Viewing posts from: July 2017

Take advantage of NOW!

All / 21.07.20170 comments

After Kylie completed university and had landed a well-paying job, her only plan was to enjoy her new financial freedom. She had living to do – the future was a long way off and would take care of itself … wouldn’t it?

Kylie’s first purchases were a trendy new hatchback car and expensive clothes suitable for climbing the corporate ladder. Enjoying her exciting lifestyle, she regularly visited restaurants and bars, and took an overseas holiday each year.

According to research conducted by Impact Leaders, Kylie’s way of life is common with one third of 18–34 year olds having no savings and excessive debt.

It’s understandable, after all, when you’re in your twenties and early thirties, thoughts of saving for a home, much less retirement, are easily put aside. But time has a nasty habit of getting away from you – just ask your parents!

A survey by Leading Edge Trends, found that the majority of 18–24 year olds won’t own their own home by retirement, fostered by a ‘buy now, pay later’ mentality. The result is that many will be excluded from home ownership, while others will struggle with late-life mortgages and financial insecurity at retirement.

Back to Kylie.

A few weeks after returning from an African safari, Kylie was informed that her position at work had been made redundant. With no savings behind her, she borrowed from her parents to pay her rent and other regular bills.

Shortly after, Kylie was forced to sell her car and use her credit card to manage everyday expenses.

Fortunately, within six months Kylie found a new job, again with a good salary, but during her brief period of unemployment she’d racked up considerable debt. A large portion of the new salary would go towards her debts. It would take years to recover.

What can you do to ensure your story doesn’t end up like Kylie’s?

Savings – a savings plan doesn’t mean restricting yourself. Even small amounts deducted directly from your wage quickly add up and can become a future home deposit or a safety net for emergencies.

Budget – sounds boring, but a realistic budget can help you to live within your means without relying on credit or feeling like you’re missing out.

Income protection – an insurance policy that pays an income if you’re injured or become too ill to work – perfect for young people starting out on a big career!

Get advice – not just for older or well-off people, a financial adviser helps you to create your budget and savings plan so you can take advantage of enjoying life now.

You might not be interested in buying a house just yet, but how cool would it be if the money were available when you were ready?

You’ll probably be surprised at how inexpensive advice is. Contact us to find out how your future can gain a head start.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.
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Super through the generations

All / 18.07.20170 comments

 

Super in your 20s
This article explains where super comes from, how it grows, how much might be needed to retire on in 40 years’ time and ways to achieve it.

Super in your 30s
This article covers super for the short and long term, options to increase the balance, how much might be needed to retire on in 30 years’ time and ways to achieve it, and insurance through super.

Super in your 40s
This article calculates how much will be needed for retirement in 20 years, how to increase the balance, salary sacrifice vs paying off mortgage, government contributions, and insurance through super.

Super in your 50s
This article explains what to do to improve super balances in potentially the last decade before having to rely on it. It covers salary sacrificing, TTR, investment focus and insurance, and a recommendation to seek professional advice soon.

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The essential ingredient of a financial plan

All / 12.07.20170 comments

Here’s a recipe for a basic financial plan:

Take one or more income sources and pour into a big pot. Add appropriate amounts of life, income protection and permanent disability insurance. Simmer for a few decades while slowly adding superannuation contributions and a dollop of non-super savings. Stir in some constructive debt, but take care to keep a lid on it. Dip into the pot occasionally to taste. Simmer steadily, and consume regularly after retirement.

Hmmm. Pretty bland, isn’t it? More like medicine than minestrone.

What’s missing, of course, is the most important ingredient of all – a generous sprinkling of dreams.

Finding the dream

In a world of almost limitless possibilities and with new things constantly clamouring for attention, it can be surprisingly hard to decide on which dreams you want to pursue. The basic goals of securing your income, protecting your family and building financial independence through retirement are all very sensible and worthy, but what’s going to put the zing into life? What do you really want?

