GREYING, WORKING AND CONTRIBUTING

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More of us a working longer and taking a less traditional approach to retirement. Continuing to build up super or spend less of it as we get older can make a big difference for you in retirement. The ageing of the population – as outlined in the latest intergenerational report – together with a growing trend to work past traditional retirement ages inevitably means more of us will want to contribute to super for longer. At Tailored Lifetime Solutions our financial planners specialise in helping people reach their retirement goals

Perhaps you are among the many choosing to extend their working lives into older ages by winding-down their working hours as employees or becoming owner/operators of small businesses.

Certainly, numerous people decide to keep working into their sixties and beyond for the satisfaction that work may give them. Then, of course, there are the financial benefits.

More years in the workforce provides an opportunity to save more for what will be a shorter and therefore less costly retirement. And obviously, there will be more money to meet day-to-day living expenses.

Australia’s changing demographics means more people will need to understand the rules about contributing to super beyond 65 and about whether their personal super contributions are deductible.

As simply explained in the Australian Superannuation Handbook, published by Thomson Reuters, a super fund can accept:

  • Compulsory contributions from an employer regardless of an employee’s age.
  • Personal and salary-sacrificed contributions from members up to 74 years of age. (Beyond 65 years, members must have paid work for at least 40 hours over 30 consecutive days during a financial year. This is known as the “work test”.)

A key question for someone who is winding-down their working life by operating a small business in their own name is whether their personal contributions are deductible.

Superannuation commentator Trish Power has written a valuable article – Who can make tax-deductible contributions? – in the latest issue of online investment newsletter Cuffelinks. (Power publishes the SuperGuide online newsletter.)

As Power explains, a person can usually claim a deduction for personal contributions up to the concessional contributions cap if they are self-employed or an employee who earns less than 10 per cent of their assessable income (salary-sacrificed super and reportable fringe benefits) as an employee.

A plan to extend your working life can be made more attractive if your super contributions are deductible.

If you would like to talk to one of our Financial Planners about your retirement goals call us on 03 9851 0300 to arrange a meeting.

Article originally published by Vanguard Investments Australia.

AUSTRALIAN HOME PRICES AND INTEREST RATES

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The case for the RBA resuming interest rate cuts this year has been fairly clear: commodity prices have fallen more than expected; the $A has remained relatively high; while residential construction and consumer spending are okay the outlook for business investment has deteriorated pointing to overall growth remaining sub-par; and inflation is low. This has seen the cash rate fall to 2.25%. While the RBA left rates on hold at its April meeting, it retains an easing bias pointing to further cuts ahead.

However, the main argument against further rate cuts has been that the housing market is too hot and further rate cuts risk pushing home prices to more unsustainable levels resulting in a more damaging eventual collapse. But how real is this concern?

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WHAT IS RISK IN INVESTING?

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What is risk? Surely that is a stupid question as everyone knows what risk is when it comes to investing. Investopedia (www.investopedia.com) defines risk as “the chance that an investment’s actual return will be different than expected”. It’s actually quite a complex concept because it could mean different things to different people depending on their circumstances and tolerance to it. And it can be highly perverse often being very different to what backward looking statistical measures and common sense might suggest. But it’s worth thinking about because it can impact how you invest.

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INVESTING – THE BASICS

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Investing can sometimes seem complicated. At Tailored Lifetime Solutions, our Financial Planners talk to clients about investing every single day. Their goal is to demystify the subject and help people make some pretty big decisions about their personal goals and how they’re going to achieve them. AMP has put together an introduction video that will help you understand some basics about investing and explain who really is an investor. If you want to know more about investing or if you want help building a plan to achieve your goals, call us today on (03) 9851 0300 to arrange a meeting with one of our Financial Planners.

 

 

 

PROTECTING WHAT MATTERS MOST

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Have you ever wondered what would happen to you and your family if you became ill? Trauma insurance provides a lump sum benefit in the event of being diagnosed with a serious medical condition. It can provide financial relief and certainty at a stressful time, giving you peace of mind so you can focus on recovering. At Tailored Lifetime Solutions we specialise in helping people find the right type and amount of insurance for their individual circumstances. If you would like to discuss your personal insurance needs, call us on (03) 9851 0300 to arrange a meeting with one of our Financial Planners.

 

 

IS IT TIME TO SELL YOUR FAMILY HOME?

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With the children gone and things slowing down it may be time to downsize.

When you’ve got a family, a big house with plenty of room may make sense. But these days a smaller place may suit you better.

Dreams of a change may be beckoning… you may be yearning to wake up to the smell of eucalyptus or doze off with an evening sea breeze.

And if you have a mortgage, smaller payments—or none at all—will help free up some cash for you.

WHY SHOULD I SELL?

You may be tossing and turning over the decision to sell. Before you decide, consider the motivations of other Australians1:

  1. Financial
    Buying a less expensive place means your home’s sale proceeds can free up money to invest, travel or boost your retirement income.
  2. Health
    You may want to live somewhere warmer for health reasons. Or be close to healthcare and specialist services.
  3. Lifestyle
    Perhaps you’d like to live close to family or spend less time looking after your home. You may aim to travel without worrying about who’ll take care of the house.
  4. Opportunity
    The current property market may present a good time to sell—you may have found a house to buy. Current interest rates may be appealing if you plan to borrow.
  5. A fresh start
    Selling may give you the fresh start you’re looking for. It may be time for a change and you’re ready to go.

