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Does money bring happiness?

All / 19.10.20170 comments

Does money bring happiness?

The short answer is ‘yes’, but only up to a point. People in richer countries are, collectively, happier than people in poor countries. Within countries, people with higher incomes are generally happier than people on low incomes. Surprisingly, once basic living needs are met, the amount of happiness gained from each additional dollar of income rapidly declines.

What is ‘happiness’?

What is it about money that contributes to happiness? And what does happiness even mean? Perhaps what people are really expressing is contentment or satisfaction with their lives.

Rather than putting us into a perpetual state of bliss, money is more likely to contribute to a sense of security, better health, less stress and, perhaps above all, choice.

It’s interesting to see what choices boost happiness. For example, in something of a paradox, giving money away makes people feel happier than spending it on themselves.

And experiences such as travel or skydiving, or even just going to a movie, provide more enduring satisfaction than material purchases. Good memories, it seems, provide better value than physical possessions.

Happiness planning or financial planning?

What does this have to do with financial planning?

Well, for many people, their financial plan is all about milestones: buying a house, meeting school fees and funding retirement. Important as these things may be, what’s missing is the journey – and no, that doesn’t mean the insurance premiums, super contributions and mortgage repayments. It means Santorini sunsets, sand between the toes and, perhaps more important than anything, time spent with family and friends.

On that basis, instead of financial planning maybe we should call it ‘happiness planning’?

Of course your plan will have a financial component, but it will be focused on the journey of life, rather than financial destinations; on achieving a balance and knowing what’s ‘enough’. It will be more about experiences, bucket lists and relationships than annuities, tax refunds and superannuation.

Putting it into perspective

Yes, money is important in providing choices and experiences, and that’s probably a major reason why richer people report higher levels of happiness.

And yes, your financial planner is going to mainly focus on super and investments and insurance as the means of opening up more options for you. Just don’t let that become the be all and end all.

More people are happily rejecting the idea of a conventional retirement. Technology is helping to blur the lines between work and play, and Millennials are opting to pursue experiences now with the expectation that they will work in some form well beyond today’s typical retirement age.

So ask yourself: what makes you happy? What sort of choices do you want to be able to make? Then share the answers with your financial planner, and ask for a plan that will not only meet your long-term needs but also allow you to indulge your shorter-term whims and desires.

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

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.
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Switch and Save

All / 12.10.20170 comments

Switch and Save

When developing a budget, it’s easy to think that you have no control over costs for essential items such as electricity, particularly when every bill seems to be higher than the last. But if you look closely at your energy usage at home and make a few small changes to reduce your consumption, you will be able to use that extra cash in more enjoyable ways than paying it to an electricity provider. In addition, you are making a valuable contribution to the environment.

The following five tips can help put more money in your pocket.

  1. Install efficient appliances. Compact fluorescent light bulbs use 80% less energy and can last up to eight times longer than conventional bulbs. Similarly, installing a water-saving showerhead can cut water usage by up to 50% and save on water heating costs.
  2. Control the temperature. Set the air-conditioner thermostat at an appropriate level that is optimum for comfort and efficiency. 25°C is the recommended temperature. Wearing appropriate clothing for the climate and installing insulation can reduce the need for additional heating or cooling.
  3. Go natural. Using the sun and fresh air to dry your laundry is a free alternative to the clothes dryer.
  4. Consult the stars. When purchasing new appliances, check the star or energy rating. The more stars, the greater the energy efficiency, and the more you can save.
  5. Turn it off. Turn off appliances if you are no longer using them; even turning off the standby function on electronic equipment will save dollars. A very simple habit is to switch off the light every time you leave a room.

There are many more ideas– just look around your home to discover ways you can switch and save. Don’t forget to involve your kids. It will help them to learn about saving money at the same time.

And finally, with so many energy companies vying for your business, shop around for the best deal for you. Visit the Australian Government’s website https://www.energymadeeasy.gov.au/ to compare energy offers.

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

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.
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If you think you’d never fall for a scam, read this…

All / 05.10.20170 comments

If you are over 50, male, highly educated, financially literate and manage your own super, beware. You’re at a higher risk of being the target (and victim) of organised investment fraud.

This isn’t necessarily because your demographic is particularly gullible. Rather, it’s because you’re more likely to control higher levels of wealth, perhaps as the trustee of a self-managed super fund (SMSF); you’re accustomed to making financial decisions; and you’re actively looking for attractive investment opportunities. What scammer wouldn’t want to target you?

Scams take many forms but when it comes to superannuation, two stand out:

  1. fraudulent investment schemes, and
  2. schemes offering early access to superannuation.

