Being actively involved in how and where your super is invested, could make a real difference to your retirement savings over the long-term.

If you are considering going down this route, there are some factors to think about such as your retirement goals, how long you have until you retire and the amount of risk you’re comfortable taking on.

For instance, if you’re close to retiring, you may want to avoid putting your super somewhere that’s too risky. Riskier investments tend to experience more ups and downs so time may help to ride them out.

This article considers four examples of investment strategies for your super.

The importance of diversification

Before we discuss the various investment strategies, it’s important to highlight the significance of diversification. Like any type of investment, spreading your super across different types of investment options, can help to build a strong portfolio and manage risk.

Why?

Because if you were to invest all of your super into one asset class such as property, your investment may suffer a loss if the property market was to fall in value. However, if you spread your money across multiple assets, you may have a different result.

Investment strategy type 1: Growth

If you don’t think you’ll be accessing your super for at least 10 years or more, a growth strategy may work for you as a longer timeframe may help an investment portfolio withstand volatility while aiming for returns.

A growth strategy that follows a higher risk, higher return approach tends to have a larger focus on assets that are exposed to capital appreciation. That is, investing in assets which are expected to grow at a higher rate than the industry or overall market.

For instance, this may involve an investment of around 70-85 per cent in shares or property with the rest in fixed interest and cash-based investments.

Historically, over any 20-year period, a growth strategy has delivered better returns than more conservative portfolios which would mainly be invested in fixed interest and cash. However, over a short-term period, you may experience significant losses as a result of market volatility.

Another key benefit of a growth strategy is that by making greater returns on your investment, your savings are more likely to keep up with the rising cost of living. This is arguably important because over time inflation may reduce the value of your retirement savings, which could make it difficult to maintain your standard of living when you’re retired.
Investment strategies for your super

Investment strategy type 2: Balanced

Similar to a growth strategy, if you aren’t planning to access your super anytime soon, opting for a balanced investment portfolio may be another option.

This strategy is aimed at balancing risk and return so your portfolio has enough risk to provide reasonable returns, but not enough to cause significant losses.

A balanced strategy typically involves investing around 60-70 per cent in shares or property, with the rest in fixed interest and cash-based investments.

Investment strategy type 3: Conservative

You may be considering how you could protect your capital if you want to access your super within 3-5 years.

A safe or conservative strategy follows a lower risk, lower return approach so it’s really about preserving the value of your investment portfolio. While there may be less risk of losing money, a downside could be that your returns may not
keep up with inflation.

For example, this could involve investing around 20-30 per cent of your super in shares and property, with the rest in fixed interest and cash-based investments.

Investment strategy type 4: Ethical and sustainable

You may choose not to invest in certain companies based on ethical grounds. For example, taking a stance against investing in firearms. This approach is called ethical or socially responsible investing.

There is also sustainable investing which goes beyond incorporating just ethical and social factors. That is, it approaches investing from an environmental and governance lens too. Some super funds now offer this, so if these factors are important to you, speak to your super fund for more details.

If you’re a self managed super fund (SMSF) trustee, there are a range of sustainable managed funds which you can tap into.

Review your investment approach

You may want to review your current investment approach with your super fund or SMSF to consider how it aligns with your goals and risk comfort.

For example, if you are looking to take an active role by directly investing your super in shares, exchange traded funds and managed funds, there are super products and platforms which enable you to do this.

Alternatively, a SMSF is an option that enables you to have more control over how your super is invested with the added bonus of being able to access more investment options such as direct property and commodities. You also have the ability to borrow within your super fund for investment. There are a
number of administration requirements however, as well as legislative requirements to adhere to.

You may want to consider speaking to a financial expert when determining which super product may be best for you.

This article was prepared by BT, a part of Westpac Banking Corporation ABN 33 007 457 141, AFSL and Australian Credit Licence 233714. This information is current as at 22 May 2019.

