Viewing posts categorised under: All

Season’s Greetings from TNR Wealth Management!

All / 21.12.2021

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6626 3000.

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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Managing the largest movement of wealth in our history

All / 16.12.2021

Managing the largest movement of wealth in our history

More than $3.5 trillion dollars in inherited funds are expected to change hands within Australia during the next 20 years, with Australians enjoying one of the highest inheritance payout rates anywhere in the world.

According to investment bank HSBC’s Future of Retirement report, Australians pass on average $561,000 to their heirs, almost four times the global average of $148,000, with two in every three Australians planning to leave an inheritance.

This payout rate is significantly higher than has been the case for previous generations, with higher property prices and ever-increasing retirement savings creating larger and larger estates to be handed from one generation to the next.

Unlike most OECD countries, strictly speaking, there are no inheritance taxes in Australia, so this has also encouraged Australians to hold on to their estates until they pass, rather than distributing assets to the next generation while they’re alive.

The only exception is superannuation.

If, for example, a person inherits funds from a loved one’s superannuation account and they are not a dependent, the transfer will trigger a 15 per cent death benefit tax, plus Medicare levy.

This can be reduced if the person leaving the funds withdraws the money and places those savings outside superannuation as part of their general estate before they pass. But given most people don’t know exactly when they will die, this is a rare event.

The only other way of avoiding this death benefit tax is to establish a family trust.

However, establishing a family trust can be a complex and expensive option and requires sophisticated legal and tax advice before being implemented. But, as a strategy, it can successfully reduce your tax obligations.

Any asset can be inherited – from property to jewellery, from shares in listed companies to fine art. Even animals can be included in your Will. If you can own it, then it can be passed on to a beneficiary when you die.

Receiving an inheritance, though, can be more complex, and professional advice should be obtained regarding how to best manage and invest any funds received.

Regarding any Centrelink entitlements, inherited funds are included for the purpose of the asset test. Therefore, they are subject to the normal deeming regulations and will impact pension entitlements accordingly.

For most people, the biggest challenge is to find a way to squeeze these funds into superannuation, where they can be invested within a tax benign environment. And once they are used to support an account-based pension, they will effectively become tax-free in terms of any capital gains or income.

This is where you need to seek professional advice.

The rules governing just when and how much can be contributed to super will vary depending on your age, whether you are still working or not, and how much you already have in super.

As estates become larger, it is increasingly important to get good advice to ensure your assets are distributed in line with your wishes. The simpler and more straightforward your Will, the more likely it is to be successfully implemented.

In addition, most advisers encourage clients to put in place a living Will, where, either in writing or via a conversation with your beneficiaries, you outline precisely what your wishes are and the reasons behind them.

By doing this, you are likely to discourage any challenges to your Will – challenges that can be extremely costly. Moreover, given that challenges can be financed by funds held within the estate, the prospect of challenges can in themselves sharply decrease the remaining assets to be distributed.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6626 3000.

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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How much do you know about retirement planning?

All / 09.12.2021

How much do you know about retirement planning?

For most Australians, the approach of retirement is something to look forward to. Yet it can also be a time that fills us with trepidation, after all, we’ve saved for it, worked towards it, but are we really prepared for it?

While Superannuation is a way of saving for life after work, it’s not the only factor you need to consider when planning your retirement.

How much do you know about retirement planning?

Take our quiz and find out!

Q1: How much savings do you need to retire?

  1. About $250,000 for each person in your household.
  2. It depends on what you plan to do in retirement.
  3. Enough to pay off your mortgage.

Q2: What age can you retire?

  1. 55 years
  2. It depends on your date of birth
  3. 65

Q3: Which of the following statements is true in relation to low interest rates?

  1. Low interest rates result from a high demand for finance.
  2. Low interest rates aim to encourage saving.
  3. Low interest rates aim to encourage spending.

Q4: Is it possible to outlive your retirement money?

  1. Retirement investments are designed to last a lifetime.
  2. We’re all living longer and we need to plan ahead.
  3. It doesn’t matter – that’s what the pension is for.

Q5: Which of the following is a benefit of transitioning to retirement?

