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Retirement – do not look back with anger!

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Nearly every Saturday at 11.30am, Donna (my partner), Scout (my dog) and I visit my mum in the aged care facility where she now resides.

Prior to COVID-19, visiting mum meant we were able to take her for out for coffee or to the shops, which she enjoyed immensely.

During this time of COVID-19, taking mum out has become difficult and not an experience that she likes or understands. The aged care facility asks that she wear a mask when she is out, and on her return to the facility, her contact with the other residents is restricted for a period of time.

My mum has dementia, and unfortunately she does not understand what is happening or why her movements are being restricted.  She becomes depressed, angry, and bitter with her life, which is understandable.

Do I think this will happen to me as I grow old? Will I become angry with the world as my health declines? Bitter and depressed because I have not done or remember doing all the items on my bucket list?

To be honest, I do not know. It maybe something I have no control over, but I can try to take all the steps I can to ensure it does not happen.

I am sure we all know people in the later stages of life who find that their health is now restricting their options. They find that they no longer have the energy or the physical ability that they had in their 50s, 60s and even their 70s. For some people, this can become a time of bitterness and despair, as they believe they have not lived their life to its’ full potential.

The decline of a person’s health as they age is very difficult to stop. You can take steps before it begins, by eating right, not smoking, possible drinking less and being active, to help slow the process; but the reality is that as you reach your 80s and into your 90s, for the majority of people their physical abilities and their strength will diminish.

So, what can you do to ensure that when this does happen that your life in your 80s and 90s is not filled with feelings of bitterness and regret? How do you build a plan so you aren’t constantly thinking, “if only I had acted earlier and understood what retirement and this stage of your life was all about”

The stage of your life after your working life requires a plan, and no, I am not talking about a financial plan. In your retirement you need to have a “purpose” and a plan to achieve this “purpose”. This “purpose” will be different for every person, depending on your finances and interests but you need to have at least one.

It does not matter whether it is travel – becoming a grey nomad, living overseas for a period of time (all which are restricted at the moment) – doing volunteer work, or learning a new skill, people should not leave their working lives behind until they understand what they are going to do in the next stage of life.

Having a “purpose” and plan is important as it provides the stimulation required to keep you healthy both physically and mentally.

It is important to be realistic in your planning, understand how many dollars you require to pay your weekly bills and then ensure you have enough left over to achieve your purpose and dream in retirement.

This stage in your life is just as important as all the other stages of your life. It is a period of time that could cover more than thirty years. It is a long time to live with regrets of what you didn’t do, or should have done, because there was no thought or plan put into this period.

I am sure that your grandchildren (if you have them) would much rather listen to someone with tales of a wonderful and adventurous life over a person who is continually complaining about the things they did not do.

Develop a plan. Understand what you want to achieve in retirement and talk to someone about how you are able to achieve the financial goals required to ensure your dreams come true.

 

Source:  Mark Teale | Centrepoint Alliance

Commonwealth Seniors Health Card – Do I qualify?

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The Commonwealth Seniors Health Card (CSHC) is a concession card issued to a person who is old enough, but not entitled, to receive either an Age Pension or a Veterans Affairs service pension.  Card holders are entitled to concessions in relation to their health care and the purchase of prescription medication.  Also, depending on location, card holders may also be able to access state or local government concessions as well.

The CSHC, unlike the pension, is not subject to an assets test. In other words, the value of the assets you have invested or own will not stop you from qualifying for the CSHC. However, the CSHC is subject to an income test.

The income test considers both your adjusted taxable income and, if you do have an account-based pension, the assessed deemed income based on the pension balance.

To pass the income test, the combination of your adjusted taxable income and any deemed income assessed on an account-based pension needs to be less than:

  • Single $55,808 p.a.
  • Couple $89,290 p.a. (combined)
  • Couples living separately due to illness $111,616 p.a. (combined)

These thresholds are adjusted on 20 September each year.

The adjusted taxable income is based on your taxable income (evidenced by your notification of assessment from your last tax return).  This taxable income amount is adjusted by any investment losses plus any reportable superannuation contributions, employer fringe benefits or foreign income.