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This article provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. It does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to these factors before acting on it. This information may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, no company in the Westpac Group accepts any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. BT cannot give tax advice. Any tax considerations outlined in this article are general statements, based on an interpretation of the current tax law, and do not constitute tax advice. The tax implications of investing in property, shares or superannuation can impact individual situations differently and you should seek specific advice from a registered tax agent or registered tax (financial adviser).

Superannuation is a means of saving for retirement, which is, in part, compulsory. The government has placed restrictions on when you can access your investment held in superannuation. The Government has set caps on the amount of money that you can add to superannuation each year on both a concessional and non-concessional tax basis. There will be tax consequences if you breach these caps. For more detail, speak with a financial adviser or visit the ATO website.

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Are we there yet?

Allowing for future age pension entitlement the Association of Superannuation Funds of Australia (ASFA) calculates that a couple will need savings of $640,000 at retirement to maintain a ‘comfortable lifestyle’ .) ASFA equates ‘comfortable’ to an annual income of $60,264.)

How are we tracking as a nation? 

In 2015-2016, 50% of men aged 60-64 had super balances of less than $110,000. For women the figure was a more alarming $36,000 – not even enough to provide a single person with a ‘modest’ lifestyle. (ASFA estimates that to upgrade from a ‘pension only’ to a ‘modest’ lifestyle would require a retirement nest egg of $70,000.)

Last minute lift

If your super is looking a little on the thin side there are a few ways to give it a boost before retirement.

• Make the most of your concessional contributions cap. Ask your employer if you can increase your employer contributions under a ‘salary sacrifice’ arrangement. Alternatively, you can claim a tax deduction for personal contributions you make. Total concessional contributions must not exceed $25,000 per year, although from July 2018 you may be able to carry forward any unused portion of this cap for up to five years.

• Investigate the benefits of a ‘transition to retirement’ (TTR) income stream. This can be combined with a re-contribution strategy that, depending on your marginal tax rate, can give your retirement savings a significant boost.

• Review your investment strategy. A common view is that as we near retirement our investments should be shifted to the conservative end of the risk and return spectrum. However, in an age of low returns and longer life expectancies, some growth assets may be required to provide the returns that will be necessary to support a long and comfortable retirement.

• Make non-concessional contributions. If you have substantial funds outside of super it may be worthwhile transferring them into the concessionally taxed super environment. You can contribute up to $100,000 per year, or $300,000 within a three-year period. A work test applies if you are over 65.

• The 60s is often a time for home downsizing. This can free up some cash to help with retirement. The ‘downsizer contribution’ allows a couple to jointly contribute up to $600,000 to superannuation without it counting towards their non-concessional contributions caps.

Bye-bye tax, hello aged pension?

One reward, just for turning 60, is that any withdrawals from your super account will be tax-free. This applies to both lump sum withdrawals and income stream payments. Depending on the preservation status of your funds you may need to meet a condition of release to access your superannuation.

Based on your date of birth, somewhere between age 65 and 67 you’ll reach age pension age. The age pension is subject to both an assets test and an income test and some advanced planning can boost your eligibility for the pension. For example, the family home is exempt from the assets test. Releasing cash by downsizing may reduce your eligibility for the age pension.

Get it right

This important decade is when you will make the key decisions that will determine your quality of life in retirement. Those decisions are both numerous and complex.

Quality, knowledgeable advice is critical, and wherever you are on your path to retirement, now is always the best time to talk to your licensed financial adviser.

Call Leenane Templeton and book in to see one of our adviser to discuss your current status and future outlook.  Call (02) 4926 2300 or contact us. 

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The 10 percent rule is history! This rule prevented employees making additional tax deductible contributions into superannuation, even though their additional contributions were within the concessional (tax deductible) contributions cap.

Outline of new measures

From 1 July 2017, you may make personal deductible personal contributions into superannuation, provided that you do not exceed your concessional contribution cap. This means that any unused concessional contribution cap amounts can fund insurance arrangements in a tax effective way.

