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Oak Financial Partners / News Library



CLIENT UPDATE MARCH 2013

 

Happy Easter from everyone at Oak Financial Partners!

 

 

 Move ahead with the right plan


 Forward planning can help to maximise your savings before winding down from the work force.

 When it comes to funding your lifestyle after you leave the world of full-time work, one key element can make all the difference: how effectively you plan today. If you’re still working, it’s not too late to take control of your plans for retirement; but it’s never too early either.

 Australians need much more

With an average super balance of $79,002 at retirement,[i] many Australians between the ages of 60 and 64 are not ideally positioned to enjoy a comfortable retirement. According to the Association of Superannuation Funds of Australia (ASFA), a comfortable retirement – as opposed to a modest lifestyle which provides minimal options – enables an older, healthy retiree to: 

  • be involved in a broad range of leisure and recreational activities
  • enjoy a good standard of living and be able to purchase:
    • household goods
    • private health insurance
    • a reasonable car
    • good clothes
    • electronic equipment
    • domestic holiday travel
    • occasional international holiday travel.[ii]

 How much will you need?

 ASFA estimates that if you are a couple, you’ll need $56,236 annually to enjoy a comfortable lifestyle in retirement and if you are single, you’ll need $41,090 annually2.

If, on the other hand, what you need is to maintain your current lifestyle in retirement, you will need approximately 65% of your pre-retirement income. The table below provides an indication of the lump sum you may need to fund such an income.1 

Pre-retirement
income per annum

65% of pre-retirement
income per annum

Lump sum required[iii] at retirement

$30,000

$19,500

$254,571

$50,000

$32,500

$423,721

$80,000

$52,000

$676,701

 

Remember, it’s usually only while you’re still working that you have an opportunity to make a difference to your retirement lifestyle. It also pays to be aware that life expectancy has increased 5.1 years between 1989 and 2009, with life expectancy for males in Australia at around 80 years and 84 years for females[iv]. While this is great news, you need to make sure that your retirement savings can go the distance.

 Make a difference for yourself today

Developing a plan for your retirement will not only help you make the most of your time in the workforce, you’ll gain a valuable understanding of: 

  • your goals
  • your spending habits today and what they’re likely to be in retirement
  • the type of lifestyle you’ll want
  • how much money you’ll need
  • what you can do now to ensure you have choices in retirement.

 Looking ahead 

We can help you to take advantage of the many strategies which can help increase your retirement nest egg, while you’re working. We can discuss salary sacrificing, transition to retirement strategies, debt consolidation, super consolidation and whether you can re-visit your investments to ensure they maximise your savings.

Call us today to start a discussion about how you could enjoy an adequate income stream throughout your retirement.

 

Avoid paying 46.5% tax on your super

 

It is important that you provide your Tax File Number (TFN) to your super fund. Contributions made into your super account such as employer super contributions and any salary sacrifice contributions could be taxed at 46.5% instead of 15% if you haven’t provided your TFN. This could affect your personal tax contributions as your super fund will not process personal after tax contributions made by you or your spouse.

Have your provided your TFN to us? If you are unsure please confirm with us today please call 03 9859 7789.

 

  

The right cover – for a lifetime

 

 Baby boomers may need to keep their insurance for longer in the new multi-generational Australian family of the 21st century.

 The children are all grown up, the school fees are behind you and the mortgage is paid off. So there’s no more need for insurance, right? Not always.

 Feeling the squeeze

Almost one in five Australians now lives in a household with two or more generations of related adults aged 18 years or older.[v] And the family nest is growing. The proportion of young adults aged 20–34 years living in the parental home grew from 13% in 1986 to 18% in 2006.1 The reasons are complex, but rising house prices and financial difficulties aren’t helping.

And many working Australians are also finding themselves caring for elderly parents. It’s wonderful that we’re enjoying longer lives – increasing life expectancy means Australian men can expect to live to age 79 and women to age 84.[vi] But as the population ages, more older Australians may be living with disability and illness, and may need support from their baby boomer children, who are now in their 50s and early 60s.

And reflecting their continuing role as providers, baby boomers are tending to stay in the workforce for longer. In 2011, 62% of Australian men aged 60-64 were still working, compared with 47% a decade earlier.[vii]

 What if the worst happens?

