General Information about Financial Advice

Feel like a sandwich?

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No, I am not referring to a piping hot ham and tomato toastie with cheese oozing out the middle, but rather I am referring to your current lifestyle.

Recently I made an observation about the number of grandparents looking after young children in a local park, and how those of us approaching retirement today often find ourselves playing the role of ‘carer for the young and old’.

For those of us in our 50’s and 60’s, we have become the ‘sandwich generation’. We are caught between our children and their growing families, and in many cases, our own parents who are approaching their twilight years.

As we approach or enter retirement, many of us still have one or both parents alive. This is a product of an increasing life expectancy. According to the World Health Organization, Australia ranks 4th in the world for having the longest average life expectancy.

With the added pressure on young families to have two incomes simply to be able to afford to enjoy the lifestyle they desire, coupled with the spiralling costs of child care, today’s 50 and 60 years olds are also becoming the part-time or even full-time carers for their grandchildren.

So, where does this leave today’s ‘young’ retirees?

They find themselves providing increasing care for aged parents, whose needs for assistance will only increase with age and, at the same time they are spending time caring for their grandchildren, even if that is just picking them up and providing after-school care.

It’s fair to say that most grandparents love to spend time with their grandchildren – watching them grow and learning to master new skills. But, this can be exhausting, particularly as grandparents start to age themselves.

When coupled with caring for older parents, that can be even more demanding.

Perhaps, for those of us with older parents, some time spent finding out what services are available in the local community is a good starting point. Whether it is the need for help when cleaning the house, mowing the lawns, administering medication, or otherwise helping to manage daily living, exploring what is available, on a short-term or longer-term basis, is worthwhile.

We need to take time out for ourselves, while still acknowledging the need to provide support and assistance where we can.

Drawing on the support of other agencies and services when the need arises should never be seen as a weakness on our part. After all, and despite the perceptions of our families, we are still only human!

 

Source:  Peter Kelly | Centrepoint Alliance

Aged Care – Not all accommodation costs are the same!

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Aged care costs are extremely complicated and issues have been raised in relation to a person entering residential aged care and having to pay a Refundable Accommodation Deposit (RAD).

What is the RAD?

A lump sum payment made by residents for accommodation in an aged care home.

Do I have to pay the RAD?

Some people will have their accommodation costs paid in full or in part by the government, while others will need to pay the accommodation price agreed with the age care home. As to whether an individual is eligible for support from the government in meeting their accommodation costs, will depend on their assets and income.

What happens if I am not able to pay the RAD in full?

If you are required to pay the RAD and are not able to pay the full amount, you will need to pay a Daily Accommodation Payment (DAP). This amount is based on the interest payable on the balance of the RAD you have not paid. The current interest rate is 5.76%. To assist with a person’s cash flow to meet the required payment of the aged care fees, a request can be made to deduct the DAP from the RAD which has been paid.

What happens to the RAD when I pass away or move homes?

Indicated by its name ‘Refundable Accommodation Deposit’, the amount that has been paid will be returned to your estate or you if you move or leave the facility. This amount could be reduced if you have requested as per the previous question that a DAP can be deducted from the RAD. It should also be noted that the RAD is underwritten by the government, in other words it is guaranteed.

The RAD is the accommodation cost, which depending on your circumstances, you do have to pay. There are, however, a couple of additional charges that have recently appeared in accommodation contracts. The charges should be closely scrutinised before any agreement is made to pay them or have them deducted from the RAD which has been paid.

These fees can appear as a ‘capital refurbishment fee’ or an ‘asset replacement contribution’ with the explanation that they are levied to cover the cost of repairing, painting and refurbishment of a resident’s room when they leave or pass away.

The Department of Health is very clear that these fees would not be supported by the legislation.

The following is a direct quote from the Department of Health website dated the 2nd of September 2016 and refers to both these types of fees:

“Where the fee does not provide a direct benefit to the individual or the resident cannot take up or make use of the services or where the activities or services subject to the fee are of the normal operation of an aged care home and fall within the scope of specified care and services”.

Painting, repairing and refurbishment of a resident’s room would fall within the category of normal operation. These services should be factored into the facilities scheduled maintenance program. The resident is certainly not going to benefit from the refurbishment after they have passed away. I do not believe the charges for these services falls within the category of fees outlined in the Aged Care Act 1997, Quality of Care Principles 2014 and the User Rights Principles 2014 which are required to be paid by the resident.

So, if you believe you are paying a capital refurbishment fee or an asset replacement contribution or one of these fees is being deducted from the RAD that you have paid, I would certainly ask the question of the aged care facility as to whether the fee can be charged under the guidelines issued by the Department of Health.

 

Source:  Mark Teale | Centrepoint Alliance

Who’s In Charge of the Finances? Should it be the lady of the house?

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Women have many natural abilities and skills that may make them better suited for this task than men. Here are four reasons why you might want to let your wife do the investing from now on.

1. WOMEN ARE CARETAKERS AND NURTURERS

Many people forget that as investors, women are nurturing our future nest egg. Your investments in your future should not be something that should be handled aggressively or erratically. Traditionally female qualities of caretaking, nurturing, creativity, and patience make them good investors.

Women are more patient with their investments and more likely to let their investments sit and grow. Men are more likely to trade their investments more often, which can lead to lower returns overall.

2. WOMEN ARE RISK-AVERSE

When it comes to long term investments, many millennial women who, according to research by BlackRock, are risk averse when it comes to investing. In fact, only 33% of millennial women are willing to take on higher risks for higher returns compared to 61% of millennial men.

