Commonwealth Seniors Health Card (CSHC)

By Jason Fittler

The CSHC is a concession card for self-funded retirees of age pension age who are not eligible for the age pension.

It provides access to discounts on medical expenses and travel concessions, certain concessions provided by state and territory governments, as well as the Seniors Supplement - however (at the time of writing) a related 2014 Budget measure proposes to eliminate this payment to CSHC holders. 

To be eligible for the CSHC an individual must have adjusted taxable income below certain thresholds of singles, $51,500 and couples, $82,400 combined.

Recent Changes

Account-based pension (ABP) income from taxed superannuation funds paid to those aged 60 or over was, before 1 January 2015, not included in the income test for CSHC eligibility, because this income is not included in taxable income.

The new legislation applies deeming to ABPs for those aged 60 or more from 1 January 2015, in the same way, financial assets are deemed under the age pension income test, using the same thresholds and rates.

The key difference is that only the value of the ABP will be used to determine the deemed income - no other assets are included in this calculation.

To prevent double counting, ABP income received by a spouse under age 60 will not be deemed, as some or all of this income may be included as adjusted taxable income.

Under grandfathering arrangements, existing ABPs remain exempt where both the ABP and CSHC were held prior to 1 January 2015 and both continue to be held.

Guidance from the Department of Social Services indicates that the grandfathering provisions will continue where a pension reverts automatically to a reversionary beneficiary, provided at the time of reversion the beneficiary holds a CSHC.

Strategies to Obtain/Retain the CSHC

Existing ABP and CSHC holders should monitor their income levels during the year to ensure they stay below the relevant threshold. Once eligibility for the CSHC is lost, the grandfathering of an ABP is lost permanently. 

For new or existing cardholders in danger of breaching the thresholds, the following strategies may help to obtain/retain the CSHC:

Manage taxable income - consider restructuring investments that generate taxable income. Possible solutions could be to contribute to super (if eligible), invest in an insurance bond or family trust, or gift assets that generate taxable income to family members.

Reduce non-grandfathered ABP value - in the legislation, the expanded income test only includes deemed income received from ABPs for recipients aged 60 and over. It does not include super accumulation balances in this calculation. Moving pension funds back to accumulation phase may provide an opportunity to reduce deemed income.

Choose the income year - normally the previous year's notice of assessment is used to determine the adjusted taxable income of an applicant or cardholder. If this income exceeds the relevant threshold, there is the ability to apply to use an estimate of the current year's income. This is usually relevant where one-off events occur in the income year of application, such as retirement or the sale of an investment (in limited circumstances).

Of course, any change recommended would need to consider the client's overall needs and objectives. 

Please call us if you would like more information. (07) 4771 4577

Financial Freedom & SMSF

By Jason Fittler

A successful retirement is when you achieve Financial Freedom

Financial Freedom is when you live the way you want, without having to rely on any government safety net or having to work.

Financial Freedom is when you take control of your life. This will be different for each person as it depends on what is important to you.

People with SMSF’s know this already. They know how much money they will need in retirement to live the lifestyle they choose.

This is why the average balance in a SMSF is 3 times more than that of the average Australian super fund balance.

So how much do you need to achieve Financial Freedom?

To calculate this amount work out how much a year you’ll need to live the lifestyle you want. Take this amount and divide by 6%.

Example: $90,000 a year divided by 6% = $1,500,000

Now you have your retirement goal, are you prepared to do what is necessary to achieve it? Do you have a plan?

80% of Australians fail to enjoy Financial Freedom in retirement. The main reason this happens? They fail to seek professional financial advice.

If you want to be in the 20% who do achieve Financial Freedom take the first step and learn how a Self Managed Super Fund can help.

Self-Managed Super Funds and Residential Property Inside Self-Managed Super Funds

By Jason Fittler

Beware the wolf dressed in sheep's clothing.

Time is running out!

Act now or you will miss out!

Your friends are doing better than you, and you need to catch up!

The marketing of investment products is becoming so sophisticated that most people now see it as information or even investment advice. It is getting harder for people to distinguish between a professional adviser and a salesperson.

My industry does not help itself as many qualified financial planners and accountants sell their soul for money. They stop providing good advice and start selling products which provides them with the best financial return. Good for them, but not in the best interest of their clients.

The big sell now is for Self-Managed Super Funds and residential property that can be purchased inside of a Self Managed Super Fund. Now this type of investment is not in itself fundamentally wrong but that does not mean it is right for you.

Self-Managed Super Funds in my experience will produce a better over all return for those people who take an active role in saving for their retirement. But they are not for everyone. You need to have an understanding of taxation, accounting and how investments work.