If the notification of assessment references your final year of employment or the last year that your business was operating, you are able to provide an estimate of your income; providing, of course, you are no longer working or operating your business.

Added to this adjusted taxable income is the deemed income on any account-based pension that you may have.  As an example, if the value of your account-based pension was $1.5 million dollars, for a single person the first $53,000 of the balance would be assessed as earning 0.25% and the remaining $1,447,000 would be assessed as earning 2.25% meaning the total deemed income on the pension would be $32,690.  It is important to note that the actual income being drawn from the account-based pension has no bearing on the income that is assessed.

Therefore, provided your adjusted taxable income or the estimate of your income is less than $23,118 for that year, you would be entitled to a CSHC.

I should point out that if one member of a couple reaches the appropriate age and does apply for a CSHC, the partner’s adjusted taxable income is still taken to account, even if they do not yet quality for their own CSHC. The total combined income as a couple would need to be less than $89,290.

Over the last twelve months, the deeming percentage rates have reduced substantially and I believe there may be people of qualifying age with large account-based pensions who may now be eligible for a CSHC. For example, a couple both of qualifying age with no other investments or income other than their account-based pension income stream would each be entitled to a CSHC even if they had a combined balance of $4 million.

For a healthy person, the CSHC may not seem to offer many concessions, but the difference in prescription prices compared to those who do not have a CSHC can be substantial.

If you are unsure if you are entitled to a CSHC, speak to someone who can look at your circumstances and advise you of your correct entitlement.

 

 

Source:  Mark Teale | Centrepoint Alliance

Health Insurance – changes on the way!

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Each year on the 1st April, the premiums for private health insurance increase. This year there is going to be a lot more than premium increases. The Australian Government is making changes that will impact on the cover held by members.

Not only are significant changes being made to the way hospital cover is structured, but a number of ‘extras’ type items are being removed. This is mainly in the area of natural therapies, like naturopathy, homoeopathy, pilates, reflexology, yoga and the like.

In order to try and simplify the comparison of cover between health insurers, hospital cover will be categorised as ‘basic’, ‘bronze’, ‘silver’ and ‘gold’. Naturally, the gold cover will offer the broadest cover and will also be the most expensive.

The basic policies will cover very little indeed. These have previously been described as ‘junk policies’. That is policies that allow people to avoid paying the Medicare surcharge, but which offer very little cover at all.

Bronze policies will cover 18 categories of services in a private hospital including breast, skin and prostate cancer surgery, broken bones, joint reconstruction (but not joint replacement), and ear, nose and throat surgery.

Silver will cover all the services offered under the basic and bronze cover levels plus an additional 8 categories of cover including heart surgery, surgery for lung cancer, bone marrow transplants and medically necessary plastic and reconstructive surgery.

Gold is the top cover and if you are planning on having a baby and you want the expenses covered by your private health insurance, the ‘gold’ policy is the one you will need.

Private health insurance has always been a bit of a ‘dark science’. For many of us, selecting the cover we think is appropriate for our needs is a bit of a stab in the dark. We sign up and hope like mad that if we ever have a claim, our private health insurance will cover us.

So, if you have private health insurance, or are thinking of taking it out, spend a little time exploring the options, and how your cover may change from April this year.
For more information, particularly in relation to the changes to hospital cover, have a look at the following link: Health Insurance Reforms – April 2019.

 

Source: Peter Kelly | Centrepoint Alliance

What happens when retirement does not go to plan?

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We have written on numerous occasions over the last few years of the need to plan carefully for your retirement – financially, emotionally, physically and mentally.

What happens if it does not go to plan, not from a financial aspect but from a health perspective?

What am I talking about?

I have observed two people close to me, a good friend and a brother in law prepare for their retirement and then retire with their first years of “freedom” or “my time” planned.

Both men were in good health and had always been very active. This continuing and increasing level of activity was an integral part of their retirement – competing and training for an Ironman race and a number of endurance bike rides. As both have now retired, finding time to fit in all the necessary training was not an issue. They were excited and looking forward to the challenge.