Either way, the result can be a major financial loss and dreams destroyed.

Golden opportunity

One clear warning of a scam is an unsolicited approach. Someone contacts you, usually by phone or email, offering an investment that is ‘both safe and delivering high returns’. This person will often know a lot about you, reciting accurate personal details they claim you provided in a questionnaire you completed earlier. Their story is supported by an apparently authentic website and, enticed by the attractive returns and smooth sales talk, you make an initial investment. At the beginning you receive statements showing your investment is growing steadily prompting you to add further funds. Then things go silent. Their phone number is disconnected, emails bounce and the website disappears, along with any hope of recovering your funds. Your stomach lurches. A cold sweat saturates you. You’ve been scammed.

Wonderful as modern technology is, it makes it easier for fraudsters to appear legitimate and transfer money in an instant. They close down one operation and set up another with ease. It doesn’t help that we give away much of our personal information, and what isn’t available for free can often be purchased by criminals.

Early access

The other major scam that lures many who need money quickly is the promise of early access to superannuation. This is how it works.

Bob’s superannuation is just sitting there, the solution to his financial problems if only he could access it.

He searches the internet for options and an advertisement promising early access to super pops up. This puts Bob in touch with a ‘specialist’ who helps him set up a SMSF, telling him that as the fund trustee he will be able to get hold of his super money. Bob signs the paperwork to set up the fund and rollover his super, but the money doesn’t turn up where it should. Eventually Bob discovers that his retirement savings were transferred to a bank account controlled by the scammer then moved overseas.

Not only has he lost the lot, Bob now faces a big tax bill for accessing his super prematurely. The scammers didn’t tell him that early access to super is only available:

  • in cases of incapacity,
  • to pay for medical treatment if seriously ill,
  • if in severe financial hardship and can’t meet immediate living expenses, or
  • if terminally ill.

Protection is the best cure

A few simple precautions can help protect your super (and other savings) from scammers.

  • Hang up on unsolicited phone calls and delete suspicious emails.
  • Take care when sharing personal information.
  • Visit scamwatch.gov.au for updates on scams that are doing the rounds.
  • If you suspect a scam report it to Scamwatch, even if you haven’t lost any money.
  • Seek advice from a licensed adviser. Legitimate advisers and investment managers appear on ASIC’s list of Australian Financial Service Licence holders.
  • And beware of dating and romance schemes. They are more common than fraudulent investment schemes, result in bigger financial losses, and are targeted at the same demographic!
For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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Salary sacrifice vs personal contributions to super

All / 28.09.20170 comments

Amongst the changes made to superannuation effective 1 July 2017 was the welcome and sensible move to give everyone who makes a personal contribution to super the option of claiming a tax deduction for it. Prior to this date, tax deductions on personal contributions could only be claimed by the “substantially self-employed”.

The upshot is that, if you are an employee, there are now two ways in which you can optimise the tax-effectiveness of your additional super contributions:

  • opt for a salary sacrifice arrangement, whereby your employer makes additional superannuation contributions beyond the compulsory superannuation guarantee (SG) amount from your pre-tax earnings and reduces your salary accordingly; or
  • make a personal contribution and claim a tax deduction when you submit your tax return.

Generally, higher income earners gain the greatest benefit from either of these strategies. Lower income earners may be better off not claiming the tax deduction and receiving a government co-contribution if eligible.

Which option?

For starters, employers don’t have to offer salary sacrifice. If they don’t, claiming a tax deduction is the only option.

Another thing to look out for: if salary sacrifice is available, will your employer still make SG payments on your pre-sacrifice salary? Legally, employers only need to pay SG on the actual salary amount, so for every $1,000 of salary sacrifice you would lose $95 in SG contributions. In this situation, you will most likely be better off claiming a tax deduction.

Fortunately, most employers do the right thing and don’t reduce their SG contributions. The federal government has also announced plans to ensure salary sacrifice does not result in a reduction in SG payments. If this happens, it will pretty much level out the playing field between salary sacrifice and tax-deductible personal contributions, but some subtle distinctions remain.

Let’s look at Jenny and Brian. They both earn $120,000 a year, and want to contribute an extra $12,000 pa ($1,000 per month) to superannuation as concessional (pre-tax) contributions. Jenny opts for salary sacrifice and will receive SG contributions based on her pre-sacrifice salary. Brian decides to make his own contributions and later claim them as a tax deduction.

Both will see their overall annual income tax bill* drop by $4,680. After allowing for 15% tax on the super contributions, they are both better off by $2,880 for the year.