  1. You could pay less tax.
  2. You’re no longer required to contribute to super.
  3. It reduces reliance on retirement savings.

Q6: Which is NOT a concession specifically designed for retirees?

  1. SAPTO (Seniors and pensioners tax offset)
  2. Family tax benefit
  3. 0% tax rate for account-based pension.

Q7: Which of the following is NOT a benefit of the Seniors Australian Health Care Card?

  1. Discount on property rates
  2. Free or discounted healthcare expenses
  3. Discounted lottery entries

Q8: What assets can you have in addition to my home to be eligible for the age pension?

  1. Only the family home is exempt from the assets test.
  2. Investment properties, providing you’re not operating as a property developer.
  3. Various types including investments, personal effects and shares.

ANSWERS & CALL TO ACTION

Q1: How much savings do I need to retire?

  1. About $250,000 for each person in your household.
  2. It depends on what you plan to do in retirement.
  3. Enough to pay off your mortgage.

The amount you’ll need in retirement is largely determined by your personal circumstances. For example, you may have expenses to consider like:

  • a mortgage,
  • rent,
  • medical costs, etc.

The amount you’ll need will also consider what you will be doing with your new freedom. Perhaps you plan to travel, renovate your home or take up a hobby.

The government’s Money Smart website has a basic calculator, designed to give you a ‘ballpark’ estimate of the savings you might need. Go to www.moneysmart.gov.au and search “calculators”. For an accurate guide to your future requirements, you’ll need to look in more detail at your current position, your retirement goals and expectations, and develop a strategy to get you there. This is where professional advice is invaluable.

Q2: What age can you retire?

  1. 55 years
  2. Depends on your date of birth
  3. 65

Retirement age in Australia depends on when you were born. The government applies a formula based on the year and month of your birth, but you can work it out using Money smart’s Super and pension age calculator found on their website.

Go to www.moneysmart.gov.au and search “calculators”.

Q3: Which of the following statements is true in relation to low interest rates?

  1. Low interest rates result from a high demand for finance.
  2. Low interest rates aim to encourage saving.
  3. Low interest rates aim to encourage spending.

Government monetary controllers, in Australia it’s the Reserve Bank, reduce interest rates when they want to encourage consumer spending. The theory is that businesses and individuals with debt, will not need to spend as much servicing their loans and will have more cash in their pockets, which, it is hoped, would find its way into retail and other industries.

Low interest rates tend to happen when an economy experiences an increase in savings and a reduction in borrowing – which can signal a lack of consumer confidence. While governments like us to save, they also hope that lower interest rates will lead to increased borrowing confidence, particularly business borrowing, resulting in greater productivity and economic growth.

Speak to your financial planner to learn about ways to maximise your retirement income in times of low interest rates.

Q4: Is it possible to outlive your retirement money?

  1. Retirement investments are designed to last a lifetime.
  2. We’re all living longer and we need to plan ahead.
  3. It doesn’t matter – that’s what the Age Pension is for.

We’re living longer these days. According to the Australian Institute of Health and Welfare, the average Australian can expect to be in retirement for around 20 years. Even if you own your own home and have no debt, you will still have to cover living expenses, medical, food, insurances, utilities and so on… for twenty years.

Twenty years! Think about it.

Without adequate planning and an appropriate savings strategy, you may not be able to afford those lifestyle goals you’ve been looking forward to – holidays, home renovations, etc., let alone access to emergency cash if the fridge breaks down or your roof springs a leak.

A financial planner will discuss your retirement plans with you, and work with you to create a retirement savings plan that will enable you to retire without financial worries. Don’t you deserve it after all those years of work?

Q5: Which of the following is a benefit of transitioning to retirement?

  1. You could pay less tax.
  2. You’re no longer required to contribute to super.
  3. It reduces reliance on retirement savings.

A transition to retirement (TTR) strategy works by enabling you to boost your retirement savings and pay less tax through salary sacrifice.

You start by rolling your super savings into a retirement income stream. Then you salary sacrifice your wages to boost your super savings. The portion of your salary that you salary sacrifice will be taxed at 15% instead of your normal income tax rate – which for most people is a tax saving.