One way to pin down what matters most to you is to make a note every time something sparks a strong visceral response or a genuine interest. It might be a good cause to support, a skill to learn or a new career to pursue. Or it could be an exotic place to visit or a situation you want to change. In fact, it can just about be anything, but whatever ‘it’ is, it will spark a consistent and enduring emotional desire. And you aren’t restricted to just one dream, of course. You’re allowed as many as you like.

Share it

So you’ve found your dream, something that you are prepared to commit time, money and energy to. What next? Well, to become a reality your dreams need to be turned into goals, and that means building plans around them. It also means running your dreams through a reality check, and maybe modifying them if necessary. A trip to Mars next year? It ain’t gonna happen. Next birthday in Paris? That’s much more doable.

While your financial planner may not be the first person you think of sharing your dreams with, it really is worth doing early in the relationship. Whether it’s a specific goal or your lifetime wish list, your adviser can help with the reality checks, work out the financial requirements and craft a strategy that gets you as close to your goals as possible. And yes, that strategy probably will include boring things like superannuation, insurance and savings.

However your adviser will be equally interested in whatever it is that leads to your personal fulfilment. He or she may even help you dream bigger, discover more possibilities and opportunities, and help you stay on track.

The best laid schemes

For all the value of having clear goals life has a knack for tossing up both random obstacles and opportunities. So be flexible in your outlook. Enjoy the journey, whatever life serves up. After all, it might turn out to be a tastier dish than any you originally dreamed.

 

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.
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The ‘what, why and how’ of contributing to super

All / 05.07.20170 comments

Despite frequent changes to its governing rules, superannuation remains, for most people, a tax-effective environment in which to save for retirement. Here’s a quick Q&A on the what, why and how of contributing to superannuation from this point on.

Why should I contribute to super?

Some super contributions and the investment earnings within super funds are taxed at 15%. As this is lower than the marginal tax rate for people earning more than $18,200 per annum, less tax is paid on the money going into super than if it was paid to you as normal income. The higher your marginal tax rate, the greater the benefit.

Earn less than $37,000 per annum? You will receive a Low Income Superannuation Tax Offset (refund) on the tax you’ve paid on contributions, up to an annual cap of $500. This is paid to your super fund and prevents your super contributions from being taxed at a higher rate than your normal income.

What types of contributions can I make?

  • Concessional contributions. These are contributions on which you or your employer has claimed a tax deduction. They are taxed at 15% within the super fund. If you earn more than $250,000 pa you will be taxed an additional 15% on the concessional contributions above this threshold. Concessional contributions include:
    • Compulsory employer (Superannuation Guarantee) contributions. Your employer must pay 9.5% on top of your ordinary time earnings to your super fund when you earn more than $450 per month.
    • Salary sacrificed contributions made from your pre-tax income.
    • Personal contributions on which you claim a tax deduction.

Cap: $25,000 pa. The unused portion can be carried forward and used in future years if your total super balance is under $500,000.

  • Non-concessional contributions. Contributions on which a tax deduction has not been claimed, including:
    • Personal contributions on which you do not claim a tax deduction, for example those in excess of the concessional cap or you are seeking a government co-contribution.
    • Spouse contributions. These can generate a tax offset of up to $540 if your spouse earns less than $40,000 pa.
    • Government co-contributions. Worth up to $500, co-contributions are available if your taxable income is less than $51,813 pa and you make a non-concessional contribution.

Caps: $100,000 pa, or $300,000 if a further two years of contributions are brought forward.

Note: you cannot make non-concessional contributions if your total superannuation balance exceeds the general transfer balance cap (the amount that can be transferred to pension phase), currently $1.6 million.

Who can contribute to super?

You can make personal contributions to super if:

  • you are under 65 years of age;
  • you are aged between 65 and 75 and were gainfully employed (including self-employed) for at least 40 hours over 30 consecutive days during the financial year.

You can claim a tax deduction for these contributions, but make sure you don’t exceed the $25,000 annual cap for concessional contributions from all sources; or the $100,000 cap on non-concessional contributions.

Spouse and government co-contributions can only be received up to age 70 provided you pass the work test.

