance is an incredibly wise precaution against any event that can prevent you from working. This policy may provide a monthly income to support you and your family during your recovery and help you stay on track with your financial commitments.  Premiums are tax deductible.  And if you think about it, why wouldn’t you insure your most important asset? – the ability to earn an income!

It’s also crucial to ensure your dependants are looked after if you die or became seriously ill or disabled. Having life insurance, total and permanent disability cover, and trauma insurance can help you protect what’s important to you.

Get advice

Balancing your need to prepare for retirement and your responsibility to your partner and kids can be tough, but keep in mind that help is always available. Speak to your adviser about how you can provide for your dependants while building a nest egg for a comfortable retirement.

Your future self will thank you for it!

Managing the cost of Insurance

You don’t have to cut corners on your insurance or sacrifice the adequacy of your cover to make your policy more affordable.

A necessary evil?  A must have?  Love it or hate it, you’re likely to need insurance in your life!  But how do you get the most bang for your buck?  This article deals with options available for personal insurances like Life and Total & Permanent Disability, Trauma Insurance and Income Protection cover.

Choosing a payment structure

Choosing stepped premiums in the first few years of your life insurance policy may help you keep the cost of cover low in the beginning. Stepped premiums allow you to start paying your insurance at a lower rate, which then rises as you grow older. Your insurer calculates your premiums on each policy anniversary based on your age, and sometimes with CPI too.

You may consider moving to level premiums as you become more capable of paying your insurance. Although they’re more expensive in the beginning than the stepped structure, level premiums generally offer a good long-term savings because premiums are calculated based on your age when you first take out level premiums.

Using your super

Taking out life insurance through your superannuation fund may lower the cost of insurance because premiums may be paid using concessionally taxed contributions paid from your employer or sacrifices into your super. Premiums can be cheaper because super funds bulk buy insurance policies and can negotiate discounts (group insurance.)  Individually, some offer a 15% discount or rebate off premiums due to the concessionally taxed structure of Superannuation.

But keep in mind that super funds may offer limited cover. Talk to your adviser on how to ensure you have enough cover.  And make sure you don’t constantly erode the value of your retirement savings with large premiums.

Waiting for a longer period

When taking out income protection insurance, you can choose a waiting period. The longer you wait before receiving income benefit payments, the lower your premiums.  Make sure you have enough in savings or an offset account to tide you over – and remember, payments are made 30 days in arrears – so a 30 day waiting period may still mean 60 days before you get paid!

You can also choose between an indemnity policy and an agreed value policy. Taking out indemnity cover may help you keep the costs down because premiums are generally lower than those for agreed value cover.

Income protection premiums are usually tax deductible if you fund your cover outside super, helping make this policy affordable. If you pay your insurance through your super, premiums are generally tax deductible to the super fund.

Getting advice

With so much to consider, seeking advice from a professional financial adviser is important to help make insurance affordable – and manageable – for you and your circumstances.  Give us a call if you’d like some help.  07 5593 0855.

You can save through Super for your First Home!

new scheme may help you make your dream of owning a home come true!!

Ongoing high property prices have made owning a home unattainable for lots of prospective first‑time home buyers.  The First Home Super Saver scheme, passed by the Australian Government in December 2017, may help keep the dream of buying a first home alive and well.

The new scheme helps you save for your first home by allowing you to use the concessionally taxed superannuation environment to build your housing deposit.  Eligible voluntary contributions are limited to $15,000 in any one financial year and $30,000 across all financial years.  They include both voluntary concessional and voluntary non-concessional contributions.

You are able to withdraw these eligible contributions and associated earnings from 1 July 2018 to buy or build a first home. You may be allowed to withdraw 100% of eligible non-concessional contributions and 85% of eligible concessional contributions.

Are you eligible?

To have your contributions released, you must be at least 18 years of age and not have owned property in Australia previously, or have already asked the Commissioner of Taxation to release funds under the scheme.  As a bonus, if you have owned property in the past, you may still qualify if the Commissioner determines that you have suffered a financial difficulty that led to the loss of your property.

The Australian Taxation Office (ATO) will assess eligibility to withdraw contributions on an individual basis.  This basically means that you and your partner or a family member can each apply for a release of contributions to buy the same property!