I have found that Self-Managed Super Funds best suit people who have owned or run a business or have worked at a high level in private enterprise. The reason being, these people tend to be better equipped to understand the regulations and paperwork, which will be required. They also understand the consequences of getting it wrong.

If you do not have this type of experience then you will need to invest some time and money to get the right advice and make sure that you are fully aware of your responsibilities and the costs and penalties associated with getting it wrong.

A free seminar will not give you the tools you need to run a Self-Managed Super Fund. You need to commit sufficient time to read and understand the regulations around running a Self Managed Super Fund. It is advisable to take a course through a recognized body. These courses take around 10-weeks to complete and have an online exam at the end.

So before you set up a Self-Managed Super Fund, you need to work out if you have the skills and time to run one.

The other big hype is all of the talk about a property bubble, which is not happening but could if more people buy property. This is simply marketing which the media are involved in. When I say media, this is a not just ads on the television or radio, this also includes people who pay to have a spot on a television show or radio show as a guest expert. This way they can make it seem as if you are getting independent advice when in fact you are receiving a sales pitch.

Ever heard of a wolf dressed is sheep’s clothing? Well it still happens.

So beware of free advice. It’s usually just a sales pitch.

The best way to lose money is to follow the latest trend or buy the latest investment product. People do this due to a fear of missing out. They are convinced that it is safe due to media reports and advertising campaigns. However, both are solely designed to convince people to buy these investment products.

The fist step to creating wealth is… “Do not lose money”.

You always need to look at the downside of any investment and if you cannot see a down side avoid the investment at all costs as marketing has blinded you.

There is always a downside.

If you would like more information about Self-Managed Super Funds and Residential Property Inside Self-Managed Super Funds please give me a call on (07) 4771 4577.

Age Care

Age care is something we will all come across in our life, either for our partner, parents, grandparents or ourselves.

It is a very confusing stage of life and quite complicated. Unfortunately usually when someone has to go into age care they do not have the capacity to understand the cost and charges and how they work. It is up to the spouse, child or grandchild to make the arrangements.

As you are dealing with other people’s money it is important to understand what is happening.

The first hurdle will be the accommodation bond, this is is usually paid when a resident permanently enters a low care or extra services high care aged care home, and the resident has more than $43,000 in assets.

The accommodation bond is an interest free loan from the resident to the aged care provider.

The aged care provider uses the interest earned from the accommodation bond monies to maintain their current building or to build new aged care homes for future residents.

There is no set level for the amount of the bond. The rule set out by the government provides that a resident must be left with at least $43,000 in assets. 

The amount of the bond needs to be negotiated between the family and the aged care operator. Given the general lack of available places in age care the family is generally in a tough position.

Be aware that the size of the bond can vary between age care facilities and residents in the same age care facility. The only rule is that the resident is left with $43,000.

There is no relation between the level of the bond paid and the level of the care provided once you have been admitted into the age care facility. There is no minimum bond level however the age care facility may request that you pay a minimum bond.

Daily care fees are the same whether you are a resident in a low-level or high-level care home.  

These fees have two components. (1) Basic daily care fees are based on the pension and are indexed and (2) Income tested daily care fees for residents with a higher income.

Aged Care Funding Instrument (ACFI) determines the level of financial assistance for personal care and lifestyle costs when a resident enters Commonwealth subsidised residential care.

The ACFI divides care into three categories and each category has three funded levels.

  1. Activities of Daily Living
  2. Behavioral Supplement
  3. Complex Health Care Supplement

Each of these areas is then broken down in the levels of care being low, medium and high. Depending on the level of care you require at each level will determine the amount of government subsidy you will receive. 

The subsidy paid to residential care provider is the lesser of the sum of the amounts payable in each level (activities of daily living, behaviour supplement and complex health care supplement) and the maximum ACFI rate, which is currently $181.21 per day.

The resident makes up any difference in the cost of the daily care fee or the facility can take a bond. 

Note: This is just a brief overview and you should consult a professional for more information.

Age Pension

By Jason Fittler

There are a number of rules around eligibility for the age pension these are detailed below.

What age can your receive the age pension?

If you were born after the 01/01/1957 you will need to be 67 before you will qualify for the age pension. If you were born prior to 01/01/1957 the age of qualification will depend on the date you were born.  See below table.

 

How much is the age pension?

For singles the age pension is $19,643 per annum or $755.50 per fortnight. For couples it is a combined amount of $29.614 per annum or $1,139 per fortnight.

The amount of age pension you receive will be reduced based on the result of the Asset test and the Income Test. The test, which reduces your age pension the most, will be the one that will be applied to you.

