General Information about Financial Advice

‘The Donald’ – from the Trump Train to the White House

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I expect you would have seen the news regarding Donald Trump’s seemingly ‘improbable’ victory in the U.S. Presidential election. Love him or hate him, Trump’s victory is effectively middle America’s retribution against the political establishment.

You may be wondering what on earth happened to financial markets overnight. For example, the U.S. share market looked like it was going to tank, but in the end, closed the day higher. You wouldn’t want to be the person who hit the sell button based on the news at the time.

Trying to ‘time’ such volatile markets only highlights that having an investment strategy based on reacting to news headlines probably isn’t going to help in building long term wealth.

The reaction in markets (and even more so, the media) reminds me of the Brexit vote by the British people to leave the European Union in late June. While there are fundamental differences between the two (i.e. that a presidency is not permanent), some parallels can be drawn – a divisive campaign, an unexpected result and palpable fear about what the future holds.

Like Brexit, it is near impossible to measure what the outcome immediately means for the country’s citizens, let alone for the economy and financial markets. What we can measure however, are valuations in investment markets. Your portfolio is driven by long-term valuation-driven investing, which means we’re not peering into a crystal ball and trying to predict the outcome and implications of elections.

Summary

While it may feel uncomfortable to read the headlines when you pick up the newspaper, the rollercoaster ride in financial markets is nothing new. On this occasion (as in the past), I encourage you to look through the market noise and panic and remain focused on the bigger picture.

As long term, valuation driven investors, with a focus on the preservation of capital, it is my belief that under or overvalued markets will return to their fair value, or what they are really worth, over time.

Negative sentiment and heavy selling, often driven by fears of what might happen, have historically created the best opportunities for value investors. From your current conservative positioning we’ll continue to monitor markets and look to buy quality assets that are ‘on sale’ using your higher levels of cash that are held for times like these.

Your portfolio is well positioned to take advantage of any investment opportunities that may arise from irrational investor behaviour in this period of uncertainty. While we should never wish for markets to crumble, we stand ready to profit from any such opportunities that present themselves.

 

Source:  Morningstar

Have a question about retirement? You’re in good company!

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When I speak with people who have either retired, or are planning to retire in the near future, there are some similar themes that emerge when it comes to the financial side of things.

There appears to be five key questions that regularly come up in the conversation.

Will we have enough money to enjoy our retirement?

Many people have an idea about what they would like their retirement to look like – where they would like to live, how they will spend their days, the type of car they would like to drive, and the places they would like to visit.

However not many people have considered just how much their ideal lifestyle will cost.

Sure, the government will pay the age pension, however that does not allow you to have a particularly ‘flamboyant’ lifestyle.

The maximum age pension for a single person is just $22,804 p.a., and for a couple it is $34,382 combined. To put this into context, the poverty line for a single person in Australia is $426 per week (pw), or $22,152 a year.

The latest figures in the Retirement Standard published by the Association of Superannuation Funds of Australia show that a modest retirement lifestyle costs a single person $23,767 per annum (pa), while the cost for a couple is $34,216. By contrast, a single person wishing to enjoy a comfortable retirement lifestyle will spend just on $43,000 – when a couple will be shelling out close to $60,000.

Will I ever be able to retire?

For those wishing to maintain more than a basic retirement lifestyle, some form of continued participation in the workforce after ‘normal’ retirement age is a decision some will be willing to consider in order to fulfil their retirement dreams.

However, undertaking work that generates an income in retirement doesn’t necessarily mean working the 9-to-5 grind from Monday to Friday. Work may be part-time, casual or seasonal. For some it may even mean self-employment – taking a hobby or a skill and turning it into a small business.

Retirement becomes a trade-off. If we have dreams of a certain lifestyle but don’t have the means to support it, it will either be a case of trading down our lifestyle – nobody wants to do that – or find a way to afford it.

In addition to providing a source of income – ongoing workplace participation provides a social outlet (and also helps to keep individuals mentally in check!).

What about the increasing costs of health care as we age?

It is a fact that as we age; we become more reliant on the health care system, and that all costs money.

For those who are eligible for a part or full age pension (approximately 2.5 million Australians) the Pensioner Concession Card provides access to a range of services including bulk-billed doctor’s visits, access to hearing services, reduced cost of pharmaceutical items, and a range of other concessions.