Both men were diagnosed with “arrhythmia”, palpitations of the heart.

I have no medical qualifications and I am not going to attempt to explain the symptoms, consequences of this diagnosis or the treatment. All I do know from my own observations of these friends was that their training now needed to be curtailed and the initial ongoing treatment, although not necessarily painful, was incredibly frustrating from their point of view.

Understandably, both were upset and feeling sorry for themselves – all the plans and hopes they had for the first few years of their retirement had been disrupted.

So what is the answer?

I did do some reading, and there are a number of common processes which people can take when life’s plans go a little astray

  • Step back and understand that aside from this one glitch their lives are in fact generally quite great – never dwell on the question of “Why me?”
  • Moping is not allowed. Sit down, reassess your plans and then attack them with the same vigour. Get busy!
  • Understand that your plan does not define who you are. The people who surround you still love and respect you.
  • Accept your limitations and reassess the plan or activity- in this case taking into account the issue

I am not saying that this is the answer, and I do know that if I were in the same situation and someone quoted these to me I would be extremely sceptical.

However, I believe it is important to remember that retirement is a 20 to 30 year period of your life and to become self-observed and continue to ask the question of “why me” is not going to make this part of your life any more enjoyable.

 

Source: Mark Teale | Centrepoint Alliance

2016 Federal Budget breakdown

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In brief, here are 3 key areas handed down by Scott Morrison in the Federal Budget;

Health, welfare and aged care

Renting family home – when a person enters residential aged care and rents their former home, the house and rent will be included for assets and income testing when determining entitlement for an age and service pension. This will only apply to new residents entering residential aged care from 1 January 2017.

Disability Support Pension (DSP) – recipients will have their eligibility reassessed over the next three year to determine their continued eligibility.

Child and Adult Public Dental Scheme – will be available to children and adults covered by a concession card.

Medical Benefits Schedule – fees frozen under the previous budget are to be extended for a further two years.

My Aged Care contact centre – additional funding has been provided to support services provided by the My Aged Care contact centre.

 

Taxation

Personal tax rate – the income threshold at which the 37 per cent tax rate cuts in will increase from $80,000 to $87,000. This is due to apply from 1 July 2016.

Company tax rate – the company tax rate is currently 28.5 per cent for companies with turnover of less than $2,000,000, and 30 per cent for larger companies.

The budget proposes to progressively reduce the company tax rate to 25 per cent by 2026-27, and commencing from 1 July 2016 for companies with turnover of less than $2,000,000, their tax rate will reduce by 1 per cent to 27.5 per cent.

Small business – a small business is defined as one with annual turnover of less than $2,000,000. A number of concessions are available to businesses that fall within this definition, including a lower rate of company tax rate and simplified depreciation rules.

From 1 July 2016, the definition of a small business will be extended to businesses with a turnover of less than $10,000,000. However, for purposes of accessing the small business capital gains tax concessions, the current turnover threshold of $2,000,000 will be retained.

Unincorporated small business tax discount – currently receive a 5 per cent discount on the tax they pay. The budget included a proposal that will see this discount progressively increase to 16 per cent over the coming years. The discount will increase to 8 per cent from 1 July 2016.

 

Financial year Discount
2016-17 8 %
2017-18 to 2024-25 10 %
2025-26 13 %
2026-27 and future years 16 %

The maximum discount remains capped at $1,000.

Medicare levy surcharge and private health insurance rebate thresholds – effective from 1 July 2018, the indexation of the income threshold will be frozen for a period of three years.

 

Superannuation

This year’s announcements are probably the most significant since the superannuation reforms that took effect from 1 July 2007. Except for a couple of notable exceptions, the proposed budget changes will take effect from 1 July 2017, subject to being legislated.

Concessional superannuation contributions – Concessional contributions caps of $30,000, and $35,000 for people aged over 49 will continue for the 2015-16 and 2016-17 financial years.  From 1 July 2017 the concessional contribution cap will reduce to $25,000 for all.

People with less than $500,000 in super who have not utilised all their full concessional contribution cap ($25,000) in a financial year will be able to carry forward any unused cap and make additional contributions in following years.
Unused concessional contribution amounts can be carried forward for up to five years.