For example, consider the situation where your employer makes a $15,000 contribution into your super during the income year ended 30 June 2018. You now have the capacity to make an additional deductible personal contribution of $10,000 in the 2018 income year. If your insurance premium is $5,000 per annum, you can make a tax deductible personal contribution of $5,000 to a superannuation fund, and have the superannuation fund pay the requisite premium.

How does this benefit you?

(i) Substantial out of pocket cost reduction

Funding insurance through superannuation in this way can substantially reduce the cost of insurance.  Unfortunately, the cost of insurance outside superannuation is generally not deductible for tax purposes. If we structure an insurance arrangement in super funded by deductible personal contributions, we can achieve a substantially different out of pocket cost outcome for you. For example, if you earn $90,000 per annum in 2017/2018, you will have a marginal tax rate of 39 percent. In order to fund an annual insurance premium of $5,000, you must earn $8,197 before tax. Using the insurance in superannuation route, you can reduce the out of pocket cost of this insurance to $5,000 per annum. The out of pocket cost reduction is based on your marginal tax rates. The higher the marginal tax rate, the greater the reduction.

(ii) No erosion of retirement savings

A major criticism is that insurance in superannuation erodes retirement savings. This is certainly true when we are using superannuation balances to fund life insurance costs. However, in this instance there is no erosion of retirement savings. The $15,000 employer contribution made on your behalf is not eroded by this arrangement.

(iii) No contributions tax

Everyone gets confused over the imposition of the 15 per cent contributions tax. The good news is that the above arrangement does not carry a 15 per cent impost.

Your personal concessional contribution is included in the assessable income of the recipient superannuation fund, but there is an offsetting tax deduction within the superannuation fund for the premium paid on life cover. This means that the contributions tax cost is reduced to zero via this tax deduction. Your insurance arrangements in super therefore do not carry any costs in addition to the premium paid.

One word of warning

Beware the notice formalities

Personal contributions into superannuation are presumed to be non-deductible (“non-concessional”) contributions, unless you provide the superannuation fund trustee with a notice of intention to claim a tax deduction. If a notice is not provided, and other associated formalities are not completed within the prescribed time periods, no deduction may be claimed for the contribution in question. This means that you need to observe these provisions meticulously and diligently to ensure that you do not lose this valued tax deduction.

Way forward

The insurance in superannuation landscape has changed dramatically with effect from 1 July 2017.  Speak to your financial planner to ensure your life insurance arrangements give you the best possible outcomes.

For more information please speak with our financial advisors at Leenane Templeton Wealth Management.   Call (02) 4926 2300

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When you are building up your superannuation, you can salary sacrifice and pay no more than 15% tax on your income. The earnings on your growing super are taxed at not more than 15%, rather than up to 49%, and capital gains are taxed at 10% rather than up to 23.5%.

Let’s imagine you decided to invest $10,000 a year for the next ten years. The table shows the comparison between salary sacrificing into super and investing it personally at different tax rates.

If you are on the top tax rate, you will have 89% more saved after ten years. And it gets better over time – after 20 years you would have 122% more! There will be no limits on how much you can have in superannuation and no penalty tax rates.

Once you retire after age 60 you can draw on your super either as a pension or by taking lump sums and it will be tax-free. If you leave it to accumulate, the fund will pay tax as described above. If you convert your super to a pension all income and capital gains are tax-free. You have the freedom in how you manage your retirement savings.

Can it really be this good?

There will be times when superannuation may not be the best solution. For instance, your money is locked away until retirement and there are limits on borrowing to invest.

Superannuation rules limit how much can be contributed tax-effectively to super:

After-tax (undeducted) contributions

• Limited to $180,000 (indexed) per person per year.

Pre-tax contributions

• Limited to $30,000 per year for those aged under 49; and $35,000 per year for people 49 and over.

