Regularly checking in on your retirement plan is always a sensible strategy. Keeping track of your finances becomes even more important in times of economic uncertainty. Given the changes we’ve seen due to Coronavirus, now is a good time to take a look at your retirement income plan with fresh eyes. We’ve put together a list of resources to help you.

Put your assumptions to the test

Making sure your retirement income is secure is an essential ingredient to a comfortable retirement. But many Australians rely on incorrect assumptions when making decisions about their money.

Are you 100% sure you’ve got the facts?

Learn how to protect your income from poor share market performance

Recent events in global markets have put money in the spotlight for many retirees. According to the ABC’s Covid-19 Monitor ¹, over half of the Australians surveyed are ‘very’
or ‘extremely’ concerned about the economic impact of the Coronavirus. In fact, they’re more worried about the economic impact than their own personal health risk.

The first quarter of 2020 has seen significant falls in both domestic and global share markets, which may have left you feeling concerned about the impact on your retirement income. The good news is, there are steps you can take to feel more confident about your money.

We explain the risk of poor share market performance in retirement and explore options to help you protect your retirement income.

Flex your budgeting muscles and keep spending on track

Chances are your spending patterns have changed since 2020 began. Research² for the first quarter of 2020 showed that overall, household spending behaviours were more conservative as significantly more consumers cut back on non-essentials. While many Australians are spending more on items like food and groceries, spending on eating out, holidays and travel has obviously fallen.

With less temptations for spending, now could be a good time to revisit your budget. Have any of your expenses gone down recently? Have you found there are things you can do without? What things have been essential to your lifestyle and wellbeing?

Staying on top of your budget is key to spending confidently in retirement.

Find out if your retirement income will last for your lifetime

With longer lifespans and less certainty in world markets, making sure your money goes the distance is more important than ever. It’s no wonder that 84% of older Australians rated the desire for regular and constant income as very important³. But how do you make that happen?

Put your retirement income to the test and get results that show:

• how long your retirement savings will last;
• whether you’re eligible for the Age Pension or an increase in payments; and

how much annual income you could guarantee for life by adding a lifetime income stream to your retirement income plan.

Get help from the experts if you’re feeling uncertain

At times like this, it can be hard not to worry. In fact, we’re hard wired to pay greater attention to bad news which can create anxiety for even the most confident investors. Talking to a financial planning professional can ensure you’re following a strategy to achieve your goals for your retirement income.

Call LT and speak with one of our financial advisors to day on (02) 4926 2300.

1 https://www.abc.net.au/news/2020-04-28/coronavirus-data-feelingsopinions-covid-survey-numbers/12188608
2 https://business.nab.com.au/nab-consumer-anxietysurvey-q1-2020-39188/
3 https://nationalseniors.com.au/uploads/09172675CRP_ChallengerReport_
RetirementIncome_FN_0.pdf
4 https://www.psychologytoday.com/au/articles/200306/our-brainsnegative-bias

Source: Challenger

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Your accumulated savings pool is likely to be highest in the years nearing retirement – and just after you retire. Investment decisions made at this time can greatly impact your income down the track.

The risk they don’t talk about in the papers

When it comes to investing we are all familiar with the most common definition of risk; investment returns can and will vary. But risk needs to be considered in context of not achieving your objectives – and how a lesser known risk called ‘sequencing risk’ impacts whether or not you meet your goals.

Critical investment period near retirement

Returns matter the most when you have the most capital at risk. Sequencing risk relates to the order in which returns occur.

Rather than just assessing how assets go up or down over a given time horizon, the path of the return also needs to be assessed. This is because your outcome will be a function of both the investment returns achieved and the size of your investment savings. Let me show you with an example.

A poor investment outcome at the wrong time can be very costly

Consider an investor in their accumulation phase who saves $10,000 each year for 10 years. In the below two scenarios, the investor experiences a large negative loss over the course of that decade. In Scenario 1, the investor experiences the loss in the first year, while in Scenario 2, the loss occurs in the final year of their investment.

