Three things you may have forgotten to plan for in retirement

Retirement can be an exciting phase in your life. But all the recent changes to superannuation bring with them lifestyle and financial issues you need to be aware of as you plan your retirement.

Retirement means different things to different people. For some, it’s an opportunity to travel, to begin that project they’ve been putting off for years, or to just relax, spend time with the grandkids and dabble in their favourite hobbies. Retirement should be a time to relax and be free.

 

Plan smart for a stress-free retirement

Your retirement should be a time to free yourself from financial stress. Planning and good advice from a qualified financial adviser is the key to a trouble-free retirement.

If you’re considering retirement, there are issues you need to think about and plan for before you take the plunge. Here are three areas retirees commonly overlook in planning for their retirement:

 

  1. Have a re-contributions strategy

Our experience in talking to prospective retirees is that few have heard about a ‘re-contribution strategy’. So, we’d like to take this opportunity to explain what it is and provide some more detail.

Your superannuation entitlements comprise both taxable and tax-fee components. A re-contribution strategy is one where you withdraw your money from your superannuation account and re-contribute that cash back into your fund.

Why a re-contributions strategy may be important

Re-contributing all or part of your withdrawn funds back into your superannuation as a tax-free non-concessional contribution increases the level of tax-free funds in your superannuation account.

This reduces the tax payable on your superannuation pension if you dip into that pension while under 60 years of age. A re-contribution strategy can also lower the tax payable on benefits paid to your beneficiaries when you direct your superannuation benefit to your non-dependent beneficiaries following your death.

 

  1. Death nominations

A lot of retirees often forget death benefits are payable to your dependents or your estate from your superannuation fund upon your death.

There are four forms of death nominations which may be allowed by your superannuation fund.

You can make a binding death benefit nomination while you are alive. This is a written direction to your superannuation trustee establishing who you wish your superannuation death benefits to be distributed to.

Secondly, a reversionary nomination is where a superannuation fund member receiving an income stream nominates a beneficiary to whom the income stream will continue to be paid upon their death.

Thirdly, you can make a non-binding death benefit nomination guiding the trustee to whom you wish some or all of your superannuation death benefits is be paid to following your death.

Lastly, you may make a non-lapsing binding death benefit nomination directing your superannuation trustee to distribute some or all of your superannuation death benefits to your eligible beneficiaries or legal personal representative. This nomination remains in place unless you cancel or replace it with a fresh nomination or the superannuation trustee is aware your circumstances have substantially changed (e.g. you married, divorced or had a child).

Why a Death Benefit Nomination is important

If you don’t dictate how your superannuation death funds are to be distributed, the trustee of your fund has discretion who to pay your superannuation death benefit to in the event of your death.

 

  1. Ensuring your money will last and maximising Centrelink

Australia’s social security system is means tested. It is designed to act as a safety net. So, the higher your income or assets you have when you are assessed, the lower your Age Pension entitlements may be.

If your income or assets exceed the set cut off limits, you will not be eligible to an Age Pension at all. Hence Australians are expected to use more of our own savings to fund our retirement.

Currently, for every $10,000 of assets above the allowable Age Pension threshold your pension drops by $390 per year each if you’re member of a couple or $780 per year for singles.

Why ensuring your money lasts is important!

The more-heavy lifting your pension does, the less you’ll draw on your retirement savings. This is important as our increased life expectancies coupled with a turbulent investment environment make it challenging to ensure your retirement savings will go the distance.

 

Final observation

Planning your retirement can be complicated. As you can see from the above three issues, the various legislative frameworks are complex. While it pays to understand how retirement works, contact a qualified financial adviser to discuss your personal situation and retirement needs.

Five strategies to help your business

Five strategies for kick-starting your small business this financial year

As another end-of-financial-year rolls by, now is as good a time as any to undertake a bit of housekeeping and give your business finances a tidy up!

The daily grind and stresses of running a small business can often distract and exhaust many business owners leaving them rushing and unprepared as they approach the end of yet another financial year.

It’s that time when we draw a line under our business finances for one year, take a deep breath, and dive straight into the next.

This year, before leaping straight into it, why not stop and take a moment to take stock of your finances and begin the year with a fresh outlook?

These are our five ideas to get you started.

Insurance

The Australian government’s business website, www.business.gov.au can help you understand your compulsory insurance requirements, along with other types of cover you should consider, like personal insurances to protect yourself, your income and your family in the event you’re injured or become too ill to work.

Additionally, there are policies to protect your premises, your stock and machinery.

If you’ve had insurance for a while, perhaps shop around to see if there are better options that may provide a better deal for you and/or your business.

Tax planning

The start of a new financial year is perfect for developing a forward strategy. To get organised, and stay organised, throughout the coming year start by understanding your industry’s regulatory obligations and entitlements. Look at government concessions, asset write-offs and deductions.

Stay up-to-date with compliance responsibilities like, Single Touch Payroll, effective from 1 July 2019.