What is the asset test?

The amount of the age pension you receive will reduced based on the value of the assets you hold. The value of the assets you can hold differ depending on whether or not you own your own home.

If you are a single homeowner, you can hold between $192,500 and $696,250 plus your home and still receive a part pension. If single with no home you can hold between $332,00 and $835,750 in assets.

If you are a couple and own your own home, you can hold between $273,000 and $1,032,500 plus your home and still receive a part pension.  If a couple with no home you can hold between $412,500 and $1,172,000 in assets.

What is the income test?

The value of the age pension you receive will reduce based on the income you receive.

If you are a single you can earn between $3,952 and $42,238 and still receive a part pension. 

If you are a couple you can earn a combined income between $6,968 and $66,196 and still receive a part pension.  

Generations

 by Jason Fittler

For most of us it is not about how well we are doing but how well we are doing compared to everyone else.

Below are a few statistics, which you can use to compare your financial position to others your age.

Gen Y – born 1980 and onward

43% have a mortgage, 9% own their home outright and 38% are renting

65% work full time, 16% part time, 5% self employed, 6% home maker and 2% on benefits

Gen X – born 1960 to 1980

50% have a mortgage, 31% own their home outright and 18% are renting

66% work full time, 12% part time, 11% self employed, 7% home maker and 4% on benefits

Baby Boomers – born 1946 to 1960

27% have a mortgage, 60% own their home outright and 11% are renting

40% work full time, 27% part time, 15% self employed, 2% homemaker, 12% retired and 5% on benefits

Silent Generation – aged 66 and up

9% have a mortgage, 77% own their home outright and 14% are renting

5% work full time, 12% part time, 8% self employed, 6% homemaker, 70% retired 

One of the big financial hurdles you have it to own your own home. It does not sound like much but once you have paid off the home then the spare funds can be put towards achieving financial freedom.

This is when you earn enough passive income to cover your current wage. Once you achieve this you can then seriously start to look at retirement.

You can see in the above that the numbers of people who own their own home increases the older you get. This is simply because most mortgages are over a 25 year period. The next generations of rich people are the 9% of Gen Y who own their own home and the 31% of Gen X who own their own home.

You do not want to end up in the 5% of the silent generation who are still working full time or the 14% still renting.

You need to plan for financial freedom… so I take my hat off to the 9% of Gen Y who own their own home outright… they are on the right path.

 

The 5 Most Common Mistakes When Panning For Retirement

By Jason Fittler

“Fail to plan is a plan to fail”… good advice given to me years ago. Advice, which I have always followed and which has served me well.

The fact is, most people fail to plan, and as they approach retirement, they make bad decisions in a rush to fix past mistakes.

The 5 Most Common Mistakes 

1. Not getting a second opinion on your superannuation. Just stick it into the employer fund or an industry fund. Your superfund might charge excessive fees, have limited investment and insurance choices or have no adviser to provide you with crucial information about how much and when to invest or how to best structure your investments.  

If you do not hear from your super fund then they are not looking after you.

2. Not having a plan. No financial plan means financial decisions are random, flavour of the month and generally lead to loss of money. While living for the moment and making decisions on the fly may feel good, a lifetime of doing so often results in insufficient savings and an overleveraged lifestyle. It could mean being destitute in retirement.

You can start by identifying where you would like to be financially in retirement and then set small goals. Baby steps.

3. Refusing to scale back. Empty nesters tend to ramp up their spending once the home is paid off and the kids have left. Instead of slowing down and saving, they spend more and save less. That's a mistake, as situations can change unexpectedly and you may not be able to work for another 5-10 years. By not making changes to your lifestyle now, you will likely find it more difficult to scale back your spending when you have no income and have no choice but to cut back.

You can trim back now without too much pain by eating out fewer times a week and socking that money away in savings.

4. Sacrificing your retirement to pay for the kid’s financial problems. Paying their way through University, buying them a car or giving them a house deposit. These activities will leave you short in retirement and reduce the time you have to save for retirement. It is natural to feel guilty about not being able to help your kids more, however, the best gift to your children is to secure your own retirement so you will not need to lean on them later on. You need to find some middle ground regards paying for your children’s lifestyle.

Children need to stand on their own two feet financially; best they start sooner rather than later.

5. Thinking you'll live forever. Many couples' retirement dreams "go up in smoke" when a spouse dies unexpectedly, with the surviving spouse forced to sell the family home, the kids change schools because the family was unprepared for the sudden death of a parent.