Even if you don’t qualify to receive an age pension, self-funded retirees of age pension age may be eligible to receive a Commonwealth Seniors Health Card which can also provide concessions for health care and pharmaceutical items.

We need to understand what benefits we are entitled to. Sadly, many Australians are missing out on accessing benefits and services that are freely available simply because they are unaware of their entitlements.

What if I run out of money?

This is a very real concern for many people as we don’t know just how long we are going to live, and that makes planning very difficult.

With life expectancy in Australia steadily increasing, retirement is likely to span 25 to 30 years for many. With the money we do have it must last a very long time.

Recent research has found that many Australians are actually under spending in retirement so as to ensure the money lasts.

Managing the retirement budget requires some careful planning. Some very good advice is available to assist in that process.

Even if you were to run out of money, the age pension is there to provide a safety net. Most Australians will be entitled to receive the age pension at some point during their retirement.

The government rightly expects people to use their own financial resources first, before drawing on the public purse. As a result, and as a consequence of an ageing population, we can expect to see government policy being tightened more to restrict the age pension, and other government welfare payments to those truly in need.

And that might include raising the age of entitlement at which we can begin receiving the age pension.

Will I be able to leave a legacy?

Being able to leave a legacy to children and grandchildren is something that many people earnestly aspire to. But, at what cost?

There are many stories of people living in poverty simply so they preserve their modest savings to pass on to the next generation who, are often living a far more luxurious lifestyle than their parents ever imagined.

While being able to leave something for the next generation is a noble ideal, I am sure that a significantly large proportion of potential beneficiaries would prefer to see their parents enjoy their retirement years.

Leaving a legacy would be wonderful ideal, but would your kids want you living on baked beans for the rest of your life? There has to be some balance.

Enjoying a comfortable lifestyle, and being able to afford it, is a very fine balancing act.

There is no simple answer, but perhaps the lesson is to start planning as early as possible, understand what entitlements are available, and seek the appropriate advice.

 

Source:  Peter Kelly – Centrepoint Alliance

Aged Care Alternatives

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What is Agedcare Alternatives?

Agedcare Alternatives is a free information service that helps older people, their carers and families, to find an understand information about aged care services.

Agedcare Alternatives offers you a personalised, face to face consultation at our centre, or answers your enquiries via telephone or email.

There is no fee charged for this service.

 

What can we help you with?

Agedcare Alternatives can provide you with information regarding a wide range of services offered by aged care organisations, including:

  • In-home care and support
  • Therapy services
  • Respite for carers
  • Retirement living
  • Residential care
  • And much, much more

 

“My Aged Care”

Agedcare Alternatives can provide information about “My Aged Care”, the Commonwealth Government entry point to aged care services.

We have volunteer Options Guides that can assist you, when required, to access the My Aged Care contact centre. We can support you through the registration process and initial screening interview, enabling you to access more support services.

 

Volunteer ‘Option Guides’

Agedcare Alternatives is supported by fully trained volunteer ‘Options Guides’, who are available to help people with:

  • Access and understand information about aged care services
  • Identify their options, choices and the various pathways available
  • Link to My Aged Care if this is person’s preference

 

How you can access Agedcare Alternatives?

Phone us on 8408 4600, email info@agedcarealternatives.net.au, or visit our information centre at 1/445 Fullarton Road, Highgate.

Our offices have easy access, plenty of close car parking and a friendly and comfortable environment.

We also provide outreach services at a number of locations. Call us to find out if we will be in an area near you.

Feel free to visit our website www.agedcarealternatives.net.au

 

 

Source:  Agedcare Alternatives

It seemed like a good idea at the time!

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Do you ever stop and wonder why you made certain decisions in the past?

Do you ever question what you have purchased, that has now become a significant burden.

As we journey through life, we often acquire things that “seemed like a good idea at the time”. It may be something we purchased, was given to us, we agreed to look after for someone, something we inherited, or even something we borrowed and never got around to returning to its rightful owner!

In the big scheme of things we now recognise that these possessions are holding us back.

They are preventing us from moving on to the next stage of our life. After all, we can’t just sell or give away that piece of furniture that was given to us by great-aunt Joan, even though it doesn’t really suit our style, and we aren’t that fond of it.

Life is full of ‘stuff’. Many of these things had a useful purpose at the time, but have now reached their use-by date.

However all these trappings of life are like old friends, and a part of us just won’t let go. We want to hold on to them for old time’s sake. We become sentimental.