Over the long term, these rules may actually make super simpler, but in the meantime, it is a good idea to get assistance in stepping through the current maze of rules.

Note: Tax rates include 2% Medicare Levy and 2% Temporary Budget Repair Levy for taxable incomes over $180,000 p.a.

For more information, contact us at Leenane Tempelton on 02 4926 2300 or email success@leenanetempleton.com.au

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What sort of lifestyle?
Sometimes life has been so busy there has been limited time for choice – school and university fees, mortgage payments and work pressures have been enough to worry about. Between age 50 and 60 it can be a challenge to choose what you (and your partner) really want for the next few decades.

How much do you need in retirement?
This will depend on how you live. For instance, Westpac/ASFA calculations* show that a couple in NSW needs $33,907 a year to live modestly and $ 58,605 to live comfortably, assuming they own their home.

The below graph below from ASFA shows the split of expenditure based on a modest lifestyle in retirement.
 

Setting a budget for your life in retirement is a vital step in achieving your retirement wealth target. Do you have enough invested to live comfortably throughout your entire retirement, which could be as long as 20 or 30 years?

Are your investments suitable?
Now is the time for you to ensure that your investments are working as hard as possible for you. If you have managed funds, shares or investment property, are they the best assets for your changing situation?

If you have life and income insurance policies, do you have the right level of cover for your current circumstances? There is no point paying premiums for cover you don’t need – but take care in cancelling cover that you may not be able to get back.

Are you taking full advantage of superannuation?
Superannuation is clearly the most tax-effective way to accumulate money for retirement and provide capital and income in retirement. Taking advantage of investing in super can make a big difference to reaching your retirement target.

Have you planned beyond your lifetime?
People aged in their 50s will often have growing families as grandchildren start appearing. Some will have more than one family after separation, divorce and second marriages. Taking time to think about how you want your assets to be distributed after your death can save a lot of heartache for those left behind. Don’t forget that the payouts from life insurance policies and superannuation don’t necessarily form part of your estate and may need to be distributed separately from your will.

With all of these things to consider, the first step in updating your financial plan may be the hardest – but it is also the most rewarding.

Contact our licensed financial adviser at Leenane Templeton on 02 4926 2300 who can help you focus on the next stage of your life.

Source: *Westpac ASFA Retirement Standard; http://www.superannuation.asn.au/resources/retirement-standard and click on calculator link

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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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Life in your 50's is great. You don’t have a huge mortgage, the kids have grown up and are not as dependent on you, your career has progressed… So what is next financially?

When you are in your 50s, you can see retirement on the horizon. Sure it might be 10-20 years off, but it is becoming more tangible. So if you haven’t already, you need to start some serious planning.

Decide on your lifestyle

Up until now you may have been reactionary in your lifestyle, with mortgage payments and work pressures being the biggest worries. But you need to start thinking about how and where you want to live for the next 30 or more years. Do you want to stay where you are? Downsize? Always wanted to move to the beach or bush?

Figure out how much you need

Once you have decided how and where you want to live, you will need to set up plans to achieve it. There are a couple of things you can look at to ensure you are on the right track:

Superannuation – Is your super invested appropriately? Do you need to contribute more now so that you have enough for the future?

Investments – If you have managed funds, shares or property, are they invested strategically to help accommodate your changing lifestyle?

Insurance – Do you have the right level of life and income insurance? Are you and your family covered if anything happens?

Daily finances – Are you spending money on things you don’t use? If the kids have moved out, are there ways you can scale back?

Start catching up now

You might find that you are further behind than you thought for your ideal retirement lifestyle. This happens to a lot of people but it is never too late to make a change. You could be at the peak of your earning potential, so that means you have a chance to save more and make up for lost time.

Get help

Everyone’s financial needs and goals are different and it’s worthwhile seeking professional advice before you make important financial decisions. Your financial planner can provide you with strategies to help make your ideal retirement lifestyle a reality.