You are eligible for mandated employer contributions, including Super Guarantee payments, regardless of your age.

Get it right

A successful super contribution strategy can mean the difference between looking forward to retirement and dreading it. This article is provided as an overview. Super is a complex area and further rules apply in some situations. Getting things wrong can be costly so talk to your qualified financial planner, and get the right advice on the best ways to boost your super.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.
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Super in Your 50’s. It’s time to push the pedal down!

All / 05.07.20170 comments

The last article in the series of super through the generations explains what to do to improve super balances in potentially the last decade before having to rely on it. It covers salary sacrificing, TTR, investment focus and insurance, and a recommendation to seek professional advice soon.

If 50 really is the new 40, then life has just begun. The kids are gaining independence or may have left home, and the mortgage could be a thing of the past. Bliss. But galloping towards you is… retirement!.

How are you tracking?

According to the Association of Superannuation Funds of Australia (ASFA), a ‘comfortable’ retirement today costs close to $59,000 per year for a couple. If you and your partner are planning to retire at 55, to afford this retirement lifestyle and secure your future, at least into your mid-eighties, you should be looking at having around $1.02 million in super[i]. Over time, inflation will push these figures higher. Leave retirement to age 65 and a couple will need around $79,300 a year[ii] from a nest egg of about $1.08 million[iii].

Find those numbers a bit daunting? Here are some ways to boost your retirement savings.

Increase your pre-tax contributions

You can ask your employer to reduce your take-home pay and make larger contributions to your super fund. If you are self-employed, you can increase your level of tax-deductible contributions. This strategy is commonly known as ‘salary sacrifice’.

If you are earning between $87,000 and $180,000 per year, any income between those limits is taxed at 39%. Salary sacrifice contributions to your superannuation fund are only taxed at 15%. Sacrificing just $1,000 per month to super will, over the course of a year, see you better off by $2,880 on the tax differences alone. Plus, the earnings on those super contributions will be taxed at only 15%, compared to investment earnings outside of super being taxed at your marginal rate.

Don’t overdo it though. If your salary sacrifice plus superannuation guarantee contributions add up to more than $35,000 this year, the excess is added to your assessable income and taxed at your marginal tax rate. This point will become even more important when the cap reduces to $25,000 per annum from 1 July 2017.

Retiring slowly

Once you reach your preservation age[iv] you might start a ‘transition to retirement’ (TTR) pension from your superannuation fund. The idea is to allow people to reduce working hours without reducing their income.

Keep your money working

There is a tendency to opt for more secure, but lower-return investments as we approach retirement. However, even at retirement your investment horizon may still be decades. With cash and fixed interest producing some of their lowest returns in history, it may be beneficial to keep a significant portion of your portfolio invested in growth assets.

Insurance and death benefits

With the mortgage paid off or much diminished and a growing investment pool, your insurance needs have probably changed. You may be paying for cover you no longer need, premiums may be quite high due to age, and that money might be better applied to boosting your savings. This is a good time to review your insurance cover to ensure it continues to be a match for your changing circumstances.

It’s also a good idea to check the death benefit nomination with your super fund. By making a binding nomination you can ensure that your death benefit goes to the beneficiaries of your choice, and may mean they receive the money more quickly.

Get a plan!

Superannuation provides many opportunities for boosting your retirement wealth. However, it is a complex area and strategies that benefit some people may harm others. Good advice is absolutely essential, and the sooner you sit down with a licensed financial adviser, the better your chances of having more when you reach the finishing line.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

 

 

[i] Sum required to fund an annual income of $59,000 for 30 years at a return of 4% pa after inflation, fees and tax, disregarding any age pension.

[ii] Value of $59,000 today in 10 years at 3% inflation.

[iii] Sum required to fund an annual income of $79,300 for 20 years at a return of 4% pa after inflation, fees and tax, disregarding any age pension.

[iv] Depending on your date of birth, your preservation age will be between 55 and 60. It is the age at which you can access your superannuation under certain conditions.

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