I am constantly reminded of the struggle people have when they decide to ‘downsize’. They make a decision to move to a smaller home or perhaps to a retirement village, lifestyle park, or even take on the life of a ‘grey nomad’ and travel the country in their caravan.

As part of this exercise it is necessary to go through a lifetime of accumulated bits and pieces, and make some very harsh decisions about what stays and what goes. This can be a very debilitating experience for many people, as the items that have to go often have the happiest or saddest memories associated with them.

Do we just bite the bullet and chuck everything out? Or do we quietly go through things one item at a time?

The answer to this question will be different for everyone. And each person’s decision should be respected.

But at some stage in our life it will be a bridge we have to cross. That is, through needs and circumstances, we will have to sort through a lifetime’s worth of possessions, and some will need to go.

But know this – it can be a very liberating experience.

I heard it said recently that if something doesn’t bring you joy or pleasure, it has probably outlived its value. There may be someone else out there who will find joy or pleasure in it.

So, today’s suggestion – if you have decided to let something go to a new home or, heaven forbid, to landfill, and you have an attachment to it, take a couple of photos. Digital storage consumes far less space than Granny’s old free-standing wardrobe!

So, the next time you walk past the old rusting trailer that is sitting in your backyard – ask yourself the following questions; “when did I last use it?” and “do I have plans to use it again in the foreseeable future?”

We are all collectors. We spend our lives gathering items to surround ourselves with. The challenge is to know when to let go.

So, take the challenge. What is one thing that you are holding on to that no longer serves a useful purpose? Give it a new life.

 

Source:  Peter Kelly – Centrepoint Alliance

Amended Government superannuation package

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The Government has released an amended superannuation package.

Note: these changes are not yet legislated and still have to be introduced and made through Parliament.

Some measures remain largely unchanged while others such as the lifetime $500,000 non-concessional cap and the removal of the work test for over 65s have been replaced or scrapped altogether.

Once legislated, most measures will take effect from 1 July 2017. There are still many unanswered questions around the practical operation of many of the measures. We await the draft legislation for further details.

Objective of superannuation

The primary objective of superannuation is to provide income in retirement to substitute or supplement the age pension.

Non-concessional contributions (NCCs)
From 1 July 2017:
• the annual non-concessional contributions (NCC) cap will be reduced from $180,000 per year to $100,000 per year
• individuals under age 65 will be eligible to bring forward 3 years ($300,000) of NCCs
• individuals with a total superannuation balance of more than $1.6 million will be unable to make NCCs.

$1.6 million eligibility threshold
The $1.6 million eligibility threshold will be tested at 30 June of the previous financial year.
This means if the individual’s balance at the start of the financial year is more than $1.6 million they will not be able to make any further NCCs.

Individuals with balances close to $1.6 million will only be able to bring forward the annual cap amount for the number of years that would take their balance to $1.6 million.

Under transitional arrangements, if an individual has not fully utilised their NCC bring-forward cap before 1 July 2017, the remaining bring forward amount will be reassessed on 1 July 2017 to reflect the new annual caps.

The $1.6 million eligibility cap will be indexed in $100,000 increments in line with the consumer price index (CPI) ie the same as the $1.6 million pension cap.

Broadly commensurate treatment will apply to members of defined benefit schemes.

Work test
As currently, the work test will continue to apply for individuals aged between 65 and 74. This was previously proposed to be removed.

Individuals aged between 65 and 74 will be eligible to make annual NCCs of $100,000 from 1 July 2017 if they meet the work test (ie gainfully employed for 40 hours in 30 consecutive days) but cannot use the bring forward option.

Worked examples (provided by the Government)
Example 1 – bring-forward rule
Kylie’s (age 58) superannuation balance is $500,000. She sells an investment property and makes a $200,000 NCC in October 2017.

As Kylie has triggered the bring-forward option, she can make a further $100,000 NCC in 2018/19.

Kylie’s NCCs would reset in 2020/21 and she could make further contributions from then.

Example 2 – bring-forward rule
Molly (age 40) has a superannuation balance of $200,000.

In September 2016, she receives an inheritance of $250,000, which she contributes to superannuation, triggering the $540,000 3-year bring forward option.

From 1 July 2017, Molly can make a $110,000 NCC in 2017/18 and $20,000 in 2018/19. She can then access the new bring forward option from 2019/20 and contribute up to $300,000 in NCCs.