The key difference is that Jenny will enjoy her tax benefit each payday. Brian needs to wait until the end of the financial year and submit his tax return before he can receive any benefit from his choice.

On the other hand, Brian’s regular pay will be more than Jenny’s as his gross income remains at $120,000 pa compared to her $108,000. This gives him more flexibility. For example, he can wait to make his entire contribution just prior to the end of the financial year – if he hasn’t been tempted to spend it in the meantime. However, if he makes regular contributions to his super fund, his net disposable income each month will be lower than Jenny’s. Only when he receives any tax refund might they be back on equal terms.

Beware the rules

While the greatest benefit of extending tax deductibility on personal contributions goes to employees who are unable to access salary sacrifice, it’s still a positive move that provides everyone with flexibility and choice. However, whether you opt for salary sacrifice or claiming a tax deduction, there are rules to be followed. Talk to your financial planner about the best superannuation contribution strategy for you.

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


Disclaimer

Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

*  Including Medicare levy

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Invest for the future not the past

All / 20.09.20170 comments

Investing bears no resemblance to gambling and, unfortunately past ‘form’ seldom provides an indication of future performance.

Many investors are tempted to look at the best performing sector over the past year and then switch their investments accordingly. Beware this can be a recipe for disaster.

In many cases, last year’s poor performer can turn out to be this year’s best – for example, International shares in 2015/16 averaged -2.7% but in 2016/17 became the star performer at 18.9%.

Or vice versa – Australian listed property achieved an average return of 24.6% in 2015/16 but proved to be the worst performing sector in 2016/17 averaging -6.3%. Investors who changed their portfolios to chase those high returns from the previous year would have been seriously hurt.

The simple answer to this lack of form is to establish a portfolio with a mixture of the various investment assets that suits your own objectives and risk profile. Staying with this formula over the long term will invariably provide the most satisfactory outcome, irrespective of the performance of individual assets.

 

Contact us on 02 6621 8544 if you would like to review your portfolio to ensure it’s continuing to meet your needs.

 

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

 

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When was your last financial review?

All / 15.09.20170 comments

The months seem to fly past in a blink of an eye and although it feels like we were celebrating Christmas just a few months ago, it’s looming on the horizon again – another year gone!

Almost every year we see changes to our superannuation system, interest rates, the stock market and the property market.

All of this emphasises the need for regular reviews of your financial strategy and your investment portfolio. A full review should take place on an annual basis and cover such topics as:

  • Have your financial objectives changed as a result of changed business, job or family circumstances?
  • Are you on course to achieving your objectives in the planned timeframe or are adjustments needed?
  • Has there been new legislation or taxation changes which you need to factor into your plan?
  • How have your investments performed and are they appropriate for current market conditions, or would you benefit from rebalancing your portfolio?
  • Are you adequately protected against changing financial and personal risks?

If you’re looking after your own investments, it might be time to ask a professional adviser to take a look at your strategy and portfolio to ensure it’s continuing to meet your changing needs now and into the future. Give us a call.

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


Disclaimer

Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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It’s never too early to start

All / 05.09.20172 comments

When teaching your children to manage their money you are helping your kids grow into financially savvy adults. You might even learn something about your own money habits along the way.

Children see money nearly every day, and as they become old enough to recognise the currency value on coins and notes they’ll want to start counting – just be mindful that very small children and coins don’t mix well.

If you decide to give children pocket money or to pay them for doing age-appropriate chores, encourage saving by giving them a money-box. Get yourself a money-box as well and each time your child puts money away, do so yourself – and vice-versa. It could be fun!

As they get older, open their own bank account. Explain how interest works and talk about their savings goals. If, for example, they want to buy a new bike, discuss how much it will cost and how much they will need to save each week.

When your child is old enough, introduce them to their bank statement and point out any fees and charges. Children often assume that ATMs supply unlimited cash. When making a withdrawal, show them the receipt and explain how the balance has reduced.

Most kids today have mobile phones. This popular object is a great opportunity to teach them about meeting financial obligations. Show them how to put aside money for bills, and allocating the remainder for savings and spending.

Part-time jobs are a standard way for teenagers to earn money. If you believe they are handling their money responsibly you might consider a pre-paid “credit” card. These work similarly to a credit card except they use the owner’s money instead of credit and are an excellent tool for learning how “plastic” works – when there’s no more left, there’s no more left.

Learning early that plastic money is not limitless can avoid a lot of grief later in life. The Australian Securities and Investments Commission (ASIC) reports that the average Australian credit card holder owes close to $4,300 per card, on which they pay around $738 interest each year! However, not all debt is bad; few people buy a home without a mortgage.