By salary sacrificing, you’ll receive less money in your take home pay, but you can make up the difference by taking a small income stream from your retirement funds.

A TTR is a complex strategy with conditions attached. If you’re not careful, it may result in you having less money to retire on, but done right, it can be a terrific way to boost retirement savings and ease into freedom from work.

As with all financial strategies, be sure to seek qualified advice before making any decisions.

Q6: Which of the following is NOT a tax concession specifically designed for retirees?

  1. SAPTO (Seniors and pensioners tax offset.
  2. Family tax benefit
  3. 0% tax rate for account-based pensions.

Family tax benefit is the correct answer here because it is not a tax concession specifically designed for retirees – it’s designed to support families with the cost of raising children.

The Seniors and pensioners tax offset (SAPTO), and the 0% tax rate for account-based pensions are tax concessions for retirees.

SAPTO is a tax concession that enables eligible retirees to reduce the amount of tax they are liable to pay – in some cases it’s possible to reduce your tax payable to zero. To claim the SAPTO you need to meet certain eligibility criteria. The Australian Tax Office (ATO) website has further information, including a calculator to work out whether you qualify. For details, go to www.ato.gov.au and search SAPTO.

The 0% tax rate for account-based pensions can be particularly beneficial to retirees taking their retirement savings as an income stream rather than a lump sum. This is because the earnings on investments in an account-based pension are tax free, which can be a considerable saving.

Everyone’s situation is different and SAPTO and account-based pensions may not be the most appropriate strategies for you. Additionally there are a number of conditions you’ll need to meet in order to take full advantage of the tax concessions.

A qualified financial planner will be able to advise you as to whether you meet the criteria, and assist you in setting up the most suitable strategy for you.

Q7: Which of the following is NOT a benefit of the Seniors Australian Health Care Card?

  1. Discount on property rates
  2. Free or discounted healthcare expenses
  3. Discounted lotto entries

While the Seniors Australian Health Care Card will not enable you to enter lotteries at a discounted cost, it does provide seniors with discounts and freebies across a broad range of products and services.

Some of the most commonly used benefits of the Seniors Card are:

  • discounts on utilities bills
  • free or discounted rates and health expenses like ambulance trips and dental check-ups
  • discounted activities like movie or theatre tickets
  • some retailers, such as hairdressers or beauticians provide discounted services
  • some cafes and restaurants offer discounted meals

Go to www.servicesaustralia.gov.au for eligibility criteria and further information.

Q8: What assets can you have in addition to your home to be eligible for the age pension?

  1. Only the family home is exempt from the assets test.
  2. Investment properties, providing you’re not operating as a property developer
  3. Various types including investments, personal effects and shares

You can own assets and still qualify for the age pension, and the list of the types of assets is considerable. It includes:

  • financial: bank accounts, shares, securities, loaned money, gold or silver etc.
  • personal belongings: furniture, jewellery, computers, life insurance policies, vehicles, etc.
  • managed investments: funeral bonds, property, unit trusts, life insurance, etc.
  • businesses: shares in partnerships, trusts, private companies, etc.

The value of these assets is calculated on the amount you’d be able to sell them for, and this amount is taken into account when determining your pension eligibility.

The government’s Money Smart website offers a calculator for you to check your pension entitlement against your current income and assets. Go to www.moneysmart.gov.au and search for “calculators”.

So, how did you go?

Retirement planning is one of the most daunting issues facing each of us. Get it right and you can enjoy the next phase of your life living your dream.

But getting it wrong may be costly and leave you unable to afford the lifestyle you’ve worked so hard for.

Contrary to common belief, you’re never too young to begin retirement planning. In fact, the earlier you set up your strategy the more options will be available to you. However it’s important to remember that superannuation is not a set-and-forget investment. Make sure you regularly review your strategy with your planner, ensuring you stay on track.

Similarly, you’re never too old to adjust, amend and tweak your retirement plan. Particularly as retirement approaches, small changes, top-ups and retirement-specific strategies can significantly impact your savings. Review regularly!

