The new year is a great time to get into financial shape. Here’s some simple steps to develop new investing habits.

The new year often comes with resolutions to get healthier and fitter.

On the financial front, it’s also a great time to review investments and superannuation portfolios and assess one’s financial wellness. Investors should take time to reflect on the habits that were beneficial and those that might need to change, and only make necessary adjustments to their portfolio if all is in line with their objectives and risk appetite.

Most portfolio reviews tend to bring a sense of optimism, especially when reflecting on gains from the last 12 months. But with the ASX 300 and S&P 500 dropping -2 per cent and -18 per cent respectively in 2022, and bond prices reeling from rising interest rates, this year’s portfolio review probably brings some level of discomfort.

But long-term investors may find comfort in the fact that while stocks and bonds looked expensive at the end of 2021, today’s markets are more attractively priced.

So, when thinking about what opportunities lie ahead this year, the plan should be to add back portfolio exposures. While doing so, reflecting on the elements that underpin market returns can help investors focus on the components that increase a portfolio’s success and ignore those that detract.

Think through your asset allocations

The importance of disciplined asset allocation cannot be overstated. Well-regarded academic studies have concluded that approximately 90 per cent of the variability of portfolio returns stem from asset allocation, while security selection and market timing combined only account for 10 per cent.

So while both activities can be exciting, trying to pick that hot stock or dancing in and out of the market at just the right time probably isn’t worth the effort. In fact, most investment strategies based on catching lightening in a bottle are doomed to fail.

Honing in on the importance of disciplined asset allocation – well-constructed long term portfolios hinge on three basic investment principles. First, long-term investors build portfolios with a pronounced focus on equities. Second, prudent investors create portfolios with substantial diversification. And third, sensible investors create portfolios with tax considerations in mind.

Equities or similar growth assets enhance portfolio returns over the long term because higher risk assets typically deliver higher returns. Of course, higher risk assets increase the likelihood of losses. That said, higher returns coupled with the compounding effect of dividends and growth ultimately may result in greater wealth.

Consider your objectives

While 2022 was rough for markets, investors thinking of moving to cash or staying in cash should consider that long-term equity ownership (10 years or more) historically delivers vastly better returns than holding bonds or cash.

A recent study forecasts equity returns to range between 4-7 per cent, annualised for the next 10 years, while bonds are expected to deliver between 4-5 per cent over the same time period. And although forecasts do not guarantee performance, the difference while modest, translates into staggering wealth differentials over long periods of time.

That said, those with shorter to medium-term requirements for capital, like buying a house or putting a child through school in a few years, should consider adjusting their allocation towards defensive assets accordingly.

While equities provide growth opportunities over the long-term, allotting the entire portfolio to equities requires careful consideration.

The importance of diversification

Which, brings us to diversification. Good health is often the result of a mix of physical activity and a balanced diet rather than only relying on one or the other. Similarly, diversifying a portfolio by investing across a range of assets – typically assets that behave differently from each other – helps produce more stable returns by spreading risk.

Investors with under-diversified portfolios are more likely to face enormous pressure to make tactical moves when their concentrated strategy produces poor results.

Lastly, shrewd investors also consider the tax characteristics of each asset class, as improved after-tax returns produce more assets, ultimately strengthening portfolio results.

If in doubt, seek advice

With all the ready-made diversified portfolios, tools and information available to investors today, good investing is simple enough to DIY but, if in doubt, seek a financial adviser.

The benefits of good financial advice typically exceeds its expense and adds value to a portfolio’s bottom line. Just as a trainer motivates and guides you on diet or workout regimes, having an adviser in your corner can really help you get the financial results you are after.

Bike paths and gyms have been very busy so it’s clear that many are working hard on fitness-related resolutions.

But a healthy lifestyle also includes financial well-being, so let’s not forget about that. Here’s to a healthy and wealthy 2023!

Call us today to talk about your investment strategy for 2023. Call us on Phone: 07 5641 4134.

Source: Vanguard

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2022 Vanguard Investments Australia Ltd. All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Most super funds offer life, total and permanent disability (TPD) and income protection insurance for their members. 