Both scenarios have the same compounded annualised return and volatility. If you were to read about these returns in the newspaper at the end of the decade, the returns would be the same under either scenario. But the dollar outcomes for the investor are vastly different.

Timing Matters: different outcomes due to different timing of returns

In Scenario 1, the market decline occurred early and impacted savings when the accumulated investment balance was low. In Scenario 2, ten years of savings contributions and years of steady market gains were impacted by the poor returns in the last year.

The difference for the investor who experienced a draw down in the last year was -17.1%. A poor investment outcome at the wrong time can be very costly.

The value of seeking expert advice

Why haven’t you read about sequencing risk more often? Financial markets don’t experience sequencing risk, only investors do. It relates to where you are in your own working/retirement journey and the savings balance you are accumulating ahead of retirement.

Investment strategies are available that aim to improve the outcomes during this important ‘transition to retirement’ phase. These strategies aim to reduce volatility and improve the stability of returns.

This highlights the benefit of seeking expert financial advice to assist with these challenges. Your financial planning adviser can tailor an investment strategy that matches your personal circumstances and seeks to address your multiple objectives. They have required skills and experience to determine if strategies designed for the transition to retirement may be appropriate for you in terms of achieving your long-term financial goals. Top 10 Microgaming Casinos in Australia​​ GunsBet – 100% deposit bonus + 100 free spins. Spin Samurai – 125% match bonus. We recommend these microgaming casino sites to play online. Best Microgaming Casinos For Australians ; 1 · Pokie Spins Casino ; 2. Jackpot Jill Casino ; 3. BitStarz Casino ; 4 · Hell Spin Casino ; 5. National Casino. Play Microgaming casino on PC & mobile software platforms · For AUD players, banking is simple and safe. Microgaming pokies can be found at HellSpin, DundeeSlots, Bizzo and Ricky casino. What is the best Microgaming pokies?

Taking the time to plan your ‘transition to retirement’ can be well worth the effort.

Speak to your Newcastle financial advisors at Leenane Templeton Wealth Management today.

Call (02) 4926 2300 or email us today.

Source: First Sentier

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When you retire, there are different financial factors to consider because you are no longer receiving income from employment.

Adverse market movements can have a greater impact on your savings in retirement because you’re not replenishing your savings with a regular pay cheque. Additionally, when you’re employed your income generally increases to keep pace with inflation. However, in retirement, inflation can erode the purchasing power of your savings.

At the same time, thanks to medical advancements and healthier lifestyles, you could enjoy a retirement period upwards of 30 years. This is a long time to make your savings last. Therefore, the decisions you make about investing your retirement funds are critical for making sure those funds last as long as you do.

Fortunately, there is a way to guarantee a level of secure, regular income throughout your retirement. An annuity pays you a guaranteed secure income that can keep pace with inflation, if you choose. The income is generally tax free if you’re over 60 and investing your superannuation money. Some annuities may also help you access or increase your seniors benefits like the age pension and the Commonwealth Seniors Health Card.

An annuity is a secure investment that provides you with a series of regular payments, either for a chosen term or for your lifetime, in return for a lump-sum investment. It can be used with other retirement investments, like account-based pensions, to set you up with a dependable income that can last throughout your retirement.

Term annuities have fixed start and end dates that are typically chosen by you. The minimum term is one year and maximum term is 50 years. Annuity payments are for the duration of the term and stop at the end of the term.

Lifetime annuities provide regular payments for the rest of your life. If you choose, the payments may continue for the lifetime of a second person after you pass away. Lifetime annuities can help alleviate the worry that you will outlive your retirement savings.

An annuity works like a pay cheque in retirement. You invest some of your savings with a financial institution who then holds your money while paying you guaranteed regular payments. This income is generally tax free if you are over 60 years of age and are investing your superannuation money. The payments can be made monthly, quarterly, half yearly or yearly.