Your child’s first debt will likely be a car. It’s tempting to help financially but you’ll probably do them a greater service by encouraging them to borrow. Not only will they earn their own credit history, they will understand the importance of borrowing, the effects of interest and price.

If you decide to lend them money, establish a repayment schedule and be strict.

Teaching your kids good money habits early is a lasting gift. And as the line goes – if you ever think no-one cares about you, try missing a mortgage payment!

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


Disclaimer

Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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Has your life changed recently?

All / 30.08.20170 comments

The busier we get the more we tend to put off the important things. Often the last subject we want to think about is our will or other estate planning requirements. Living life always seems to get in the way! Sometimes that’s not our fault, especially if there has been a crisis or major change in our lives. The irony is that’s exactly when these issues should take a higher priority.

If you or your family have recently (or not so recently) undergone a major life change, you need to update these important documents. A will should be reviewed every three to five years, or when circumstances change to ensure it still meets your needs.

If you have experienced any of the following, it’s time to act.

Marriage/Remarriage
Any existing will is automatically revoked by a marriage or new de facto relationship. For second or subsequent marriages, things can get complicated. Children, families and assets can create challenging estate planning situations.

Family additions
A good will anticipates future children and grandchildren, but you need to review any particular gifts, testamentary trust or guardianship arrangements to ensure the provisions remain current

Divorce
Separation will not revoke your will so it will remain in effect until you divorce. Depending on the state in which you live, your will is either revoked upon divorce or the section referring to your former spouse becomes null and void. As divorce is a major life change, you should seek professional advice as soon as possible.

Adult children
Marriage, separation, divorce, bankruptcy or a new business venture can each have implications for a gift left to an adult child. Would any of these affect your adult children differently?

Inheritance
Suddenly receiving a considerable inheritance in the form of money or property may change the way you want your estate to be distributed.

Executor
Your will doesn’t just involve you – if your executor is unable to handle the responsibility through illness or death, or you simply wish to appoint a different or additional person, make that change now.

Retirement
As one of the biggest changes in life, retirement often instigates considerable estate planning changes. As soon as you have settled your finances for this next stage, review and change your will.

Don’t keep putting this in the “too hard basket”; we can refer you to the appropriate professionals. Then you can get on with living life.

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

 

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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10 Tips to prepare for retirement

All / 25.08.20170 comments

Looking forward to retirement?

 Check out our top 10 tips to make sure you’re on track.

Tip 1: Take stock

How do you want to live in retirement? Now do the numbers. How much will it cost? How much have you saved? Do the figures meet your expectations? If not, what action do you need to take now?

Tip 2: Plan for the rest of your life

Most people are retired longer than they expect. While your health and family longevity will influence your life span, if you’ve survived life’s early risks, such as accidents or illnesses, you could easily live into your nineties or older. Plan for the long term, and don’t forget that you may need extra assistance or care as you get older.

Tip 3: Review your investments

For your savings to last the rest of your life, you need to invest for the long term. And that means getting the investment mix right, with a balance of income and capital growth. Diversifying your investments across cash, fixed interest, shares and property will help reduce risk and achieve smoother, more consistent returns over time.

Tip 4: Stick to your plan

Investments can quickly change in value. While it can be tempting to sell everything when the market falls and put all your money in cash, that’s often the worst thing you can do. It’s important to remain focused on the long term as the market usually recovers if given enough time.

Tip 5: Get the structure right

By changing the way you own investments and receive income, you may be able to reduce the amount of tax you pay while also increasing your Centrelink or DVA benefits. Even if you aren’t eligible for an Age Pension, you may be entitled to discounts and other benefits, which can save money over time.

 

Tip 6: Get your affairs in order

Estate planning allows you to pass on the right assets to the right people at the right time. The first step is putting a will in place, but you should also speak with your solicitor about an Enduring Power of Attorney and medical care directive. These can help your family fulfil your wishes if you’re not able to make decisions yourself. And remember to review your estate plan at least every three years.

Tip 7: Stay fit and healthy

If you stay mentally and physically active, you’re more likely to enjoy a long and healthy life. Take up a hobby, learn a new skill, keep working or volunteer in your community

Tip 8: Re-think the move

Some retirees have moved away from friends and family to their dream location only to realise it wasn’t what they hoped for. If the coast or bush is beckoning, try living there on a temporary basis first. It will give you time to work out if it’s the right move.

Tip 9: Think about the “what ifs”

The last thing you need in retirement is for your finances to be affected if something unexpected happens. Review your personal insurance needs to make sure you are fully protected. Don’t forget health and travel insurance cover, especially if you plan to join the grey nomads.