When reviewing your insurance, check if you’re covered through your super fund. Compare it with what’s available outside super to find the right policy for you.

Types of life insurance in super

Super funds typically offer three types of life insurance for their members:

• life cover — also called death cover. This pays a lump sum or income stream to your beneficiaries when you die or if you have a terminal illness.

• TPD insurance — pays you a benefit if you become seriously disabled and are unlikely to work again.

• income protection insurance — also called salary continuance cover. This pays you a regular income for a specified period (this could be for 2 years, 5 years or up to a certain age) if you can’t work due to temporary disability or illness.

Most super funds will automatically provide you with life cover and TPD insurance. Some will also automatically provide income protection insurance. This insurance is for a specified amount and is generally available without medical checks. 

TPD insurance cover in super usually ends at age 65. Life cover usually ends at age 70. Outside of super, cover generally continues as long as you pay the premiums.

Insurance on inactive super accounts

Under the law, super funds will cancel insurance on inactive super accounts that haven’t received contributions for at least 16 months. In addition, super funds may have their own rules that require the cancellation of insurance on super accounts where balances are too low.

Your super fund will contact you if your insurance is about to end.

If you want to keep your insurance, you’ll need to tell your super fund or contribute to that super account.

You may want to keep your insurance if you:

• don’t have insurance through another super fund or insurer

• have a particular need for it, for example, you have children or dependents, or work in a high-risk job

Insurance for people under 25 or with low super balances

Insurance will not be provided if you’re a new super fund member aged under 25, or your account balance is under $6000 unless you:

• contact your fund to request insurance through your super

• work in a dangerous job and your fund chooses to give you automatic cover – you can cancel this cover if you don’t want it.

If you already have insurance and your balance falls below $6000, you usually won’t lose your insurance as a result.

Superannuation and insurance can be complex. If you need help call your super fund or speak to a financial adviser.

Pros and cons of life insurance through super

Pros

• Cheaper premiums — Premiums are often cheaper as the super fund buys insurance policies in bulk.

• Easy to pay — insurance premiums are automatically deducted from your super balance.

• Fewer health checks — Most super funds will accept you for a default level of cover without health checks. This can be useful if you work in a high-risk job or have health conditions that can make it difficult to get insurance outside super. Check the  product discloure statement (PDS) to see the exclusions and treatment of pre-existing conditions.

• Increased cover — You can usually increase the amount of cover you have above the default level. But you’ll generally have to answer questions about your medical history and do a medical check.

• Tax-effective payments — Your employer’s super contributions and salary sacrifice contributions are taxed at 15%. This is lower than the marginal tax rate for most people. This can make paying for insurance through super tax-effective.

Cons

• Limited cover — The amount of cover you can get in super is often lower than the cover you can get outside super. Default insurance through super isn’t specific to your circumstance and some eligibility requirements may apply.

• Cover can end — If you change super funds, your contributions stop or your super account becomes inactive, your cover may end. You could end up with no insurance.

• Reduces your super balance — Insurance premiums are deducted from your super balance. This reduces your savings for retirement.

Check your insurance before changing super funds. If you have a pre-existing medical condition or are over age 60, you may not be able to get the cover you want.

How to check your insurance through super

To find out what insurance you have in your super you can:

• call your super fund 

• access your super account online 

• check your super fund’s annual statement and the PDS

You’ll be able to see:

• what type of insurance you have

• how much cover you have 

• how much you’re paying in premiums for the cover 

Your super fund’s website will have a PDS that explains who the insurer is, details of the cover available and conditions to make a claim.

If you have more than one super account, you may be paying premiums on multiple insurance policies. This will reduce your retirement savings and you may not be able to claim on multiple policies. Consider whether you need more than one policy or whether you can get enough insurance through one super fund.

When reviewing your insurance in super, see if there are any exclusions or if you’re paying a loading on your premiums. A loading is a percentage increase on the standard premium, charged to higher risk people. For example, if you have a high-risk job, a pre-existing medical condition or you’re classified as a smoker.

If your super fund has incorrectly classified you, contact them to let them know. You could be paying more for your insurance than you need to.