Low income superannuation tax offset – Low income earners (people earning less than $37,000) currently receive a Low Income Superannuation Contribution (LISC) from the government of up to $500 to compensate for the 15 per cent tax paid on their superannuation guarantee contributions.

The current LISC is due to cease from 1 July 2017, but will be replaced with a new non-refundable tax offset of up to $500.

Low income spouses – from 1 July 2017, the current low income spouse superannuation tax offset of up to $540 will be enhanced with the income threshold for the spouse for whom a contribution is made, being increased from $10,800 to $37,000.

Contributions for older Australians – Superannuation contributions can only be made by people aged between 65 and 74 if they meet a ‘work test’ in the financial year in which contributions are made. The work test requires they be gainfully employed, or self-employed for a period of at least 40 hours, worked within a period of 30 consecutive days.

The intention is to remove the work test requirement thereby enabling older Australians to contribute to superannuation without having to meet the work test. This is due to apply from 1 July 2017. However, there is no change to allow people over the age of 74 to make or receive contributions to super, other than mandated employer contributions.

Tax deductibility of super contributions – currently a person may only claim a tax deduction for personal super contributions if they derive less than 10 per cent of their assessable income (+ reportable fringe benefits and reportable superannuation contributions) from employment.

The budget proposes that anyone under the age of 75 will be able to make tax deductible personal contributions, irrespective of their age or work status. This change is proposed to take effect from 1 July 2017.

However, consideration needs to be given to the concessional contribution cap, and any employer contributions that may also be made. Furthermore, a tax deduction for personal contributions cannot create a carried forward tax loss.

Non-concessional contribution lifetime limit – current limit is $180,000 per annum. The budget has proposed replacing the current non-concessional cap with a lifetime limit of $500,000.

Even though legislation has not been introduced, it is proposed this change will take effect from 3 May 2016. And, to complicate matters even further, any non-concessional contributions made since 1 July 2007 will be assessed against the lifetime cap.

Extension of tax on super contributions for high income earners – Australians earning more than $300,000 currently pay an additional 15 per cent tax on their concessional superannuation contributions, bringing the total tax rate to 30 per cent. This is referred to as ‘Division 293 tax’.

Effective from 1 July 2017, the threshold will be reduced from $300,000 to $250,000.

Super pension limitations – Money transferred to the pension phase of superannuation is concessionally taxed. That is, a superannuation fund pays no tax on the income it earns on investments that are supporting pension payments.

In the budget, the government announced restrictions will be placed on the amount that can be held in the pension phase of superannuation. The proposed limit is $1,600,000. Amounts in excess of this will need to either be withdrawn from super, or may be retained in an accumulation account with investment earnings being taxed at 15 per cent.

This proposal is retrospective in that people already drawing income from a pension that has a value of more than $1,600,000 as at 1 July 2017, will need to transfer the excess over $1,600,000 back to an accumulation account.

Anti-detriment payments – An anti-detriment payment is an additional benefit that may be paid from a superannuation fund on the death of a member, where the benefit is paid as a lump sum to an eligible dependent beneficiary. It is proposed that anti-detriment payments be abolished from 1 July 2017.

Transition to retirement pensions – It was expected that the budget would introduce restrictions on the use of pre-retirement, or transition to retirement (TTR) pensions. The approach the government has taken on TTR pensions was not as expected.

From 1 July 2017, the investment earnings derived by a super fund that is paying a TTR pension will not be tax exempt to the super fund. Investment earnings of the super fund will be taxed in the super fund at a rate of 15 per cent, instead of the current 0 per cent.

 

Conclusion

The initiatives announced in the budget are subject to successfully passing through parliament and with an election looming, the success of any of these making it through the legislative process is uncertain at this stage.

However, most of the initiatives announced do make sense despite what some commentators might have said. Certainly, a number of measures are on the harsh side, but we will have to live with those.

The key message at this point is to keep calm. With most of the announcements, we have over a year to digest the implications and develop alternative strategies, where appropriate.

 

Source:  Treasurer Scott Morrison budget speech