It is important to note that annuities are designed to be held to term. If you would like to withdraw your annuity, in most cases you will receive a return of your investment but you may receive back less than you invested originally and less than you would have received had you held the annuity for its agreed term.

To find out more about how an annuity can help you in retirement, speak to your Leenane Templeton financial planner on 02 4926 2300

Source: Challenger

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As we approach retirement some people start to panic a little wondering if they are truly looking forward to the time of their life when they no longer have to work. All of a sudden something they have been dreaming of starts to seem real! Instead of worrying, have a read of the following tips and if necessary, act now. After all, it’s your future – and it could be here sooner than you think.

1: What do you want and how will you get it?

What are your goals and objectives for your retirement? Write out a plan that sees you enjoying the fruits of your labours. Then make sure your finances can achieve your goals. If not, do something about it now while you still have time. Be realistic and set achievable timeframes.

2: It’s not just about returns; remember the risks

Every investment has some degree of risk. Cash is considered the safest as there’s a good chance your money will still be in the bank when you need it. The downside is that it pays the lowest return; it isn’t tax effective; and doesn’t tend to keep pace with inflation. To achieve higher returns and make your money work harder, you need to take appropriate risk. Understand the differences between cash, fixed interest, shares and property and make your decisions wisely.

3: Share it around

To help reduce risk, share your investments across several asset classes and within those asset classes as well. The right balance will depend on your financial objectives, the amount of time you have available to invest, and your risk tolerance.

4: Don’t forget super…

Superannuation will be your bank account when you are no longer working so you should be considering ways to boost your superannuation balance prior to retirement. But be aware the tax benefits are not always equal so make sure you have a balance of inside-super and outside-super investments. 

5: …or tax

Tax is the trickiest area of all. Always make sure you get good advice on investing tax-effectively. A simple restructure of an underlying asset, investment vehicle or ownership structure could help you to minimise the amount of tax you pay and maximise your after-tax return.

6: Retirement can last another lifetime

With medical technology and improved lifestyles we are living much longer than our previous generations. The older you get, the longer you’re likely to live. If you’ve managed to survive early risks, such as accidents or illnesses, your life expectancy actually increases. Be prepared for a longer retirement than your parents. This means that your money must last longer, so don’t be too conservative with your investments, speak with one of Leenane Templetons financial advisers to discuss your investments and risk.

7: Stay cool

You are in this for the long term so when markets fluctuate and investments unexpectedly fall in value, don’t panic and sell. Sit down with your adviser, review your portfolio and stay focused on your long-term goals and objectives. 

8: Keep learning

You are never too old to learn. Financial advisers have an important role in giving you tailored guidance, but you still need to make your own informed decisions about your financial plan. Make sure you understand your plan and if not, ask questions or do some research.

To discuss your retirement
Call (02) 4926 2300 or email us. 

Our team of award winning financial planners are available to discuss your retirement needs. 

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Is your retirement just around the corner? Then it’s time to make your super work harder by avoiding these common pre-retirement super traps and start planning.

1. Outdated investment strategies

As you approach retirement, you should revisit your investment strategy. But that doesn’t necessarily mean putting all your money into defensive assets like cash. Diversification is the key to smoothing out the inevitable bumps when economies, sectors and assets rise and fall. A well-diversified portfolio includes a good mix of asset classes — such as cash, fixed interest, property and shares.

2. Over-insurance

Just as your investment needs change, so will your insurance requirements. For instance, if you’ve eliminated or significantly reduced your debts, you may not need as much life insurance or income cover as you once did. And, if you’re an empty nester, you’re insurance needs are likely to be very different to those of a young family’s sole breadwinner.

Your lifestyle might have also changed over the years — for example, you may no longer engage in high-risk work activities or leisure pursuits like skiing. So make sure your cover matches your needs.

3. Missing out on tax benefits

Before the end of your career, it may be worth considering a transition to retirement (TTR) strategy. This involves drawing a pension from your super savings while you’re still working, which you can start doing once you’ve reached your preservation age (currently age 55). This pension income is likely to be taxed at a reduced rate or be tax-free. At the same time, you can boost your super contributions through salary sacrificing, with any contributions of up to $35,000 taxed at just 15 per cent.