Making a claim on insurance in super

To make a claim for insurance through your super fund, see making a life insurance claim for more information or simply call us on Phone: 07 5641 4134. 

Source:
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/how-life-insurance-works/insurance-through-super

Important note: This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.  Past performance is not a reliable guide to future returns.

Important
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Succession planning can be difficult at the best of times without dealing with the added pressures farmers have recently faced with droughts, fires and floods.

And that’s why it is even more important to plan early and get it right when you are on the land. You are not just dealing with a business, but invariably also with a home.

Some 99 per cent of the 134,000 farms in Australia are family owned with the average age of farmers being 52.ⁱ It is believed that farmers are five times more likely than other Australians to be working beyond the age of 65. There are a variety of reasons for this, from a reluctance to relinquish control, to a lack of family willing to take over the reins and financial necessity.

Given the physicality of farming, it would seem to make a lot more sense to start thinking about succession planning well before that stage.

Often such planning is put into the too hard basket because there are so many variables to consider. But this will not solve the problem, so it’s better to get good advice and get it early.

Start talking

The first thing you need to do is open the doors of communication. Arrange a time to talk with your family to discuss:

• Who wants to inherit and work on the farm and who wants to leave the property

• Whether they agree each child should be treated equally or accept that the one inheriting the farm should receive preferential treatment

• How everybody feels about splitting the property between siblings, or

• The way forward if none of your children wants to stay on the land.

These are all considerations that need to be addressed and revisited over time to ensure they meet with everybody’s wishes.

If just one of the children wants to remain on the property, will they need to find the finance to pay out the other siblings? If so, then the next decision is how that finance will be found.

Perhaps the answer is to transfer the property before you die. If that is the case, then where will you live in retirement and what will be your source of income once you retire? Again, you need to examine the options. Perhaps you may receive an ongoing income from the property, or maybe find income from other investments. Importantly, you also need to revisit these options over time to ensure they still work for you.

One danger of not having a succession plan and working well beyond your best years, is that you can run the farm into the ground and make it a far less attractive property to sell.

Structure your plans

There are so many questions to ask and what is right for one family, may not be right for another.

But once you determine how you want to move forward, you then need to examine the best structures to put in place to make the process as efficient as possible. Some of the key advice you may need is on tax, trusts and land ownership and the intersection of all three.

Tax is particularly important as you want to avoid or at least minimise capital gains tax (CGT).

If you are 55 years of age or more and retiring and have owned your property for at least 15 years, then you may qualify for the small business 15-year CGT exemption on your entire capital gains. Other concessions may apply if you don’t qualify the 15-year exemption.

For couples where the family farm is held in their own name, perhaps you might want to consider a joint tenancy agreement as it leads to automatic transfer of ownership if one dies.

Or you might consider putting the farm into a family trust or perhaps holding it as an asset in your self-managed super fund. There are so many what-ifs to consider when it comes to rural properties. If you want to discuss how to move forward on your estate and succession planning and what will work best for you, then give us a call.

i https://www2.deloitte.com/au/en/pages/consumer-business/articles/succession-family-farm.html

Important: This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Here are some tips that can help you build confidence in your investing approach, no matter what the markets are doing.

Emotions always play a role in investing. For some investors, especially newer ones, it can be hard to separate the idea of investing from “losing it all.” If you’re anxious or insecure about your investing plan, you could make heat-of-the-moment decisions during market downturns that might not be best for your long-term goals. That’s why it’s important to acknowledge those nerves early and make sure your emotions are working for you when you invest, not against you. Here are some tips that can help you build confidence in your investing approach, no matter what the markets are doing.

Consider dollar-cost averaging

Say you have a large lump sum of money to invest. Maybe it was an inheritance or a gift. If you’re very risk averse, one of the first thoughts you might have is “what if I invest all this money at once, and the market drops right after?” If that sounds like you, dollar-cost averaging might bring you some peace of mind.

Dollar-cost averaging means buying a fixed dollar amount of a particular investment on a regular schedule, no matter what its share price is at each interval. Since you’re investing the same amount each time, you automatically end up buying more shares when prices are low and fewer shares when prices rise. This can help you avoid that potential buyer’s remorse of investing a lump-sum amount when prices are at their peak. Incremental investing is one way to help you get comfortable with the market’s natural movement, and it can be especially helpful for self-identified worriers.