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6626 3000.

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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How to create savings while paying off debt

All / 02.12.2021

How to create savings while paying off debt

Over the past 30 years, Australians’ household debt has increased. According to the Reserve Bank of Australia, our household debt-to-income ratio has risen from 70 per cent in the early 1990s to around 190 per cent today. With numbers like this, it’s understandable that you might feel like you’ll never get out of debt. Changing your thinking around your finances, however, and learning how to make sure your money is working for you will reap great rewards. Below, we’ve outlined a few ways you can create savings while paying off debt.

Review your debt and determine what to pay off first

When you’re assessing your financial position, you first need to look at your different types of debt. The most common types of debt are credit card debt, high-interest personal loans, vehicle financing, HECS-HELP loans, and mortgages. You should focus on paying off high-interest debts first.

Review your household budget

If you don’t have a household budget, review your bank statements for the last few months and put everything into a spreadsheet. Your budget should include fixed expenses (mortgage payments or rent, bills and transport) and the money you’ll set aside for other expenses.

Eliminate unnecessary spending

When you review your spending, you’ll probably find unnecessary transactions. Identifying this unnecessary spending and adding it up will show you how much money you could put towards saving. Of course, you don’t want to feel like you’re depriving yourself and a treat each week is fine. So, set aside a small portion of your money to enjoy yourself while still living within your means.

Pay yourself first

Paying yourself first was a principle made popular in recent years in Robert Kiyosaki’s book, ‘Rich Dad, Poor Dad’. To pay yourself first, set up an automatic savings transfer to move 10% of your income straight to savings each time income hits your bank account. Once you’ve built up some savings, you could invest the capital into a balanced portfolio which will grow over time.

Use credit cards carefully

Make sure you’re using your credit card carefully and paying it off in full each month. It might seem harmless to pay the minimum, but the interest isn’t worth it.

Pay the minimum on your mortgage

It might seem responsible to make extra mortgage payments when you have the cash, but it doesn’t make your money work for you. Once you’ve paid off the minimum on your mortgage, put your leftover capital into an offset account. This will reduce the interest payable on your mortgage while allowing you to build up savings.

Pocket change savings apps

Setting up an account with a micro-investing app is another great way to save. Apps like Raiz round up your spending on purchases to the nearest dollar. It then invests your balance based on your risk appetite.

Looking at the numbers – how you can create savings while paying off debt

Jessica’s take-home salary is $5,000 per month. She sets up an automatic monthly transfer of $500 to her savings account. At the end of year two, she has $12,000 saved. If Jessica takes her savings balance, invests it in a low-cost fund returning an average of 7% per annum and continues depositing $500 per month, she will have a balance of approximately $106,000 after ten years. This doesn’t factor in the fact that Jessica’s income will increase over that time too. Over this time, you’ll have continued to pay-off your debt, and you’ll have built up a healthy nest egg.

Consistent small actions over time lead to big results

 The hard thing about debt is you often feel like you’ll never be in a comfortable financial position. It’s the small, consistent actions over time; however, that will pay great dividends in the future. Everyone’s financial situation is different, so make sure you speak to a financial adviser to discuss your unique situation and put together a strategy.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6626 3000.

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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How an increase to super may result in a pay cut

All / 25.11.2021

How an increase to super may result in a pay cut

The super guarantee (SG) is the minimum percentage of ordinary earnings that employers must contribute to superannuation for their eligible employees.

After years being stuck at 9.5% the SG rate is on the move again. It increased from 9.5% to 10% on 1 July 2021, and will increase by a further 0.5% each year until it reaches 12% from July 2025.

More money into super to provide a more secure retirement? What’s not to like about that? Well, it depends on your employment contract as to whether you are in for a welcome bonus or a nasty surprise when each annual increase in the SG kicks in.

Salary plus super, or super included?

If you are paid a base rate plus super then your employer should increase your super contributions by 0.5% with no change to your take-home pay. This is the likely to be the most common (and the best) outcome. It’s possible some employers may take the increases in SG into account when negotiating future wage increases, but this is an indirect and by no means certain outcome.