Note: This may mean an individual under age 65 in 2016/17 can trigger the current bring-forward option (subject to eligibility) and contribute an entire $540,000 in NCCs. It is unclear exactly how the remaining bring forward cap will apply from 1 July 2017 where less than $540,000 is contributed.

Example 3 – work test
Gary (age 72) a retiree, works around 40 hours in September every year and has a superannuation balance of $450,000.

As Gary meets the work test, he can make a $100,000 NCC in 2017/18.

However, as Gary is over age 65 he cannot access the 3-year bring forward option.

Example 4 – $1.6 million eligibility threshold
Eamon (52) has a total superannuation balance of $1.45 million. He can make a $200,000 NCC in 2017/18.

He cannot access the full 3-year bring forward option as this would take his balance over $1.6 million.

Eamon would also not be able to make any further NCCs.

CGT cap
Separate to the NCC cap, the current CGT cap of $1,415,000 (2016/17) continues to apply for small business owners.

Concessional contributions (CCs), contributions tax and catch up CCs
The annual concessional contributions (CCs) cap will be reduced to $25,000 (currently $30,000 and $35,000 if age 50 or over) from 1 July 2017 for all individuals.

The cap will index in line with Average Weekly Ordinary Time Earnings (AWOTE).

Individuals with adjusted taxable income of $250,000 (currently $300,000) will incur 30% tax on their concessional super contributions from 1 July 2017.

Catch-up CCs
This measure has been pushed out a further 12 months.
From 1 July 2018, unused CC cap amounts can be carried forward over 5-year periods accrued from 1 July 2018 where total super balance is under $500,000.

Example 5 – catch-up CCs
Anne has a superannuation balance of $200,000 but did not make any concessional superannuation contributions in 2018/19 as she took time off work to care for her child.

In 2019/20 she has the ability to contribute $50,000 into superannuation ($25,000 under the annual concessional cap and $25,000 from her unused 2018/19 cap which has been rolled over).

Tax deduction for personal super contributions
Individuals under age 75 and not just the wholly or substantially self-employed will be able to claim a tax deduction for their personal super contributions from 1 July 2017. This means more people will be able to make concessional contributions and it provides an alternative to salary sacrifice.

Example 6 – tax deduction for personal contributions
Chris has started his own online merchandise business but continue to work part-time at an accounting firm earning $10,000 as his business is growing.

His business earns $80,000 in his first year and he would like to contribute $15,000 of his $90,000 income to his superannuation.

Chris could claim a tax deduction for his $15,000 of superannuation contributions.

$1.6 million pension cap
A $1.6 million cap will apply on the amount that can be transferred into the superannuation pension phase from 1 July 2017. There will be no restriction on subsequent earnings.
Accumulated super in excess of $1.6 million can be retained in a member’s accumulation account (with earnings taxed at 15%) or moved outside super.

The cap will index in $100,000 increments in line with the consumer price index (CPI) and is expected to be around $1.7 million in 2020/21.

Transition to retirement (TTR)
Individuals who have reached preservation age can still access a transition to retirement (TTR) income stream but earnings on the amount supporting it will be taxed at 15%.

Innovative new retirement income stream products, such as deferred lifetime annuities and self-annuitisation products will become eligible for the earnings tax exemption.

Individuals will no longer be able to elect to draw lump sums from their TTR pension to reduce tax.

The tax treatment of income stream payments remains unchanged ie; for recipient’s age 60 or over the payments will be tax free, or taxed at the individual’s marginal tax rate less a 15% tax offset between preservation age and age 60.

Spouse contributions and tax offset
As currently, individuals can only make spouse contributions where the receiving spouse is under age 65 or age 65-70 and working.

The income threshold of a low income spouse for the purposes of the spouse contribution tax offset will increase from $13,800 to $40,000, from 1 July 2017.

Low income superannuation tax offset (LISTO)
The low income super contribution (LISC) will be replaced with the Low income superannuation tax offset (LISTO) from 1 July 2017.

The LISTO will automatically refund tax paid on low-income earners’ concessional contributions. The offset is capped at $500 where taxable income is less than $37,000.

Without the offset, low income earners would pay more tax than if they earned the income directly.

Anti-detriment
The anti-detriment will be abolished from 1 July 2017 as previously announced

Source: Asteron Life