Tip 10: Get help

Making financial decisions can be complex. Getting the right advice can make a big difference to your retirement.

 

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

 

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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Hitting an insurance home run

All / 18.08.20170 comments

Most people either cringe or yawn when the word insurance is mentioned but regardless of whether you find it scary or boring, managing risk is a necessity in the world in which we now live. Let’s cover all of the bases to help make your home run as easy as possible.

First Base – Income Protection

Considering that over 530,000 people in Australia suffered a work-related injury or illness in 2013/14, what would your future look like if suddenly you were unable to work?

For most of us, the ability to earn an income is our most valuable asset. Depending on your age, your future income may well be worth far more than a house and its contents, a couple of cars, a boat or caravan all combined. Yet few people properly insure their income, and if illness or injury prevents them from working, financial hardship often results. With around half of us likely to spend more than three months off work due to ill health during our working lives, Income Protection insurance should be the first item on the personal insurance list.

Income Protection or Salary Continuance insurance can pay you a regular amount, usually up to 75% of your normal income if you are unable to work due to illness or injury. Benefits are taxable, and commence after a waiting period. Payments continue to be made until you return to work or until the benefit period expires. The waiting period and the benefit period are selected at the time of application.

 

Second Base – Life & Permanent Disability

Life Insurance pays a lump sum benefit if the policyholder dies. But what happens if they don’t die and can never return to work in their chosen occupation? Total and Permanent Disability (TPD) insurance can help ease the financial burden caused by loss of income by providing a lump sum payment.

Most people underestimate the level of life insurance they need. The insured sum should be enough to clear net debt, cover future expenses such as school fees, and provide an adequate replacement for the income that the deceased would have earned through to their normal retirement age. For a breadwinner with young children, an appropriate amount may be well in excess of $1 million. This cover is also important for primary care givers to ensure the children are properly cared for.

Third Base – Trauma Cover

Trauma Insurance fills a gap between Income Protection, Life and TPD Insurance. It was designed by a doctor who found that his patients’ recoveries were hampered by their concerns over the financial burden caused by major illness. Trauma Insurance pays a lump sum benefit on the occurrence of a specified condition such as cancer, heart attack or stroke, which can strike at any age. It often provides a benefit when neither Income Protection nor TPD Insurance claims can be made.

Unlike Income Protection, where the benefit is paid if you are unable to work regardless of the nature of the illness, trauma payments are based upon the specific illness, not the degree of disability.

 

Trauma Insurance is designed to cover out-of-pocket medical expenses and other costs associated with major illness, and to allow recovery to take place without financial worry. It isn’t a replacement for the other types of personal insurance. A comprehensive insurance portfolio will include Life, TPD, Income Protection and Trauma Insurance.

Home Base – General Insurance

Most people insure their house and contents, motor vehicles and other possessions. The key here is to make sure that all possessions are covered for full replacement value. Insurance companies provide guides on their websites to determine an appropriate level of cover. Don’t forget valuables like jewellery, antiques or artwork, which often have to be separately noted in the cover.

A super way to insure

Most superannuation funds (and all industry funds) offer Life and Permanent Disability Insurance.

There are a number of advantages in holding life insurance inside your super fund.

Super funds can often negotiate wholesale insurance rates, so premiums for their life insurance are often lower than can otherwise be obtained as an individual. In addition, premiums are paid from your superannuation balance. Whilst this reduces your ultimate retirement benefit, the relative effect is usually small, and by relieving the strain on the household budget, you may be able to increase your overall savings. The main advantage of insurance held in super is that the premiums are tax-deductible to the fund, which ultimately reduces your cost of insurance.

When you join a superannuation fund you may be offered a minimum level of insurance. This is rarely enough to provide adequate cover and it’s up to you to request an appropriate level. Depending on your age, medical history and the level of cover you require, you may also need to undergo a medical examination.

When leaving a superannuation fund you should find out what happens to your insurance cover. You may be offered a “continuation option”, which is an ongoing policy provided by the insurance company. If you don’t take this up within the period that the offer covers, you may find yourself without insurance. If this happens, and if there has been a change in your health, it may be difficult and cost much more to obtain replacement cover in the future.

Find a Coach

Insurance is a complex area. Policies vary in their detail and insurance companies differ in their approach to processing both applications and claims.

Each type of insurance has a role to play and it is a job for an expert to work out the right amount of each type for you. You should also seek expert advice whenever you consider allowing a policy to lapse to ensure you are fully aware of the potential consequences.

We can analyse your insurance needs and recommend cover that’s right for you and your budget. After all, you don’t want to strike out before reaching first base.

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

 

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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