It’s a different story if you are paid on the basis of a total package, including super. In this case, and provided it doesn’t drop your pay rate below award minimums or the minimum wage, your employer may deduct the additional SG from your take-home pay. Not such a desirable outcome.

What can you do about it?

Just because an employer can reduce take-home pay to make up for the higher SG doesn’t mean they will. Many employers will wear the cost, and if that’s the case with your employer, all well and good. Also bear in mind that employers may use both types of contract, so just because your colleague at the next desk is paid on a salary plus super arrangement, you may not be.

With the outcome entirely up to your employer it’s important to talk to them. Find out if you are affected, what they plan to do, and if necessary see if you can negotiate an appropriate increase to your total package. If you have union representation this may be helpful.

It will all come down to the strength of your bargaining position. Employers who want to keep good employees and avoid the cost of employee turnover may be more willing to carry the cost of the increase. It’s also possible for your employer to take one approach this year and another next year, depending on business conditions.

While the drop in take-home pay after the initial SG increase may be relatively small, by 2025 it will be a much greater amount. It’s important to have that conversation with your employer as soon as possible.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6626 3000.

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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Foundations of a wealthy lifestyle

All / 18.11.2021

Foundations of a wealthy lifestyle

A study conducted by the Australian Stock Exchange reported that nearly 25% of investors over the past two years were aged 18 to 24.

These young Australians were found to be knowledge seekers, keen to take on life and begin their journey towards financial security.

If this describes you, congratulations! You get it, you really do. You’re Next Generation Investors who know that building financial independence starts early.

However, according to the same study, Next Generation Investors, aware of their inexperience, are uncomfortable making financial decisions.

If this is also you, here are our tips for laying the foundations for a wealthy future!

Avoid unnecessary debt

If there’s one thing guaranteed to keep you awake at night it’s debt. Naturally, some debt can’t be avoided and is considered ‘good’ debt, like when you borrow to buy a house.

But ‘bad’ debt is sometimes unnecessary and often comes with high interest; best avoided where possible. You know we’re talking about credit cards, right?

Credit cards can fast-track you into debt-strife, particularly as tap-and-go transactions are just so quick and so easy.

Additionally, while those buy-now-pay-later schemes can be useful for emergencies if, say, your fridge packs up, they’re a trap if you don’t stay in control.

Sure, online shopping and bill-paying means using cards but you can avoid using credit.

Functioning the same as credit cards, debit cards use your money instead of the bank’s. They can be linked to your bank account, or loaded with cash which is handy for keeping track of your spending, as you can only spend as much as you’ve loaded.

If you do end up with debt, be accountable. Pretending it’s not there won’t make it go away. Further, unpaid bills can grow through late fees and penalties.

Read the fine print on contracts and understand what you’ve signed up for. Late payments and loan defaults can result in legal action, even bankruptcy, destroying your credit rating for years!

Pay down debt as soon as you can by:

  • making additional payments where possible.
  • paying above the minimum monthly amount.
  • consolidating debts, and negotiating a better deal.
  • prioritising debts with the highest interest rate.

Track spending

On the topic of spending, get into the habit of tracking yours. Using a simple spreadsheet, or an app from your bank, log your purchases and reconcile spending with receipts.

You’ll see exactly where your money is going and spot any areas of unnecessary spending, like those items you really don’t need but are the coolest ‘must-haves’.

Don’t fall for it; ‘must-have’ is a marketing term. True must-haves are basics like food, shelter, transport and medical – not the latest trends and gadgets.

We’re not saying don’t treat yourself occasionally, but to pause and consider whether the item is really worth burdening yourself.

Superannuation

Think you’re too young to worry about superannuation? Prefer to put your money toward something for now rather than later?

You may be right, but don’t dismiss super altogether. Here are some things you can do that won’t impact your current finances:

  • Ensure your employer is contributing the correct amount of super. If you are earning more than $450, pre-tax in any calendar month, your employer must contribute 10% to a super fund on your behalf. These contributions are Superannuation Guarantee Contributions (SGC) and they are compulsory.
  • Low-income earners may qualify for Government Co-contributions where the government contributes up to $500 to your super fund. When you lodge your tax return, your eligibility is automatically assessed, and if you qualify the government deposits directly into your super account.
  • Put unforeseen cash into super. Sure, you’re locking it away, but it’s money you weren’t expecting anyway! The longer it’s in super, the more it can potentially grow.

