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When is the best time to start planning for retirement?

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Planning for retirement is a bit like planting a tree, the best time to plant a tree (or start planning for retirement) was 20 years ago! The second-best time to start planting or planning is now.

When we think about retirement, from a financial perspective, we are often planning for a very long time. With an increasing life expectancy, the average Australian can expect to spend 20 to 30 years in retirement. In today’s society some people are looking to spend almost as much time in retirement as they spent working.

All too often we hear stories of people who are about to or have just retired and they visit a financial planner, often for the first time to get their retirement sorted. After all, super and the age pension is very confusing unless you have been closely involved with it for a long time.

Often when planners meet with prospective clients to discuss retirement, it becomes apparent that the retiree has insufficient savings, and particularly super, to support the type of lifestyle they have dreamed of.

What are some of the things I have learnt about planning for retirement, and would tell a “younger self”?

1. Don’t think you are too young to start planning for retirement. Time goes by very quickly and we find ourselves sitting on the threshold of retirement asking, “where did the years go?”

2. Aim to save 15% of income in a retirement savings account, from as early as possible. Employers are currently required to contribute 9.5% of a person’s salary to super. This is intended to increase to 12% over the coming years. However, by voluntarily contributing extra salary to super can mean the difference between a comfortable, and a very modest retirement. It can also be tax effective.

3. Eliminate debt as soon as possible. It is all too easy to get caught up in the trappings of everyday life and consumerism by wanting all the latest gadgets and toys. But the reality is, we often don’t need them and all we are doing is adding to our debt.

If we are to have the type of retirement we have always dreamed of, start planning as early as possible. Find a good financial planner who will work with you to help you set goals, develop smart savings strategies and invest wisely for a profitable future.

 

Peter Kelly | Centrepoint Alliance

The Invisible Money Generation

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Today’s kids have a different concept of money to previous generations. Instead of using coins and bank notes, this generation has grown up watching people buy things by tapping and swiping or clicking buttons online. They live in a world where in-app purchases, electronic bank transfers and digital currencies like bitcoin are as common as piggy banks were back in the day.

It’s no wonder that research from the Financial Planning Association (FPA) revealed two in three Australian parents say it’s difficult for their children to grasp the actual value of money.

DIGITAL NATIVES
Generations Z (born 1995 to 2009) and Alpha (born after 2010) are the invisible money generation – citizens of an increasingly digital world with the Internet at their fingertips. They are savvy with technology because they’ve been using it all their lives, and having ready access to all the information they want has made them more curious in matters of money and life than any previous generation.

These digital natives don’t just learn about money from their parents. They gather their information from a wide variety of sources, including grandparents (63%), teachers or coaches (59%), peers (26%) and social media (18%).

How children use digital money Ages 9-13 Ages 14-18
Make online purchases for themselves or their family 30% 68%
Buy a mobile app or in-app purchase, or a console in-game purchase 48% 66%
Transact with debit/credit card or other form of digital money 31% 65%
Make a purchase using a mobile phone 24% 44%

MORE CONFIDENT, BUT WORSE OFF
The FPA research showed parents recognise that their children are more engaged with money than they were at their age. Compared to their own childhoods, 69% of parents say their children are more confident asking questions about money and 57% feel their kids are more financially literate.

Yet, 62% of parents believe their children’s generation will be financially worse off than they were. Uncertain economic conditions and the growing cost of living play a part in this belief, but for many this fear goes beyond external influences. More than two in five parents are concerned that their kids won’t have the financial skills they will need as adults to become financially successful.

FINANCIAL STRESS AND UNCERTAINTY
It’s possible that financial stress and limited financial literacy are affecting people’s confidence when it comes to talking about money. Almost two in three young parents (aged 18-29) say they are very or somewhat stressed, while that number is closer to one in three for those aged 60 or over. People living in regional or remote areas are more likely to be financially stressed than their city-dwelling counterparts, and single parents report a much higher level of stress (67%) than those who live in two-parent households (47%).

Parents who are financially stressed are less likely to talk about money to their kids compared to those who don’t feel stressed – with 32% admitting they’re reluctant to have these conversations because they don’t want their kids to worry about money. But the FPA report revealed that children who participate in conversations about money are more curious, confident and financially literate than those who don’t – even if the conversations aren’t always positive.