Make saving automatic

Some investors worry they’re not saving enough to reach their long-term goals—or that they’re not doing enough to keep their financial lives on track. You can take some of that uncertainty out of the equation by setting your savings on autopilot. Put a percentage of each paycheck or your annual salary into your investment accounts. You’ll be taking positive action to stay on track—and that’s a great feeling!

Diversify your investments

Diversifying your portfolio is one way to help control risk. It’s a fancy way to describe putting your eggs in many baskets—or in this case, putting your money into high-, moderate-, and low-risk investments, both domestic and international. Your portfolio will still have the growth potential that comes from higher-risk shares, but you won’t be as vulnerable during market downturns because you’ll ideally also hold safer investments like bonds and cash. The breakdown of shares, bonds, and cash in your portfolio determines how much risk you take on when you invest, and you have the freedom and flexibility to choose a mix that feels right for your life.

Think long term

Successful investing isn’t about reacting to today’s news or to the latest trends bubbling up on social media. It’s about letting your long-term goals guide your financial choices. That’s what inspired you to invest in the first place! You might be tempted to pull your money out of the market during periods of volatility. But if you do that and reinvest when the markets calm down, you could end up farther away from your goal. Why? Because your investments lose the power of compounding. And while a measured, disciplined investing approach isn’t always easy, it can be worth it in the end.

Remember: Strong financial plans are built with market volatility in mind. If you diversify your holdings, invest regularly, and stay focused on your big-picture goals, you can feel confident that you’re doing your part to set your portfolio up for success—and set yourself up for ongoing financial wellness.

Call us today on Phone: 07 5641 4134 to discuss your investment strategy, we’re here to help.

Source: Vanguard

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2022 Vanguard Investments Australia Ltd. All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Characteristics of dollar stretchers

A ‘money mindset’ is a way of thinking about personal finance. Your money mindset can change over time, and it may help explain your spending and savings habits. Understanding this can help you build habits and strategies to better manage your money.

Dollar-stretchers often find that:

• They experience difficulty paying for essential expenses, like bills and food.

• It’s hard to save money because there’s rarely enough left after paying for essentials.

• They use any unexpected financial windfalls to pay outstanding bills.

• If they receive an unexpected bill, they may have to borrow money or use credit to cover it.

• They often feel anxious about money.

About dollar stretchers

Dollar stretchers aren’t bad with money. They’re often excellent budgeters who know how to stretch their income to cover their everyday expenses (like food and transport) and debt repayments. The problem is that their income isn’t high enough for them to save money after they’ve covered everyday costs. Because of this, dollar stretchers are at high risk of financial hardship.

Dollar stretchers aren’t always on a low income. Someone with a high income who struggles with significant debt could also fall into this category. Dollar stretchers often have minimal savings, and may use credit options like payday lenders. They spend very little on leisure activities.

Dollar stretchers experience high levels of financial anxiety and often struggle to find ways to improve their financial situation.

Dealing with financial hardship

If you’re struggling to pay your debts you may be in financial difficulty. The best thing you can do is reach out to us as soon as you can to find out what assistance is available. We may be able to help you.

You can also speak to us about dealing with financial hardship, and access additional support services if you need them.

Remember that loans don’t always have to come from banks. You may be eligible for funds through Centrelink.

Managing debt repayments

Debt repayments make it difficult to save money and get ahead. If you’re a dollar stretcher, you may take on high-interest debt to cover everyday expenses. These repayments then make it harder to save money.

If you’re making repayments on multiple loans, consider consolidating your loans so you can make repayments at a lower interest rate. 

You could also investigate balance transfers, which could help you manage credit card debt.

Planning for your financial future

Once your debt repayments are under control, it’s time to start saving an emergency fund. You can dip into this when faced with an unexpected expense, to avoid taking on more debt. Aim for $500 first, and then build to $1,000.

Look for ways to earn extra money, by taking on extra shifts at work, selling items you don’t need anymore, or working at a side hustle. You can also look into small ways to save, like avoiding credit card interest.