Save Vs Spend

You’re entitled to live, and you’re entitled to a social life. We’re not saying save or spend, we’re suggesting you can do a bit of both.

This is how it works:

 Scenario 1Scenario 2Scenario 3
Initial Deposit$1,000$1,000$1,000
Interest Rate2% PA2% PA2% PA
Regular DepositN/A$50 per month$100 per month

Each scenario is based on a $1,000 initial deposit with 2% PA interest calculated monthly. In Scenario 1 no further deposits are made. Scenario 2: shows $50 monthly deposits, and Scenario 3: $100 monthly deposits.

Adjust the figures to suit your personal budget and commit to saving a small amount each pay while still enjoying a life. Have the amount automatically deducted from your account and soon you won’t even miss it!

Regular savings accounts are available from banks and other financial institutions, and offer a variety of arrangements. For example:

  • Your initial deposit can be as little as $50.
  • Some pay bonus interest if no withdrawals are made in a month.
  • Some offer higher interest for 18 – 24 year olds.

Do your research, particularly websites providing independent product comparisons.

Seek advice

A professional financial planner can tailor a plan specifically for you. They will consider your debt, income, goals and much more, and work with you to structure a strategy for now, and into the future – you may even be surprised at how inexpensive good advice can be.

So, there you are! The future is laid before you and it’s loaded with potential; all you need to do now is get on with it.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6626 3000.

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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How much can we spend in retirement?

All / 28.10.2021

How much can we spend in retirement?

Having looked forward to retirement for years, it was difficult to accept that two people who had spent decades living happily together could spend so much of their time arguing over money.

“Enough,” I cried in frustration. “We need help from someone who can tell us just how much you can spend on a new car to tow the caravan and how much I can spend on updating a twenty-year-old kitchen without us running out of money,” I said.

Within days we were in the office of a local financial planner, who had no doubt heard it all before. The starting point, he said, was to determine just how much money we had saved for retirement and then determine if it was in the most tax-effective location – that being superannuation.

From there, he explained we needed to be proactive in our investment choices without taking on too much risk. For example, leaving our retirement funds in bank accounts earning next to nothing in interest might make us feel safe, but it would be a mistake long-term.

Then he set us some homework. First, we both had to go away and write down the ten most important financial goals we wanted to achieve in retirement without consulting each other.

At our second meeting with our financial planner, we were surprised to learn how similar our lists were. Top of both lists was the desire to not run out of money in retirement, to which our financial planner laughed.

This was easily done, he said. Just make sure you never spend more than the income being earnt by your investments. The best way to achieve this? Sit down with me each year, and we’ll go through how much money your investments have made and set your income for the year ahead accordingly.

It soon became obvious our biggest area of disagreement was that my husband wanted to leave a substantial legacy to our children, whereas I did not.

After much discussion, we finally agreed that we would both be happy as long as the children inherited the family home. If there were extra funds available to be left to them, well, that was all well and good, but we agreed it was not a priority.

Another key area of contention was what to do if we needed additional care as we grew older and, more importantly, what we would do if one or both of us needed to go into an aged care facility.

Again, our financial planner had talked many people through these issues, and we felt much more relaxed once we understood all our options. It seems lots of people face these same issues every day.

As our financial planner pointed out to us, the fact that we owned a substantial family home in a capital city was almost like a financial safety net for us, and we could always use the downsizer rules to boost our superannuation if needed.

Interestingly the areas that had been causing the most arguments were the easiest to solve. Once we worked out exactly how much money was in the kitty to support us in retirement, we both agreed to spend a bit less on the new kitchen and car to ensure we didn’t run out of money.

With our money dispute resolved, for now, and a plan in place for our future retirement spending, we were both relieved and thankful we’d put in the effort to seek expert advice from a financial adviser.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6626 3000.