WANT TO KNOW MORE?
Seeking advice from a financial adviser can build your financial literacy and confidence. If you would like to know more speak to your financial adviser.

 

Source: Colonial First State

Why I use a financial planner

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On 12 December 2017, I will have been working in the financial services sector for 50 years.

With all that experience you would think I had all the answers and didn’t need to use a financial planner. Some years ago I bit the bullet and decided I needed a financial planner.

I needed discipline. I needed someone who could guide me and make me accountable for the decisions I wanted to make. Like a sounding board – a counsellor.

Selecting a financial planner is not necessarily an easy process. I had specific needs.

I needed someone who could keep me on the straight and narrow, someone who would challenge me when it became necessary, and someone who experienced financial success in their own life. Not ‘in your face’ wealthy, but someone who was financially comfortable and had mastered their own work/life balance. Someone who practised what they preached.

They had to be younger than me, or someone who at least had a robust business succession plan in place – as I didn’t want a planner who would be retiring when my wife and I needed them most.

On top of all that, I needed to find someone my wife was comfortable to deal with, and someone who could guide her if there came a time when I was no longer around.

When looking for a financial planner, I didn’t need someone who could tell me about salary sacrificing into super, making spouse contributions, claiming the government low-income co-contribution, or even the benefits of commencing a transition to retirement pension.

What I needed was someone who could guide me on investment selection. What managed funds should I be using, what shares should I be buying, and the fixed interest and hybrid securities to consider?

A couple of weeks ago I met with my financial planner for our review.

Now, we didn’t need to discuss the investment returns as I keep on top of that through my online access to my account. We did discuss the state of the market and general concerns about the investment decisions that might need to be made in the coming weeks and months.

Most of the conversation revolved around what my wife and I wanted to do with our lives, rather than with our finances. Given my circumstances, the conversation naturally turned to our retirement plans.

When this question comes up, I either brush the question off or say something vague like ‘in a couple of years’. It is quite confronting and frankly, it is something I don’t really want to think about at this stage.

If I enjoy my work and my life, and if I am able to continue to deliver a quality service to my clients, then why should I have a fixed retirement date in mind? After our conversation, I felt liberated.

Having a financial planner who is willing to have some of the more awkward conversations is, to me, where the value lies in the relationship. They are a counsellor or coach first, and a financial planner second. To me, my financial planner is worth their weight in gold!

 

Source:  Peter Kelly | Centrepoint Alliance

Aged Care Loans

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Australia has an ageing population that will continue to grow significantly over the next 25 years. Approximately $3 billion per annum is already required to fund individuals moving into aged care facilities. The ability to fund entry to an aged care facility will become an important one for your customers.

Most individuals have to pay a Refundable Accommodation Deposit (RAD) commonly exceeding $500,000. How to fund this deposit can be difficult, stressful and most often at a time when a decision needs to be made quickly.

Click on the video below to see how an Aged Care Loan can help fund the RAD and also keep the family home. This flexible solution gives the breathing space to consider financial needs and decide what financial requirements will best suit the family.

Source: LaTrobe Financial

Retirement is not that simple!

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Most people dream of the stress-free and simple life that retirement brings, however just how stress-free and simple will retirement be.

For most of us, by the time we retire, we would have dealt with all the stress, the high blood pressure and emotions that one would normally face over a period of 40 plus working years.  Regardless of the type of work you have performed – whether you were self-employed, a professional, a public servant, tradesperson, or a labourer – without a doubt you would have been confronted with many decisions and challenges work brings.

This level of work stress is compounded further by the ongoing issues of family life.

From having children and riding the bumps through the different stages of their lives to saving for a deposit to buy a home.

After you have survived this period of your life, retirement should be easy and certainly stress-free. You own your home and the last of the children have moved out and there is no longer a drain on your bank balance.

Life should now be simple…

Not quite as now you have a new set of things to worry about, like Do I have enough superannuation to keep me in the lifestyle I would like to achieve in retirement? Do I qualify for the age pension or the Commonwealth Seniors Health Card? What happens if I am not able to look after myself? Will I be able to afford care and the necessary medical assistance?

So what can a person do to try and reduce the level of stress in retirement?

A financial expert or adviser will understand the legislation and how much you will need in your retirement.  They can educate you not only during retirement but more importantly, they can help you take the correct steps before you reach retirement age.

 

Source:  Mark Teale | Centrepoint Alliance