Setting up a savings goal and tracking it an app is a great way to keep yourself motivated.

Call us on Phone: 07 5641 4134 if you need more budgeting tips.

Source: NAB https://www.nab.com.au/personal/life-moments/manage-money/money-basics/dollar-stretcher Reproduced with permission of National Australia Bank (‘NAB’). This article was originally published at https://business.nab.com.au/ National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686.

The information contained in this article is intended to be of a general nature only. Any advice contained in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice on this website, NAB recommends that you consider whether it is appropriate for your circumstances. © 2023 National Australia Bank Limited (“NAB”). All rights reserved.

Important: Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Income protection insurance pays part of your lost income if you’re unable to work because of a disability caused by illness or injury. It can help pay the bills so you can focus on getting better.

What income protection insurance covers

If you’re unable to work due to partial or total disability, income protection insurance pays:

• up to 90% of your pre-tax income in the first six months, and

• up to 70% for a specified time after six months.

Income protection insurance is designed to replace your income based on your annual earnings in the 12 months prior to your illness or injury. 

Each income protection policy has its own definition of partial or total disability that must be met before a claim is made. Check the insurer’s website or the product disclosure statement (PDS) for the definition and any exclusions.

Deciding if you need income protection insurance

Income protection insurance can be important if you:

• are self-employed or a small business owner, as you may not have sick or annual leave

• have family members or dependents that rely on the income you earn

• have debt, such as a mortgage, you’ll need to make payments on even if you’re unable to work

To work out how much income protection you need, prepare a budget. This will help you see your monthly expenses and the income you’ll need to replace. You may want to factor in making payments to your super as well.

Also consider:

• if you have total or permanent disability or trauma insurance, that can help replace lost income

• if you have private health insurance that could help pay for any medical expenses

• what help or support from family or friends may be available

If you want help deciding if you need income protection insurance and how much, speak to us on Phone: 07 5641 4134.

Choosing an income protection policy

Some of the things you’ll need to consider when choosing an income protection policy are:

Policy type

Income protection policies are either an:

• Indemnity value policy — the amount you’re insured for is a percentage of your salary when you make a claim. If your salary has decreased since you bought the policy, you’ll get a smaller monthly insurance payment. If your income is variable, your insured amount will be based on average annual earnings over a period of time appropriate for your occupation. 

• Agreed value policy — the amount you’re insured for is a percentage of an agreed amount when you sign up for the policy. These are generally more expensive but can be useful if you have income that changes from year-to-year.

From 31 March 2020, insurers can no longer offer agreed value policies to new customers. If you purchased an agreed value policy before this date, you can continue to hold this policy. If you decide to change policies, you will only be able to purchase an indemnity value policy.

Indemnity value policies are generally cheaper and can be useful for people with a stable income. 

Waiting period

This is the amount of time you must wait before your payments start. Most income protection policies offer a waiting period between 14 days and two years. You must be unable to work as a result of your illness or injury at the end of the waiting period to be eligible for payments. 

In general, the longer the waiting period, the cheaper the policy. When you’re choosing the waiting period, think about how much you have in sick and annual leave, savings and emergency funds.

Benefit period

The benefit period is how long the monthly payments will last if you remain unable to work due to your illness or injury. Most income protection policies offer two or five years, or up to a specific age (such as 65). The longer the benefit period, the more expensive the policy. But it also means greater protection if you’re unable to work for a longer time.

Stepped or level premiums

You can generally choose to pay for income protection insurance with either:

• Stepped premiums — recalculated at each policy renewal, usually increasing each year based on the higher chance of a claim as you age

• Level premiums — charge a higher premium at the start of the policy, but changes to cost aren’t based on your age so increases happen more slowly over time

Your choice of stepped or level premiums has a large impact on how much your premiums will cost now and in the future.

How to buy income protection insurance

Check if you already have income protection insurance through super. Most super funds offer default income protection insurance that’s cheaper than buying it directly from an insurer. You can increase your level of cover through your super fund if you need to.

You can also buy income protection insurance from:

• an insurance broker

• a financial adviser

• an insurance company

Premiums you pay for income protection insurance held outside of super are generally tax deductible. Policies outside of super usually allow a higher amount of cover and have more features and benefits available.