Once your super fund releases your contributions, the Commissioner of Taxation will withhold tax. This will be calculated at your marginal tax rate less a 30% offset.

You have up to 12 months from the time you receive the first amount to sign a contract to buy or build a house. (But, if you still really need more time, you may apply for an extension of up to 12 months.)

Get advice too!

It’s important to seek professional advice before you consider making or withdrawing voluntary super contributions to buy your first home.  Talk to your adviser to see how the scheme can work for you.  Or we’d be happy to help walk you through it if you still have more questions.

Lost Super?

There are about 14.8 million Aussies with a superannuation account, 40% of which hold more than one account.

Some of that 40% make up the $18 billion in ‘lost super’. Is some of that yours?

Find it

Moved home? Changed your job? Don’t quite remember where your teenage self stashed your super? It’s really pretty easy to track it down.

Combine it

Save on fees, reduce your paperwork, keep track of your hard earned money, grow your retirement fund.  But maybe get advice first!  If your health has changed and getting new insurance is problematic, it may be worth keeping more than one account open.

Get online

Many websites and super funds offer to help find and combine your super. It is quick, easy and free. You can check with your known superannuation provider/s, your MyGov site or the Australian Tax Office.

Grow it

A qualified financial adviser can help you find an appropriate superannuation fund that will grow your hard-earned income ready for your retirement – and the sooner you get on top of this, the better!

Fees are just part of the story, do you also know how your fund has performed?  Are you able to choose your own insurance levels?  Or opt-out of insurance if not required?  Do you know your investment risk profile and which style of investing is best for you?

Truth is, most of us get excited when we find $20 in a pocket or an old handbag… your superannuation is likely worth thousands, and it is YOUR money!  Take care of it!

 

Source: https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Super-statistics/Super-accounts-data/Super-accounts-data-overview/

What should I expect when seeing an Adviser?

What should I expect at my first meeting?

Your initial consultation with a financial planner will give you a chance to get to know each other.  Most provide an initial consultation at their own time and expense.

Your financial planner will explain how their service works, and how it can work for you.  You should receive a Financial Services Guide and an Adviser Profile and have these documents explained to you.  You’ll have the opportunity to talk about your current financial situation and your financial goals.

Some questions to consider before your first meeting:

  • Reflect on what you want in life. Start with the next few years. Are there any changes you’d like to make, or things you’d like to do? What about 5, 10 or 25 years from now? Where do you want to live? What do you want to be doing?  Is retirement on your radar?  Are there specific goals you’d like to meet in the near future?
  • Consider your attitude to money.  Are you a spender or a saver? A risk taker or someone who prefers more certainty? When it comes to spending and managing money, what do you enjoy and what keeps you awake at night?  You can complete a Risk Profile questionnaire that can provide you with you personal risk profile in relation to different investments.  You might be much more aggressive when investing your superannuation than you would be if saving for a home deposit.
  • Think about the financial issues you find most challenging.  Where do you think you could be making better decisions?  What do you think you need to better understand?  Do you know you have downfalls in specific areas?

Talk to your spouse or partner about these issues too. When you visit a financial planner, you’ll want to discuss what it is you want to achieve together as well as your individual dreams.

Many people also neglect to educate their children about money.  What issues did you wish you knew about when you were younger.  Is there something you could pass on to make their life a little easier going forward?

What to bring along

To help your financial planner gain a clearer understanding of your current finances and the services that could be right for you, a little preparation can go a long way. If possible, try to gather the following information before your first consultation:

  • Your income. If it’s easier, feel free to bring in tax documents, especially if you have income from multiple sources or you’re self-employed.  Otherwise, a recent payslip is helpful.
  • Your assets. Including property, superannuation, savings and investments.  Do you also have different structures like Trusts that hold assets?
  • Your budget.  An estimate of where your money goes each month, including your mortgage or rent, personal or business loans and credit card debt will be helpful.
  • Insurance covers. Especially life, disability and income protection policies, if you have them.
  • Questions. In addition to a list of your short and long-term financial objectives, bring any questions or concerns you may have.  And write them down so you don’t forget any!

Your first meeting is informal so don’t worry about gathering all the details if you can’t lay your hands on everything.  The important thing is to get started thinking about your financial future.  If you choose to proceed with your Adviser, you can nail the details in subsequent meetings.

To find out more, contact us and we can guide you through the process.