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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Investing in trends

All / 14.10.2021

Investing in trends

What are some of the big ideas, the themes, that are likely to influence the economy, both locally and globally, in coming years? How about Australia’s aging population? As we collectively grow older we should see increasing demand for assisted accommodation, leisure and entertainment services, escorted travel, pharmaceuticals, healthcare and more. Waste is a growing problem. What does this mean for the development of new recycling technologies and recycled products? Which is the next emerging market or technology set to grow at a spectacular rate?

Picking the right trend and investing at the right time can deliver quite a boost to a portfolio’s performance.

Traditionally, thematic investing has involved buying numerous shares in relevant companies or trying to find a typical managed fund that matches to some degree with the selected theme. But as more trends emerge an increasing number of exchange traded funds (ETFs) have appeared that precisely target a range themes.

ETF basics

As their name suggests, ETFs are managed investment funds that are traded on a stock exchange. Their units are bought and sold in the same way as shares so, unlike unlisted managed funds, it’s possible to enter or exit a position in a matter of minutes. Most ETFs follow a specific index or track a benchmark. For example, an S&P/ASX 200 index ETF will deliver the performance (less fees) of Australia’s 200 largest companies. With relatively low fees and transaction costs ETFs provide a convenient way to construct balanced and internally diversified share portfolios.

While ETFs have historically tracked the major indices (ASX200, S&P500, FTSE, etc) a growing number of ETFs now cater to more focused investing. Investors can now easily gain access to companies engaged in cloud computing, biotech, artificial intelligence, cybersecurity, climate change mitigation and many more niches.

Electric dreams

One investor taken with the thematic approach is James. He has heard that in the not-too-distant future a number of countries plan to phase out the sale of cars powered by fossil fuels. This, he believes, will massively increase demand for battery electric vehicles (EVs) and the components they are made from. James anticipates that this will see not only EV manufacturers, but also lithium miners and the companies that are developing new battery technologies experience massive growth and generate profits to match.

To back his conviction James could buy shares in a range of EV makers, lithium miners and battery companies. However this may create a mountain of paperwork and incur multiple brokerage charges on relatively small holdings.

Or he could make use of one or more of the growing number of exchange traded funds (ETFs) that cater to his interests.

James does some homework and discovers a battery technology and lithium ETF that invests in EV companies, lithium miners and battery technology companies – just what he was looking for.

A word of caution

There are no guarantees that thematic investing will deliver higher returns. The ‘tech wreck’ of 2000 provides one enduring lesson. So no matter how compelling any thematic story might be the basic rules of investment still apply, starting with ‘don’t put all your eggs in one basket’.

But if you want to add another dimension to your portfolio, keep an eye on the trends that are constantly emerging, decide which ones might be worth investing in, and ask your financial adviser for an objective opinion of your pet themes.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6626 3000.

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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Why financial advice may be your best investment

All / 07.10.2021

Why financial advice may be your best investment

It is commonly assumed that seeking financial advice is for the wealthy, and it only helps the rich become richer, yet financial advice can prove useful to anyone who wishes to better their financial future.

Financial advice is like getting a health check-up for your financial situation. Your financial adviser is like your personal trainer, assisting you in achieving your best possible financial health.

Seeking professional financial advice provides you with a clear path to achieve your financial goals, and that is an investment worth making.

Why invest in financial advice?

Imagine a couple in their early 30s who started investing in the share market in 2019 to save for their children’s private school fees over the next 10 years. Their shares dropped by 35% during the March 2020 market crash caused by the COVID-19 global pandemic. They panic and sell their shares, incurring a loss. However, a good financial adviser would explain the risks, provide examples from their experience and probably would have advised them to hold the course because theirs was a 10-year long term plan. Within a year, the share markets recovered and are now higher than ever.

Financial advice isn’t only about investing your money in the share market. Want to save to buy your first home? Want to protect your children in case of your death? Want to enjoy a comfortable retirement? Don’t understand what to do with your super or how to invest in the share market? Think of a financial adviser as a one-stop shop for the majority of your financial issues in life.