What you need to tell your insurer

An insurer will ask you questions when you apply for or change your insurance. These questions may be about your:

• age

• job

• income (salary, wage, commissions)

• medical history

• lifestyle (for example, if you’re a smoker)

• high risk sports or hobbies (such as skydiving)

If an insurer doesn’t ask for your medical history, it may mean that the policy has more exclusions or narrower policy definitions.

The information you provide will help the insurer decide:

• if they should insure you

• how much your premiums will be

• terms and conditions for your policy

It is important that you answer the questions honestly. Providing misleading or incomplete answers could lead an insurer to cancel or vary your cover, or decline a claim you make.

Making a claim on income protection insurance

If you want to make a claim, see your provider for information on what to do. Any payment received under an income protection policy must be included in your tax return. 

Source:
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/how-life-insurance-works/income-protection-insurance

Important note: This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.  Past performance is not a reliable guide to future returns.

Important
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Deciding on your retirement funding options in retirement comes down to what makes the most sense for you.

If you’re close to retirement, chances are you’ve already spent time thinking about how to tap into your superannuation when you retire.

Broadly speaking, you have a few options when you retire, as long as you’ve reached the minimum ‘preservation age’ when you’re allowed to access your super.

That’s a little bit complicated, because there’s currently a staggered range of preservation ages depending on when you were born. If you were born after 1 July 1964, your super access age is 60.

You can check out your personal preservation age on the Australian Tax Office website.

Deciding on your retirement funding options comes down to what makes the most sense for you.

Leaving your super alone

There’s actually no legislation that says you must start drawing out your super savings when you retire.

In fact, if you don’t need your super to fund your living expenses, you can simply leave it where it is.

You can keep investing your super, and even add money into your account if you pick up some work income, and make concessional contributions up to $27,500 per year (which are taxed at 15 per cent), or personal non-concessional contributions up to $110,000 per year using after-tax money.

You can contribute to your super at any time generally up until the age of 74 (excluding a home downsizer contribution), and by not starting a pension you’re not forced by the government to start withdrawing regular payments.

The government also allows people aged 60 and over to add up to $300,000 into their super account if they sell their principal place of residence, subject to a range of conditions. Legislation to lower the eligibility age to age 55 was passed in the Senate on 28 November.

Keep in mind that if you do leave your money in a super accumulation account, all investment earnings will continue to be taxed at the 15 per cent rate.

But that rate is still likely to be lower than what you would pay if you decided to withdraw your super and invest it into another asset, such as an investment property, where the rental income would be taxed at your full marginal tax rate.

Leaving all your money in super after you’ve retired means you can’t withdraw money as a regular pension income stream. To do that you generally need to roll at least some of it over into an account-based pension.

However most super funds will let you withdraw lumps sums whenever you like if you’ve met all release conditions and have the money transferred into your bank account. A minimum amount of $6,000 generally must be left in your account.

You should also be mindful that if you leave money in your super account or account-based pension and die that there may be tax consequences for non-dependant beneficiaries (see below).

Starting a pension stream

On the other hand, if you want to use all of your super to have a regular income stream once you retire, you’ll need to roll it over into a pension account.

You’ll need to contact your super fund manager to do this or, in the case of a self-managed super fund, ensure the trust deed allows for the payment of a pension income stream.

Your basic options are to either roll your super over into a pension product offered by your current super fund or to transfer it over to another pension product provider.

Most account-based pension products enable monthly, quarterly, half-yearly or annual payments, which will continue until your account balance runs out.

Be aware that once you start up a pension you’re required to withdraw a set percentage of your account balance every financial year, which increases as you age.

The minimum pension account withdrawal amounts have been temporarily reduced by 50 per cent for the 2022-23 income year. You can see them on the ATO’s website.

There are a range of advantages from setting up a pension income stream versus keeping your super money in accumulation mode.

Most importantly, if you’re aged over 60 and retired, your pension payments are tax-free and so are any investment earnings generated inside your pension account.

You can use your own pension income stream to supplement the government Age Pension if you’re eligible to receive it. And you’re also able to withdraw lump sums from your pension account at any time.