This can give a valuable boost to your nest egg during the crucial pre-retirement years. That’s why it’s worth consulting a financial planner to find out the best TTR strategy for your situation.

4. Inadequate estate planning

Although it’s probably not something you like to think about, it’s important to consider what will happen to your estate when you pass away. When it comes to super and insurance, this means nominating who you want to receive your super savings and any payable insurance benefits. The tax implications for your beneficiaries can vary depending on their age, their relationship to you and whether the payments are classified as a lump sum or as an income stream. When you’re getting your affairs in order, it’s a good idea to seek professional estate planning advice.

5. Going it alone

Everyone’s circumstances are different, so your super strategies should be too. Talking to a financial planner is the first step in getting the most out of your super.

Source: MLC, October 2014

To find out more, contact our team of financial planners today.
Call (02) 4926 2300 or email us.

To discuss pre-retirement super traps and what you should be avoiding, please contact the award winning team at Leenane Templeton.
 

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Add to this the reality that many of us are going to outlive our savings, and the age we qualify for the Government pension is rising, then it’s no surprise that aged care and estate planning are hot topics for government, financial advisers, and families alike.

So what are some important things to consider when looking to plan your life, or that of a loved one, after retirement?

Five core issues

1. The costs.

Establish entry fees and bonds and ongoing costs of nursing homes and hostels. For residential care make sure you understand the costs are for things like daily care fees, and income-tested fees.

2. The family home.

Consider if someone will continue to live there, or should it be sold or rented out? You might consider options such as a reverse mortgage.

3. Social security.

Find out how to maximise your age pension entitlement by structuring your assets in the most effective way.

4. Tax.

Look at what special tax offsets may be available when living in residential aged care.

5. Estate planning.

Have you or your loved ones sorted out a power of attorney or enduring guardianship?

Government help

In July 2014, the Australian Government launched the Let’s talk about changes to aged care campaign (myagedcare.com.au). The changes included:

• greater support to stay independent and in your own home and community with more home care packages to meet your needs
• older people being asked to contribute to the costs of care, if they could afford to do so
• increased flexibility in ways to pay for accommodation in an aged care home
• Centrelink providing income testing for people receiving home care, and both income and asset testing for people receiving residential care.

Estate planning

A huge part of aged care planning is estate planning. At its most basic, estate planning is about working through what you want to do with your assets when you die. It’s much more than just a Will. Effective estate planning is about protecting your assets and empowering you with the information and knowledge you need to make informed, conscious choices so that your family is not left stranded or your assets eroded or exposed to systems, processes and challenges that you may not be aware of or have even considered.

Financial planning

Whatever your preferred choices are for aged care there is a need for preparation and sound financial planning.

Source: BT Financial, October 2014

Call Leenane Templeton on (02) 4926 2300 or email us.

Our team of expert financial planners are at hand to assist with your financial position ahead of retirement. Living Long – Living Well.

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Retirement is a life-changing event. After you stop working, you can find yourself with time to do the things you may not have been able to do before, like travelling, volunteering or spending more time with family and friends so making the most of your retirement income is essential.

As you adjust to this new lifestyle, you'll also need to think differently about your finances. In retirement, your priority typically changes from saving, in preparation for when you leave the workforce, to carefully spending those hard-earned savings. It's likely that your initial focus will be to find a way to replace your salary or wage with cash flow from other sources.

The composition of your retirement income requires careful planning. Your retirement income may come from more than one source.

Age Pension

The Age Pension is an income support payment offered by the Government to older Australians who meet the relevant eligibility criteria. 

With maximum payments of $21,912.80 p.a. for a single pensioner and $33,035.60 p.a. for pensioner couples (including the Pension and Clean Energy Supplement and current for the period 20 March 2014 to 19 September 2014), the Age Pension probably won't be enough to afford most people a modest post-work lifestyle of basic activities, let alone a comfortable lifestyle.