Come to think of it, be it your parents telling you to save money from your first job or an Instagram ‘finfluencer’ explaining the benefits of compound interest while dancing to a trendy song, these are all informal pieces of financial advice you receive throughout your lifetime.

However, a professional adviser can legally provide holistic advice by reviewing your entire financial situation and your risk-taking capacity to recommend an appropriate investment portfolio. Also, an adviser’s investment recommendations are based on research which can give you comfort over your decisions rather than constantly worrying about the investment you made based on your work colleague’s stock ‘tip’.

Is financial advice cost effective?

The financial advice industry has undergone a monumental transformation following the Financial Services Royal Commission of 2017-2019. As a result, new education and compliance requirements have been legislated to further protect the client’s best interests.

This has led to a drop in the number of financial advisers Australia-wide – from approximately 28,000 in 2018 to just 19,000 in 2021.

The silver lining here is that while there are fewer advisers to choose from, the quality of advice is deemed to improve exponentially.

As per Russell Investments “Value of an Adviser” report, advisers added a value of approximately 5.2 per cent to their client’s portfolios in the 2020 COVID-19 pandemic.

Still, the true value of financial advice is much more than comparing the fees you pay against the performance of your investments, or the tax saved on your income.

A financial adviser can be a sounding board for your financial ideas, a resource to answer the simplest or most complex of queries, provide research-backed recommendations, and guide you over the long term based on their experience.

Ready to make the investment?

Your day to day job may not allow you to focus on the financial aspect of your life. In contrast, your financial adviser’s primary daily responsibility is to help you handle your finances efficiently.

So, are you ready for your financial check-up? Take the first step and book an appointment with a financial adviser today.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6626 3000.

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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The art of dividend reinvestment

All / 30.09.2021

The art of dividend reinvestment

The real power of investment comes from compounding returns – the process of putting your investment income straight back to work so it can earn more income. To help their investors reap the rewards of compounding, many companies offer dividend reinvestment plans (DRPs).

The potential benefits of a DRP

Under a DRP, investors can choose to use some or all of their dividends to automatically purchase additional shares in the company. As a sweetener, investors avoid brokerage, and some companies even offer a discount on the share price. This means that dividend payments are working to earn new dividends rather than languishing in low-interest bank accounts.

Participants in DRPs can also benefit from dips in the market. When prices are down, a given dividend amount will buy more shares than when prices are high. However, be aware that it is entirely up to each individual company’s management to decide whether or not it will offer a DRP, and that the plan can be suspended or altered at any time.

Who might DRPs suit?

DRPs are suited to investors who do not need the income and who are seeking to maximise the growth of their portfolio. They can also be good for ‘lazy’ investors. Once the nomination to participate in the DRP is made it happens automatically with each dividend payment: no further action required.

That said, DRPs can generate a lot of paperwork. Each purchase is a separate event with its own cost base for capital gains tax (CGT) purposes, and its own start date for the CGT discount.

DRPs are not suited to retirees and people who are drawing down on their portfolios and dependent on all the income it can produce.

Don’t forget the tax

With a DRP the dividend never hits your bank account, but that doesn’t mean you haven’t earned it. It still needs to be declared as income on your tax return, along with its associated franking credits (the tax already paid by the company). Depending on your marginal tax rate, the franking credit may be sufficient to cover any tax payable on the dividend, or you may even receive a refund. If not, you will need to pay some additional tax, so be prepared for this.

Alternatives to DRPs

DRPs can be good for investors who have a positive view of the company they own shares in and are happy to increase their holding in it. Of course, if the company turns out to be a dud, partaking in a DRP will magnify the ultimate losses.

An alternative is to take cash dividends and regularly apply them to purchasing other assets. This can still provide the benefit of compounding while creating an opportunity to further diversify and rebalance the portfolio.

Dividend Reinvestment Plans can be an effective component of an investment growth strategy. The quality of the company offering the plan is paramount, but record keeping and income requirements also need to be managed. Your financial adviser will be able to further explain the potential pros and cons of DRPs and help you decide if they are right for you.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6626 3000.

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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