It’s not something we like to think about. But every year illness, injury and even death strikes thousands of Australian families without warning. In 2008, there were 12,430 deaths of married men or women of working age (20 to 64 years). This means that every day, 34 Australian families are losing a family member and over half of these involve children losing a parent.[viii]

If something were to happen to you, it could put pressure on your loved ones. Your elderly parents may have to step in and support their grandchildren, putting them under strain at a time when they may be needing more help themselves. Or if you’re out of action through illness or injury, your grown-up children may have to pick up the pieces and look after you, clipping their wings and making it even harder for them to get ahead.

It could also put pressure on your finances. You may have to fall back on your retirement nest egg to pay the bills and support your family, potentially destroying your dreams of a comfortable retirement.

So even if you’re nearing retirement, you may still need to retain insurance to protect what you’ve built up.

Insurance is for life…

Most superannuation funds offer a basic level of insurance cover. But even taking into account insurance within super, most of us don’t have sufficient cover to protect ourselves and our loved ones, and maintain our lifestyles in the event of illness or injury. In fact, over 95% of Australian families don’t have enough insurance, meaning we are underinsured by a collective $1.37 trillion.4

Many people believe that insurance is something they only need when the children are at school and they are paying off the family home. But it’s important to continue protecting yourself and your family throughout your working life. 

  • When you’re starting off in the workforce – It’s all about being prepared for whatever life brings your way, and about being able to make the most of life knowing you have adequate cover. Also, waiting until later in life to get insurance could affect your insurability, ie you may not be eligible for insurance cover or cover may be subject to exclusions or premium loadings.
  • When you’re building your wealth – Don’t just rely on cover in super. Check what insurance cover you have through your super fund and outside of super, and make sure it’s enough to maintain your lifestyle.
  • When you’re nearing retirement – Don’t cancel your cover too early. If you have adult children and elderly parents potentially relying on your income, it may be worth keeping up some level of cover, even with a reduced premium, rather than cancelling your insurance altogether.

 Financial protection isn’t just about insuring your life. You can also insure against trauma, total and permanent disability and, importantly, loss of income.

 If you’d like to know how much cover you need to protect yourself and your financial dependants, call us today.

 

 

 

 



[i] Source: AMP. (2011). How much is enough?

[ii] Source: Association of Superannuation Funds of Australia. (November 2012). ASFA Retirement Standard.

[iii] Based on a June 2006 AMP annuity quote for a 65-year-old male; 20-year nil residual capital value (RCV); nil indexation.

[iv] Source: Australian Bureau of Statistics. (June 2012). 4102.0 – Australian Social Trends.

[v] Source: Australian Housing and Urban Research Institute. (2012). Multi-generational households in Australian cities.

[vi] Source: Australian Institute of Health and Welfare. (2012). Changes in Life Expectancy and Disability in Australia, 1998 to 2009.

[vii] Source: SMH. (9 February 2012). Working longer, retiring stronger by Tim Colebatch.

[viii] Source: Lifewise/NATSEM. (February 2010). The Lifewise/NATSEM underinsurance report: Understanding the social and economic cost of underinsurance.

 

 

What you need to know

Any advice contained in this article is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regard to those matters. If you decide to purchase or vary a financial product, your financial planner, our practice, AMP Financial Planning Pty Ltd and other companies within the AMP Group will receive fees and other benefits, which will be a dollar amount and/or a percentage of either the premium you pay or the value of your investments. You can ask us for more details. 

 

 

How to have a stress-free Christmas |

Oak Financial Partners / How to have a stress-free Christmas



 

While Christmas is one of happiest times of the year, it can also be one of the most stressful when it comes to money. 

With so many additional expenses to account for such as the cost of presents, Christmas food shopping and holiday outings, careful budgeting is essential.

There’s no need to be a scrooge, but there are many simple tips to follow to ensure you enjoy the festive season without risking a financial hangover in the New Year.

 

Tips for controlling silly season spending:       

  1. Get everyone to bring a plate – hosting Christmas lunch is expensive but you can spread the cost by asking everyone to bring a dish. Your family and friends won’t mind being asked to bring a salad or dessert.

 

  1. Be a savvy shopper – set a budget for presents and stick to it. Instead of buying for everyone why not organise a ‘Secret Santa’. Also use catalogues and shop online to find the best deals. Vouchers are a great gift idea because you can use them in the post-Christmas sales and get more bang for your buck. Don’t forget many toy shops offer no deposit lay-bys right up until Christmas.  