Most women aren’t as interested as their husbands are in trying to hit home runs with their investments but rather focus on their long term success relative to their goals. Also, they are often willing to give up the potential for higher returns in order to take less risk with their investments. Women could provide a nice balance to men when it comes to making investment decisions as a couple. Women’s focus on long term goals and success could be an asset to many families when doing financial planning.

3. WOMEN TAKE THE TIME TO RESEARCH

Women make great investors because they do not make rash decisions. Instead, they spend considerable time researching different options to ensure they make the right choice for their families.They may take a long time to do research before they settle on a course of action, and often consult with a pool of experts.

4. WOMEN LIVE LONGER THAN MEN

According to the Centres for Disease Control and Prevention, women now have a life expectancy of 81.2 years whereas men have a life expectancy of 76.4 years.

It seems a bit morbid, but this is a prime reason why you should let your wife do the investing. It’s important for women to understand investing and investing decisions so they feel comfortable making them for themselves should something happen to their husbands.

However, both partners in a marriage should be decision makers, but if your wife is not as involved as she could be, perhaps some of the tips above will convince you that women’s natural tendencies towards research, patience, and being nurturing can make them an asset when it comes to financial planning.

So, if talking about money and retirement isn’t something you normally do with your wife, give it a shot. You might be surprised at how the process can bring the two of you closer together.

Is the 4% retirement rule right for you?

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Meet the 4% rule

The 4% rule has been around for a long time. It was introduced by financial advisor Bill Bengen in 1994. It says that you can withdraw 4% of your nest egg in your first year of retirement, adjusting future withdrawals for inflation. This withdrawal strategy assumes a portfolio of 60% in stocks and 40% in bonds, and it’s designed to make your money last through 30 years of retirement.

Here’s how it works: Imagine that you’ve saved $500,000 by the time you retire. In your first year of retirement, you can withdraw 4%, or $20,000. In year two, you will need to adjust that rate by inflation. Let’s say that inflation over the past year was at its long-term historic rate of 3%. You’ll now multiply your $20,000 withdrawal by 1.03 and you’ll get your second year’s withdrawal amount of $20,600. The following year, if inflation is still around 3%, you’ll multiply that by 1.03 and get your next withdrawal amount of $21,218.

So what’s the problem with this seemingly super-helpful rule? Well, unfortunately, several things.

Interest rates have fallen: For starters, remember that the rule was created more than 20 years ago, when interest rates were higher. Mortgage rates in 1994 were in the 8% range. In such an environment, the bond portion of a portfolio would have been generating more income than bonds today.

It assumes a certain asset allocation: Then there’s the rule’s assumption that your portfolio will be split 60-40, respectively, between stocks and bonds. You might not have or want that allocation. If your portfolio is split 50-50, or you have 75% of it in stocks, then the 4% rule won’t work as advertised.

People are living longer: Many people are living much longer lives. The 4% rule aims to make your money last for 30 years, but if you retire at 62 and live to 96, your retirement will be 34 years long and you might be quite pinched in your last years.

Should you use the 4% rule?

Clearly, the 4% rule is flawed. But you don’t necessarily have to throw it out altogether.

If you think you stand a decent chance of having a retirement that’s more than 30 years long, you can be more be more conservative, perhaps using a 3% or 3.5% withdrawal rate in the early years of retirement. Don’t be too rigid about it, though. If the market grows briskly in your first few years, you can re-evaluate and perhaps increase your withdrawals.

It is a good idea to reassess your financial situation regularly during your retirement. For example, if you’re 80 and you don’t think you’ll be around in a decade and your coffers are rather full, you could start withdrawing and enjoying more each year, or just plan to leave more to your loved ones.

We all need to plan carefully for retirement.

 

 

Are you ever too old to learn a new skill? The short answer – NO!

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You would be aware of the saying ‘‘You can’t teach an old dog new tricks”. Which literally means asking older people to change their habits or acquire new skills is impossible.

It is a very broad statement that we overly use in reference to all people over a certain mythical age, but like most broad statements, it is certainly not applicable to all older people.

As we grow older there is a preference to carry out tasks and activities the way we have always done them. This familiarity is understandable as it is comfortable and does not require a lot of effort and will not strain the brain.

It is very easy to use the phrase “old dogs and new tricks” when it comes to learning a new activity or process. The reality is that for most of us over the age of 60, the simple answer is: “I cannot be bothered, it is all too hard”.

This is a mistake. The brain benefits by you tackling something new, a task that it is not familiar which requires effort and mental activity. This increased mental activity in later life is associated with lowering the risk of dementia.

My mum is a very good example, she is 86 years of age, does not have dementia but is quite vague, forgetful and can get a little depressed. Last Christmas we gave mum an adult colouring book and pencils.

She was not impressed and I think was a little insulted. However, after some coaxing she finally opened the book and started to use her imagination and colour in the complicated designs and pictures inside the book.

Over a short period of time, we noticed an improvement in her hand-eye coordination, she is no longer watching as much television, has started to once again listen to music and would appear to be a much happier person.

This is only my observations and not conclusive proof that colouring will improve the lives of those people over the age of 80, but I do believe that this small mental activity has made my mum a more contented person.

The new skills you decide to learn do not have to be complicated.

A good friend who has retired has decided to grow all his own veggies and herbs in his front yard in large raised garden beds. Over the last few months he has acquired the knowledge, to first build his garden beds, understand the soil requirements to grow the perfect zucchini and sweet potatoes, install the irrigation system and build the necessary scarecrow to keep the birds off his vegetables.

Dementia is a growing problem and if remaining mentally alert through activity delays or prevents this insidious condition, it is time to move away from the television, pick up a book, go for a walk or learn a new skill before it is too late.

Source: Mark Teale – Centrepoint Alliance