Source: IOOF

Our expert financial planners are here to help with any financial questions you may have about your 50's. 
Call (02) 4926 2300 or email us. 

To discuss getting ahead in your 50's please give the team at Leenane Templeton a call. 

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The months seem to fly past in a blink of an eye with another new financial year on the horizon again – it’s almost another financial year gone!  

Almost every year we see dramatic changes to our superannuation system, interest rates, the stock market and the property market.

All of this emphasises the need for regular reviews of your financial strategy and your investment portfolio. A full review should take place on an annual basis and cover such topics as:

• Have your financial objectives changed as a result of changed business, job or family circumstances?
• Are you on course to achieving your objectives in the planned time frame or are adjustments needed?
• Has there been new legislation or taxation changes which you need to factor into your plan?
• How have your investments performed and are they appropriate for current market conditions, or would you benefit from rebalancing your portfolio?
• Are you adequately protected against changing financial and personal risks?

If you’re looking after your own investments, it might be time to ask a professional adviser to take a look at your strategy and portfolio to ensure it’s continuing to meet your changing needs now and into the future.

Call (02) 4926 2300 or email us. 

P;ease contact the team at Leenane Templeton to discuss having a financial review and how we can help you! 

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There will be no changes to the super contributions caps for the 2015/16 year. 

Limits will remain the same as last year:

It's important to note that Super Guarantee contributions on salaries of more than $315,000 per year will be in breach of their caps without anything else being counted. 

If you wish to discuss Super caps further, please do not hesitate to contact the team at Leenane Templeton on (02) 4926 2300 or email us. 

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Both sides of politics have committed to retaining the age pension “for those in need”. The age pension is means tested using both an income and an assets test – the test that pays the lowest pension is the one that is used.

Conclusion – The age pension will remain, but not for everyone

There are two other aspects to the government’s retirement income policy – compulsory superannuation and tax-concessional voluntary superannuation. As you build more super, you will qualify for less age pension.

Statistics below show the predicted impact of superannuation on the age pension. These figures are for people of age pension age:

Conclusion – Fewer people will qualify for the age pension in the future

One aspect that people don’t consider is the age when a pension becomes payable. Historically, it has always been age 65 for men, and since 1995 the qualifying age for women has been progressively extended to age 65.

With people now living longer lives, the age pension may be payable for 20 to 30 years – a very long-term commitment for governments. This raises the question “why 65?”

The answer to this question suggests another key issue in the provision of the age pension. It all goes back to Otto von Bismark, the German Chancellor in the 1880s. He introduced state funded “accident and old age insurance” – the first pension scheme in the world. This standard was followed throughout the rest of Europe and eventually the world.

His actuaries nominated age 65 as when the “old age insurance” would be payable. This was at a time when the average life expectancy of a German male was 44. A very small percentage of the population could expect to receive the pension and they were not likely to receive it for long.

In 2010 the government considered the question of ‘why 65?” and the age pension age was increased. The qualifying age for both men and women will be increased by six months every two years starting from 1 July 2017. From 1 July 2023, the qualifying age will be 67. Four years later in the 2014/15 Federal Budget, the government has proposed increasing the qualifying age further to 70 by 2035. The legislation to implement this change is yet to be passed.

With increasing “grey power” as our population ages, it would be political suicide for any government to even consider abandoning the age pension. Instead, fewer people are likely to qualify at a later age for a shorter period.

This is all the more reason to continue to build your own superannuation nest egg and become self-sufficient in retirement.

Source:
www.centrelink.com.au
www.rim.treasury.gov.au Inquiry into Superannuation and Standards of Living in Retirement
demographics.treasury.gov.au A More Flexible and Adaptable Retirement Income System
www.agedcare.org.au An Ageing Australia – (Saul Eslake, 2008)

Disclaimer

If you wish to discuss the age pension with our expert and award winning financial planning team please call (02) 4926 2300 or email us.

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