 

  1. Go easy on the credit – while credit cards are convenient, they can be addictive over the Christmas period and undo a well-planned budget. Avoid buying gifts with credit, unless you are going to be able to pay off your card before interest is charged. You don’t want to be still paying off Christmas well into the New Year.

 

  1. Start paying off your holiday now – if you’re going away over the Christmas break, try to pay off your accommodation costs in instalments before you leave. Make sure you holiday within your budget and avoid paying for expensive overseas travel on your credit card if you won’t be able to pay it off quickly.

 

  1. Bake it or make it – if you have a talent for craft or baking you can create inexpensive presents such as home-made fruit cakes, rocky road, jams and relishes. If you can sew, knit or have some other skill, a personalised gift will be even more special.

 

  1. Budget for New Year expenses – when doing your Christmas budget, don’t forget to factor in some of the big expenses you’ll be facing in the New Year. If you’ve got children, be mindful that all those back to school costs are just around the corner. You’ll also have a new round of bills starting to roll in, such as rates, electricity and phone bills.

 So with a little thought and planning now, it is possible to have a jolly festive  season without blowing a hole in the budget.

 Once the fun of Christmas is over and the summer holidays a distant memory,  you can then look forward to getting off to a flying financial start in 2013.

 

 Oak Financial Partners is an Authorised Representative of AMP Financial Planning Pty Ltd, ABN 89 051    208 327, AFS Licence No. 232706. 

 Any advice given is general only and has not taken into account your objectives, financial situation or    needs. Because of this, before acting on any advice, you should consult a financial planner to

 consider how appropriate the  advice is to your objectives, financial situation and needs.

Client Update October 2012 |

Oak Financial Partners / Client Update October 2012



 

Sensible things to do with your extra money

 

If you find yourself with additional money at the end of the month such as a tax refund, a bonus, or an inheritance, you might be tempted to indulge on things you don’t need. 

Here are some ways to spend this money that can give you long-term benefits[i].

  • Pay off debt
  • Generate an emergency savings fund through a high interest savings account
  • Contribute extra to your super (which will save you tax)
  • Consider investing

For large amounts of money, such as from an inheritance or a redundancy payment, you should obtain financial advice. Our advisers have extensive experience and knowledge to help you work out a strategy to make the most of your money.

Taking care of your accounting needs

For your accounting needs, it’s important to ensure you allow yourself enough time to make any adjustments. With this in mind, please contact Chris Arandt (Tax Accountant) on (03) 9859 8791, or alternatively, via your adviser to organise a time to discuss your tax situation.

 

Are you an Australian making the transition to retirement or high income earner?

 If you answered yes to either question, you may need to take note of some of the changes introduced via the 2012/13 Federal Budget to the way superannuation contributions are taxed. These new rules might well affect your retirement plans.

 1.       Higher contributions tax for high income earners 

The federal government is doubling the super contributions tax rate to 30% for Australians earning over $300,000.

 2.       Lower concessional contributions cap for over 50s

 Over the past few years, Australians over age 50 have enjoyed a significant tax break on their super contributions to encourage them to save for their retirement. They have been able               to contribute $50,000 a year towards their super at the 15 per cent concessional rate of tax – that’s double the standard $25,000 annual concessional contributions cap.

 This tax break ended on 30 June 2012, but the government was planning to continue the incentive for Australians aged over 50 with a super balance under $500,000.

 However, the government is now deferring the start of this new system to 1 July 2014.

 The two-year deferral means that everyone, regardless of age, will now be subject to the same $25,000 concessional cap for the 2012/13 and 2013/14 financial years.

 

Stay under the limit

You may need to review your arrangements to make sure you’re not making concessional contributions over the reduced concessional contributions cap. 

Going over the cap attracts a severe penalty. Any contributions exceeding the $25,000 concessional cap will attract an extra 31.5% tax in addition to the standard 15%, potentially matching the highest marginal tax rate.

With significant penalties for exceeding the cap, it’s vital to review your strategy. You don’t want to be faced with an excess contributions tax bill for 2012/13.

 

Plan well

 Many people leave it right to the end of the tax year to look at their super. But it’s worth putting a plan in place at the start of the year to avoid the last minute rush. Early planning means you stay in control all year and can avoid inadvertently breaching the $25,000 concessional cap.