To afford even a modest lifestyle in retirement, many people will need to supplement the Age Pension with other income. This could come from an annuity, an account-based pension or other investments.

An annuity (from within or outside super)

An annuity is a simple, secure financial product that guarantees a series of payments, for a fixed term or for life, in return for an upfront investment. The earning rate is fixed at the outset, and this applies for the length of the annuity, regardless of share market movements or interest rate fluctuations. Capital can be returned at the end of the agreed term or gradually during the term of the annuity as part of the regular payments.

An account-based pension (from your super)

An account-based pension is an investment account which gives you the ability to choose from a range of investments and can vary from time to time with the level of income you wish to draw subject to the minimum annual withdrawal amounts set by the Government. Account-based pensions are usually market linked. This means that the capital value is linked to the performance of the underlying investments, which can impact the level and duration of your savings and the income produced. Account-based pension providers, which may include your super fund, charge management and/or administration fees for these products. This reduces your investment returns.

Other investments

These are just some of the types of investments that can sit within your super fund (personal or self-managed superannuation fund) or outside superannuation.

• Term deposits are fixed term, fixed interest savings account. Terms generally range from one month to five years.
• Shares pay income in the form of dividends. You can invest in shares directly or via managed funds.
• An investment property is real estate which has been purchased with the intention of earning a return on the investment, either through rent, the future resale of the property, or both. Another type of property investment is a property trust, which is a managed fund that enables investors to pool their money to purchase an interest in a portfolio of real estate assets.

Income from various sources can be 'layered' to meet your income requirements. This can be set up so that more secure income, such as from the Age Pension or an annuity, can cover your essential costs of living, while your income from other sources can fund your discretionary spending.

This approach can also allow your more growth-oriented assets to remain invested, giving them time to grow.

Source: Challenger, May 2014

Disclaimer

Since each person is different, there is no single retirement income solution. More than one investment strategy and product may be required so it's important you receive professional help from your financial planner. It can make all the difference to your financial success in retirement.

Please call our email our expert team today!

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Living the good life, retiring happy, wealthy and wise

Retirement is a little like Clark Kent taking off the Superman suit. It’s peeling off an identity – from an industry, a company, or a personal work history – and entering an entirely new life stage.

There’s freedom and excitement, the time to do all the things we’ve been waiting for, but there’s also some fairly key life changes and adjustments to make, some of which may be totally unexpected.

Although retirement is one of life’s most mentally challenging milestones, retirement advice usually focuses on finance rather than feelings. Planning for both can make a tremendous difference.

The bright side & the down side

So, what are the changes we face when we step into the retirement phase?

Time stretches luxuriously in front of us, something many of us have craved our entire working lives. Time to travel, read the books we’ve always wanted to read, take up a new interest or spend hours doing what we love. Some of these activities require money; many just need a good attitude and a mind that loves a challenge. However they all hinge on what retirement offers: time, and a lot of it.

But retirement can carry a downside. As Dr. Robert Delamontagne writes in The Retiring Mind: How to Make the Psychological Transition to Retirement, “For the first time in my life, I had no answers. I had fallen into a black hole where there were no guideposts for me to follow. What had happened to me? I built a successful company and lived a very active and dynamic life…yet I had no clue what to do next. For the first time in twenty-five years, I did not have a company to manage, nothing that urgently needed to be done, and, most troubling, no one who needed me to make a decision or contribute to a discussion. I did not play golf, nor belong to any clubs, and had little interest in doing either.

I wish that I had though, because brother, was I stuffed.” 1 The challenges of retirement can be numerous – from dealing with a change in identity and filling the hours previously spent working, to being labelled ‘retired’ or feeling unneeded. With no job, industry, company or colleagues to confirm who we are and where we fit, it’s easy to forget our own sense of purpose.