You should:

  • regularly review your profit and loss: monthly, quarterly, annually.
  • track revenue to ensure your billing and collection procedures provides adequate cash flow.
  • calculate and understand the cost of doing business; devote more time to activities that are the most profitable and help grow your business. You’ll be surprised how many business owners have little idea on the margins and profit on the various services and activities they provide
  • A good business adviser can help you put a system in place that will keep your tax records organised and up-to-date throughout the year, it may even make your tax accountant smile. Why not call them to arrange a time to talk it through?

Systems

If you’re doing things a certain way because that’s how they’ve always been done, it may be time to cast a critical eye over some or all of your business procedures.

Are there:

  • better, faster or more efficient ways of doing things?
  • technologies to simplify processes, e.g. point-of-sale (POS) systems?
  • process bottle-necks or duplicated steps that can be safely bypassed?
  • ways to automate manual processes like running reports, making appointments or paying regular accounts?

Business tracking

Staying on top of business performance, trends and cash flow can eliminate surprises by spotting potential problems and identifying supply and demand patterns.

Start by:

  • analysing data and trends from previous years or seasons.
  • looking for peaks and troughs in sales, job completion times and inefficient uses of labour.
  • identifying what worked well and what didn’t work so well.

Plan to grow

Once you know where you are, you can look for ways to move forward.

Whatever your business’s growth strategy is, be sure you have the resources to support it. Consider whether you’ll need to invest in machinery, supplies or specialist staff?

Now, update your business plan and review it regularly to stay focused on where you’re heading.

Running your own business is hard work, but it’s also one of the most satisfying and important things you can do.

Richard Branson once said, “A business is simply an idea to make other people’s lives better.” So, this new financial year, start refreshed and set yourself up to make your life, your family’s life and your customers’ lives even better.

Talk to us find out more.

Good debt or bad debt?

Is household debt consuming you?

By the end of 2018 Australia had, relative to the size of its overall economy, one of the highest levels of household debt in the world. At 127% of gross domestic product (GDP), our household debt, as a percentage of GDP, had nearly doubled over the last 20 years.

So, are Australian households groaning under the weight of oppressive levels of debt? For the most part the answer is surprisingly, no. A major reason for the increase in household debt is that interest rates are much lower than they were 20 years ago, so it’s easier to service larger loans. And over 90% of our household debt is owner-occupied home loans and investment loans.

Good debt, bad debt – is there a difference?

Home loans and investment property loans are often referred to as ‘good’ debt because, when used correctly and responsibly, they (usually) improve well being and build wealth over the long term. That said, poor property selection or unfortunate changes in circumstances – borrowing too much, loss of a job or an increase in interest rates for example – can quickly see ‘good’ housing debt turn ‘bad’ or even “toxic”.

Another type of bad debt is lifestyle debt (the worst kind). This has a negative impact on wealth because the debt is being used to buy things such as cars and caravans, clothing, holidays and electronic gadgets or appliances – things that lose value rather than gaining it. In today’s world it’s easy to accumulate bad debt.

Temptation galore – it’s a jungle out there

Credit cards, digital wallets on our phones, payday loans and buy-now-pay-later options all make it easier to spend money, even if it’s money we don’t have. Relentless, targeted advertising, the fear of missing out, the increasing level of peer pressure enabled by social media or just paying for daily essentials are all capable of leading us into spiralling debt.

Is debt consuming you? – these are the signs

Some warning signs that you have a debt problem include:

  • Not paying off your credit card in full each month. This means you will be paying a higher rate of interest on the carryover balance.
  • Your total debt is actually increasing month on month, along with your interest payments.
  • You’re experiencing housing stress. This means rent or mortgage repayments consume more than 30% of your pre-tax household income.
  • You’re using debt to fund basic living costs.

Taking control – make a plan

How to deal with your particular debt problem depends very much on personal circumstances, the amount of money you are comfortable wasting and the time frame you have before it consumes you.

  • Track your spending. Australians buy huge amounts of clothes they don’t wear, food they don’t eat and gadgets they don’t use or even open. For every purchase ask yourself, “Do I really need this or am I buying it to impress somebody I don’t even like?”
  • Consider selling items and junk that you no longer use or need. Maybe it’s an exercise bike in the shed or a third television that you have not used for three years. Either way, you’ll be surprised by the amount of junk you can rid yourself from by hosting a simple garage sale or posting an ad on websites like Gumtree.
  • Take out a lower interest rate personal loan to pay off high interest debts such as credit cards. Repay the loan as quickly as possible.
  • If you have a home loan, make sure it has a linked offset account that you use for everyday banking. You only pay interest on the difference between your loan balance and offset account balance, so all of your money is working to pay down your loan.
  • Review your home loan regularly. You may be able to refinance at a lower interest rate. Check for all the fees involved.
  • Talk to your financial adviser. They can look at your specific situation and recommend strategies that will put you in control of your debt rather than having debt consume you.

Contact Bridges Lake Macquarie today