Upon your death, non-dependants who receive money left in a pension account will need to pay tax on the taxable component. The amount of tax payable may be reduced by tax offsets.

Doing both

If you’re wanting total financial flexibility in retirement, you could consider leaving part of your money in super, rolling over some of it into an account-based pension, and also withdrawing lump sums whenever you need to.

There are a range of benefits from adopting a combination of your options, although there may also be potential tax consequences for both you and your beneficiaries.

Managing the combination of a super accumulation account, an account-based pension, an Age Pension entitlement (if eligible), potential investment earnings outside of super, and irregular lump sum payments, can be highly complex.

Using the services of a licensed financial adviser is a worthwhile consideration as you weigh up all of your retirement options.

Call us today if you’d like more information about transitioning into retirement. Contact us on Phone: 07 5641 4134.

Source: Vanguard

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2022 Vanguard Investments Australia Ltd. All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Travelling cheaply needn’t mean you miss out. Find out the best ways to save big on your overseas holiday plans, and make the most of every dollar.

Why you should budget for your overseas holiday

Most of us love to travel, but not many can afford to travel as often as we’d like. A trip to Europe or the US might seem like it’s out of reach, but there are ways to rein in your travelling expenses and get to the places you love, more often.

Travelling on a budget doesn’t have to mean that you miss out. If you plan ahead, work out a budget (and stick to it), you can have a better, longer – and cheaper – holiday.

You may also want to consider our savings accounts and term deposit account which can earn interest against your deposits to help you get to your holiday savings goal.

Here are ten tips on how you can save money on your travels – and have a cheaper, better, longer holiday.

1. Fly for less

One of the few downsides to living in Australia is that you’re miles from anywhere. Getting much beyond Bali will cost you, but there are ways to reduce flight costs.

2. Avoid peak holiday times

Travelling at the height of the European summer, for example, not only costs more, it’ll mean half your holiday is spent in a queue.

3. Compare flights as well as airlines

Remember, the cost of a flight can vary a lot, depending on when and how you purchase it.

Check out flight comparison websites to get a good deal. If you do book through one of these sites, be sure to read the small print. Their change or cancellation policies might not be as flexible as you need and could cost you more than you save.

4. Find an inexpensive bed

Halve your accommodation costs and you might be able to travel for twice as long.

5. Consider homestays

Go into this with the right attitude—be generous and ready to share—and you could end up with a free roof over your head, a tour guide, and a lifelong friend all wrapped up in one.

6. Check out a house swap website

You’ll be surprised to know how many people from Tuscany are eager for a holiday in Tasmania.

If you’re a bit more adventurous or love the outdoors, try backpacking, (no longer just for the young) or camping.

7. Go somewhere, not so obvious

Paris. New York. London.

Of course, the great world cities will always be magnetic places, but there’s a whole world out there. How about Marseille? Portland? Manchester? Belo Horizonte? Naples?

8. Get off the beaten track

It’s quieter, cheaper, and often more ‘authentic’. So long as you don’t tell too many people.

9. Eat like a local

Your greatest cost after accommodation will be food. Take the opportunity to sample the local cuisine – and cook when you can.

10. Do your research before you leave home 

If you have a smartphone, get a good, cheap mobile data plan. Check out the public transport, perhaps download the transport apps for the cities you’re travelling to. Oh, and a free wi-fi finder app also might be worth getting.

Source: NAB

Reproduced with permission of National Australia Bank (‘NAB’). This article was originally published at https://www.nab.com.au/personal/life-moments/travel/money-saving-tips

National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686. The information contained in this article is intended to be of a general nature only. Any advice contained in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice on this website, NAB recommends that you consider whether it is appropriate for your circumstances.

© 2022 National Australia Bank Limited (“NAB”). All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Many parents and grandparents worry about how to help the children in their lives achieve financial independence. But the value of long-term investment can seem like a dry and complicated idea for kids to get their heads around.

In fact, many young people would like to know more about money, according to a Young People and Money survey by the Australian Securities and Investments Commission MoneySmart website. The survey found more than half of the 15-21-year-olds surveyed were interested in learning how to invest, different types of investments and possible risks and returns. What’s more, almost all those young people with at least one investment were interested enough to regularly check performance.