 

Super simple solutions

 Is your super scattered all over? If so, what about any insurance you hold inside it? Get super savvy today by bringing it all together into one account, so you can be better off tomorrow.

 

Lower fees, less paperwork and a better strategy – consolidate your super and you may stand to achieve all three benefits.

 

All in one

 Most of us have more than one super account, often because of job changes. Or we have ‘lost’ track of super accounts we have accumulated over the years. And, that’s how Australians have, on average, three super accounts per person[i].

Among the many reasons to consolidate, the issue of fees is important. Super fees can add up, especially if you are paying multiple member fees across multiple accounts. Over the long term that could mean a lot of money. Instead of paying double or triple the costs you need to, you could be better-off keeping your money in one account where it can compound into more retirement dollars.

Keeping track of different accounts can also be time consuming and the energy required to wade through all that paperwork could be better spent on deciding on a super-related strategy that can maximise your retirement benefits.

 As our existing client, you may already have your superannuation consolidated by us. When changing jobs make sure you have nominated your existing superannuation fund. As our valuable client, we are more than happy to review your current super to match and personalised them with your needs.

 Your financial planner can help you decide which super fund is right for you, by:

 

  • Comparing the benefits of each of your current super funds in view of your own objectives.
  • Considering whether you will be charged fees to leave a fund.
  • Finding any lost super if you have lost contact with a fund.
  • Helping you understand insurance.

Whichever way you look at it, one thing is certain – the more you end up with, the better-off you’ll be.

 

What you need to know

Any advice contained in this article is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regard to those matters. If you decide to purchase or vary a financial product, your financial planner, our practice, AMP Financial Planning Pty Ltd and other companies within the AMP Group will receive fees and other benefits, which will be a dollar amount and/or a percentage of either the premium you pay or the value of your investments. You can ask us for more details.  

[i] https://www.moneysmart.gov.au/tools-and-resources/life-events/getting-a-windfall?

 [i] Australian Institute of Superannuation Trustees (19 March 2012). Media release: Australians still confused about super – poll. Retrieved 21 August 2012 from aist.asn.au.

Five money lessons Dads should teach their kids |

Oak Financial Partners / Five money lessons Dads should teach their kids



 

Father’s Day often gets dads thinking about whether they’ve been the best father they can be to their kids. Have they passed on those important worldly lessons, so their children will lead a happy and successful life?  

While many dads teach their kids practical things such as how to ride a bike or change a tyre, they often forget to share their hard-earned lessons about money.

Just think how much more financially secure we’d all be if we could turn back the clock and start over again, knowing what we do now.

By teaching their children some simple tips about money, dads can help set their kids on track for a prosperous future.

 

Five money secrets dads should share with their children:  

 ·         The magic of money – Talk to your kids about your own financial milestones such as the first big thing you saved up for. Let them know how rewarding it felt to empty your money box on the counter and buy your first skateboard or album. Also, discuss things you wish you had done. Don’t be afraid to talk about your mistakes and what you learned from them.

·         Dodge the debt ­– Mobile phones are a core part of teenagers’ social lives, but they can also be one of the biggest debt traps. Credit card debt and car loans are also common pitfalls for young people, so it’s important to flag the potential dangers with older children. Make sure they understand they need to take responsibility for their own finances.  

·         Every penny counts – It’s a good idea to encourage kids to develop good financial habits early in life. Whether they’re still receiving pocket money or have a part-time job, encourage them to set aside money for spending, saving and investing. Also, teach your children how to be savvy spenders by showing them how to shop around for the best price.

·         The bank of mum and dad – Let your kids know everyone has to contribute to the household, even if it’s by helping with the chores. While parents often want to give their children a better life than they had, it’s easy to overdo it. You can teach kids the value of money by encouraging them to save for some things themselves. After they’ve finished studying, you can also ask them to pay board if they continue living at home as young adults.

·         Save for the future – When older children first begin their working life, it’s tempting for them to blow their new found cash on a flash    set of wheels, designer clothes or going out. Of course this is part of being young, but also encourage them to set some long-term financial goals and discuss how they might achieve them. Saving for a car or deposit for a first home can take years, so the earlier they start the better.

 

Oak Financial Partners is an Authorised Representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No. 232706.

Any advice given is general only and has not taken into account your objectives, financial situation or needs.  Because of this, before acting on any advice, you should consult an accountant, tax professional or financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.