WHAT ARE THE COSTS?

Sometimes selling can seem like the only logical choice but often, it’s not your only option. Downsizing may bring downsides and unforeseen costs—emotional, practical and financial.

There may be a lifetime of memories in your home and belongings that you and your family have collected. Then there’s the financial side of things—the costs of selling and moving, impacts on the kids’ inheritance and your pension entitlements.

NEXT STEPS

It’s possible that things may work out better in the long term—financially and in other ways—if you stay in your home and change things to fit you. Or selling may work out to be the best option for you.

Tailored Lifetime Solutions team of financial planners are here to help you work through these questions and our dedicated mortgage broker can assist you if you have any lending needs. Call us on (03) 9851 0300 to arrange a meeting.

CHINA – THE USUAL WORRIES, BUT NO BOOM AND NO BUST

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In some ways I find analysing China amusing. First, as long as I can recall numerous commentators have been calling for a Chinese hard landing. And for as long as I can recall they have been wrong.

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SEVEN STEPS TO CUTTING DEBT

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You enjoy a challenge – right? Then step towards financial fitness by cutting your debts this year.

  1. Understand and embrace your debt. Firstly, work out where and what type of debt you have and start to plan how you’re going to cut it down. For example, if you roll multiple debts into one, you may save on fees and interest rates. AMPs education module Good debt bad debt can help you figure this out.
  2. Create a budget. Work out your daily, weekly and monthly spending. There are various tools available to help you do this. Check out MoneyBrilliant to organise your finances online, try ASIC’s TrackMySPEND app or the AMP Budget Planner.
  3. Reframe your thoughts. Think about money in a new way. Tell yourself how proud you’ll be if another $500 comes off your credit card debt instead of going towards new clothes. Make your lunch: buying your lunch every day tends to cost more than making it. So try making your lunch for some extra savings that can then put toward paying off debt.
  4. Work actively with your money. Set up separate accounts for debt payments and monthly bills. Consider using cash instead of EFTPOS – this may make you realise how much money you are actually spending!
  5. Look for larger debt cuts. Can you drive a smaller car so you’re paying less in fuel? Can you use public transport instead of having a car? Can you find a cheaper place to rent? Look at ways you can cut debt in more substantial chunks, as this will mean paying less interest sooner.
  6. Earn some more cash. What about a second job on the weekends? Or, selling your unused goods on eBay or at your local markets.
  7. Reward your progress. Update your budget each week – and reward yourself with a low-cost treat.

Use these steps and you’ll be on the way to reducing your debt in no time. Review your situation in a couple of months – if you’re not progressing as quickly as you’d like, then call Tailored Lifetime Solutions on (03) 9851 0300. Our Financial Planners are specialist in budgeting and will work with you to get you back on track.

TEN TIPS FOR BUYING YOUR FIRST HOME

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Property prices may go up, but there are ways to get onto the property ladder.

We love property in Australia―it’s part of the Australian dream1. About 70% of us live in our own homes. But owning property can seem an impossible dream for first homebuyers with research revealing they hold less than 12% of all home loans2.

Don’t lose heart. Our tips for home ownership may help.

  1. Build your plan – The earlier you start planning, researching and saving, the better off you’ll be.
  2. Work out what’s most important for you in a property – Shortlist suburbs and properties that meet your needs.
  3. Can you take advantage of potentially undervalued suburbs? You may be better off with a more affordable house in a different location that may prove a good investment over time.
  4. Work out costs – Make sure you understand the upfront costs of buying property—for example, stamp duty and lenders mortgage insurance (if it applies). Consider the ongoing costs like loan-interest charges and any relevant strata fees. Our cost of home loan calculator can provide information about other costs.
  5. Gather your deposit – When it comes to saving, work out your income and how much you can save while meeting day-to-day needs—use our budget planner. Then how long it will take you to save your deposit—consider AMP’s savings accounts for competitive interest and ready access to your money.
  6. Work out how much you’re likely to borrow and how you’ll repay the home loan – Use our loan repayments calculator.
  7. Some states may still provide first home buyer grants – Contact your state revenue office.
  8. Choose your lender – Visit several lenders and when you’ve found the right one, arrange financial pre-approval. With a pre-approved home loan from AMP you can benefit from competitive interest rates and terms, and be ready to bid or buy when you find the right property.
  9. Find out more at Q&AMP where we cover all things property.
  10. Consider seeking financial advice. Tailored Lifetime Solutions team of Financial Planners and our dedicated Mortgage Broker are here to help. Contact our office on (03) 9851 0300 to arrange a meeting.

THE AUSTRALIAN ECONOMY STILL IN THE DOLDRUMS

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Through 2013-14 it seemed the Australian economy was starting to transition away from a reliance on mining investment to more broad based growth.Unfortunately this transition has wavered a bit recently and growth has remained below trend. Fortunately, the RBA has recognised the problem and resumed cutting interest rates. This note looks at the outlook for growth and rates and what it means for profits and investors.

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