One way to introduce investment to children may be to begin a share portfolio on their behalf. The child can follow the progress of the companies they are investing in, understand how the market can fluctuate over the short- and long-term, as well as learn to deal with some of the paperwork required, such as filing tax returns.

How to begin

Setting up a share portfolio doesn’t need to be onerous. It’s possible to start with a minimum investment of around $500, using one of the online share trading platforms. Then you could consider topping it up every year or so with a further investment.

Deciding on which shares to buy comes down to the amount you have available to invest and perhaps your child’s interests.

If the initial investment is relatively small, an exchange traded fund (ETF) may be a useful way of accessing the hundreds of companies, bonds, commodity or theme the fund invests in, providing a more diversified portfolio.

ETFs are available in Australian and international shares; different sectors of the share market, such as mining; precious metals and commodities, such as gold; foreign and crypto currencies; and fixed interest investments, such as bonds. You can also invest in themes such as sustainability or market sectors such as video games that may appeal to young people.

Alternatively, buying shares in one company that your child strongly identifies with – like a popular pizza delivery firm, a surf brand or a toy manufacturer – may help keep them interested and excited about market movements.

Should you buy in your name or theirs

Since children cannot own shares in their own right, you may consider buying in your name with a plan to transfer the portfolio to the child when they turn 18. But be aware that you will pay capital gains tax (CGT) on any profits made and the investments will be assessable in your annual income tax return.

On the other hand, you could buy the shares in trust for the child. While you are considered the legal owner the child is the beneficial owner. That way, when the child turns 18, you can transfer the shares to their name without paying CGT. Your online trading platform will have easy steps to follow to set up an account in trust for a minor.

There is also some annual tax paperwork to consider.

You can apply for a tax file number (TFN) for the child and quote that when buying the shares. If you don’t quote a TFN, pay as you go tax will be withheld at 47 per cent from the unfranked amount of the dividend income. Be aware that if the shares earn more than $416 in a year, you will need to lodge a tax return for the child.

Taking it slowly

If you are not quite ready to invest cash but are keen to help your children to understand share investment, you could consider playing it safe by playing a sharemarket game, run by the ASX.

Participants invest $50,000 in virtual cash in the S&P/ASX200, a range of ETFs and a selection of companies. You can take part as an individual or a group and there is a chance to win prizes.

Another option, for children able to work independently, is the federal government money managed website. This is pitched at teens and provides a thorough grounding in savings and investment principles.

Call us on Phone: 07 5641 4134 if you would like to discuss how best to establish a share portfolio for your child, grandchild or a special young person in your life.

Fixed rate terms last for a set period of time that is prearranged between you and your lender. Fixed rate periods last between one and five years.

When your fixed rate term ends, your loan will usually revert automatically to the standard variable interest rate unless you have provided instructions to refix your loan.

As the end of your fixed rate term approaches, it’s important to plan ahead and talk to your mortgage broker about what your new, or roll-off, interest rate and repayments might be and what your options are.

Repricing with your current lender

Lenders may not apply the lowest interest rate they offer when a loan reverts to a variable rate.

But, you can ask for a reprice to a more competitive rate. If you do find a more competitive rate with a different lender, you could also ask your current lender if they can match it.

Refinancing to a different lender

Once your fixed rate term ends, you may be able to refinance to a different lender.

While the interest rate is a key factor when choosing a loan product, it’s important to know the ‘true cost of switching’.

You may see tempting cashback offers from lenders, or lower rates advertised, but there are a myriad of fees and charges involved in setting up a new loan that you will need to consider.

If your loan-to-value ratio (LVR) is above a certain limit – usually 80% LVR – you may be required to pay Lenders Mortgage Insurance if your refinance.

A broker can help you understand what it will actually cost you to change lenders, and how much you could save.

To learn more about loans, contact us on Phone: 07 5641 4134 today.

Source: MFAA

Reproduced with the permission of the Mortgage and Finance Association of Australia (MFAA)

Important:
This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.  Past performance is not a reliable guide to future returns.

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author.

Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.