Charting a new course

Whether retirement is a goal or an unexpected curve ball, planning for retirement mentally as well as financially is key. Some people take a hybrid approach and continue working – either part time, in a consultancy role, or in a new industry with reduced pressure (and salary).

Many choose to get involved as a volunteer, evidenced by the 34% of the adult population of Australia who volunteer at least one hour every week with community organisations.2 Others take on a new project, sign up for courses, or help family raise young children.

Charting a new course for retirement means we need to think about our values – and act on them. What we do with retirement will give us satisfaction if it lines up with what we truly value. It’s wonderful to take care of the grandkids, for example, but extremely important to decide upfront how much time you’re happy to give. And buying that beach house is only a good idea if you love relaxing, which some people actually don’t.

Feeling good about retirement is an important goal, but it may not come as naturally as we think. It’s important not to underestimate the psychological impact and that’s where planning can help. Sorting out real values from perceived values will help us transition into retirement – and live the good life we’ve been waiting for.

1 Delamontagne, Dr Robert P. The Retiring Mind: How to Make the Psychological Transition to Retirement, Synergy Books, 2010, pp.1 – 2.
2 Volunteering Australia FAQs. www.volunteeringaustralia.org

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In order to meet the definition of ‘business real property’ the property must be wholly and exclusively used in one or more businesses. When looking at this business real property Trustees should be wary of breaching the ‘in-house’ asset rules.

An ‘in-house’ asset is considered to be:

• Loan to or investment in a related party of the fund;
• An investment in a related trust of the fund; or
• A leased asset arrangement between the trustee and a related party.
   

The level of in-house assets that a SMSF can hold is currently limited to five per cent of a fund’s overall asset value.

The test applies at the end of each income year, as well as at any time that a new inhouse asset is acquired. Breaching this limit can result in the ATO deeming the fund to be non-complying, which may have major tax implications for the fund.

To be exempt from the ‘in-house’ asset rules the property must be subject to a lease arrangement on arm’s length terms.

Trustees are obliged to ensure that the fund deals with the related tenant as if the tenant was an unrelated party.

Trustees should ensure that rent is paid at the amount and frequency required by the lease, that annual increases required by the lease are complied with.

The rental payments cannot fall into arrears and all outgoing expenses are to be paid by the party specified in the lease.

There are serious consequences for SMSFs that fail to maintain the arrangement on arm’s length terms. In some circumstances auditors are required to immediately report the breach on non-compliant activity to the ATO.

An immaterial breach will also cause a contravention to be reported to the ATO if the breach occurs in more than one year or if the fund is recently established.

A breach may also result in an ATO audit of the SMSF, which can be a costly exercise.

Click here for our SMSF Advisors web site

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Our financial planners in Newcastle are often asked what you need to retire in comfort.  If you want to retire in comfort, you may need more money according to the latest figures released in the Association of Superannuation Funds of Australia (ASFA) Retirement Standard.

A couple looking to achieve a comfortable retirement will need $55,316 a year to meet their needs, whilst those seeking a 'modest' retirement lifestyle will require $31,767 a year.  These retirement figures for the September 2011 quarter have increased by 0.7% over the June 2011.
 

Whilst there was a slight decrease in cost of food in the September 2011 quarter, there was an overall increase of 6.4% for the year to September 2011.

Budgets for various households and living standards (September quarter 2011)

Source: ASFA Retirement Standard, September 2011

If you're looking to plan for your retirement it's important to have good financial advice, with the variety of options available in superannuation from self managed super funds, industry funds and the like through to property investment, stocks and shares it's sometimes hard to plan accordingly and particularly to assess the risks and opportunities.   Our financial advisors at Leenane Templeton help to identify the right strategy for you and your family according to your attitudes and stage in life. Call our team today on 02 4926 2300.

To plan your retirement speak to our award winning financial planner in Newcastle  Andrew Frith

Don't forget to ask about our SMSF solutions for your retirement, particularly as the change to superannuation laws now allow self-managed superannuation funds to borrow within a SMSF.

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