To avoid the "double shock" of grieving for a loved one and dealing with a new financial reality, buy term life insurance on both spouses, create wills, and make sure both spouses are informed and ready to make financial decisions in case one dies.

You know that you can buy this through your superannuation to help reduce the impact on your take household cash flow.

Plan to succeed. Take the time to review your financial affairs at least once a year.

Don’t just seek advice make sure you act on it as well.

Planning for retirement can only improve your life. 

For more information please contact us on 07 4771 4577.

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Take Control of Your Superannuation

By Jason Fittler

Below is an ABC news story from last week. Please have a read of this before reading further. 

Key fund's woes puts super at risk for thousands

On Wednesday 14 December 2011, 9:52 EST

A key scheme of one of Australia's biggest superannuation funds is short of money, leaving more than 100,000 people facing the prospect of having their super slashed.

At universities across Australia just about everyone from the boffins to the backroom staff is in a super scheme called UniSuper.

The fund has more than 450,000 members and about $30 billion in assets under management.

Its members thought they were in a scheme that was secure but that is no longer the case.

Continue reading... 

Could the failure of Uni Super really happen? Yes and it already has happened to other super funds!

Who pays for the failure of a Super Fund? You!

Following the collapse of Trio Capital, the Federal Government announced in April 2011 that it would provide a grant of approximately $55 million in financial assistance to benefit the members of four super funds that were formerly under the trusteeship of Trio Capital.

This grant of financial assistance has now been recovered by way of a levy on all regulated superannuation funds under the Superannuation (Financial Assistance Funding) Levy Act 1993. The levy is based on the total assets of each fund at 30 June 2010 multiplied by a rate of 0.0001347, with a maximum of $750,000 per superannuation trust. 

Commencing 21 November 2011, this levy will be passed onto members.  This will result in all members with an open super or pension account being charged a proportionate fee based on their account balance at 30 June 2011. The deduction will appear in members' accounts with the description 'Financial Assistance Levy'. 

When you receive your next statement from your Super Fund take a look, I bet you have a Financial Assistance Levy being charged to your account. As such you will pay for the failure of another person’s super fund. 

Anyone with a Self Managed Super Fund does not pay the Financial Assistance Levy.

With a new year approaching every house hold should sit down a quickly do the math on what they are worth and where they need to be in retirement.  Just jot down the following figures;

  1. Value of your house less what you owe to the bank.
  2. Value of your combined super.
  3. Value of any other investments or investment properties less what you owe to the banks.
  4. Value of any other assets being cars, home contents etc.

It has been my experience that your Superannuation is you largest asset, if not your second largest asset if you have paid off your house. 

My concern is that very few people give their Superannuation the respect it deserves. Most people are very house proud but find Superannuation annoying and frustrating. 

This New Year do yourself a favour; 

  1. Pay a professional to explain your superannuation to you. We can help.
  2. Take control of you Superannuation. 

From reading the above article by the ABC it has become more obvious that you need to be in control of your Superannuation.

You have a number of options in doing this, a Self Managed Super Fund or a product like the new Asgard Infinity which is cheaper then Industry Funds and you are in control. 

Let us know if we can help. 

For more information please call us on 4771 4577. 

Commonwealth Seniors Health Card

By Jason Fittler

Are you over age 60?

An Australian resident living in Australia?

Are you over pension age but do not qualify for an age pension?

Is your income below $50,000 if you are single or $80,000 if you are a couple?

Then you may qualify for a Senior Health Card which will provide you discounts for all of your medical needs. If you are not sure then contact Centre link and find out.

Please note, if you are receiving an Account based pension from your super fund it does not form part of your taxable income so you may still qualify.

For more information please call us on 4771 4577.

What Does it Mean to be Rich?

By Jason Fittler

Everyone wants to be rich, but few have any idea of what rich is.

No, I am not being all sentimental and focusing on the intangible things in life. I am a stock broker, when we speak of being rich we are talking about old fashion cold hard cash.

The truth is that most people gauge they wealth based on how they compare to friends, relatives, celebrities or the super rich. They make direct comparisons based on the size of their house, type of car they drive, where their children go to school or holidays they take.

Can you see the mistake people make? There will always be someone richer.

Wealth is about achieving your own personal financial goals (that is the easy part). The hard part is working out what these goals are.

Not sure what your financial goals are. Let us help you figure out your goals, and then show you how to achieve them.

For more information give us a call on 07 4771 4577.

How to Have a Rich and Rewarding Retirement

By Jason Fittler

Making money is about discipline, most people do not have the courage to stick to their convictions and achieve the result they want.

Rather than talk theory I have decided to use my family as a real life scenario.

My wife and I would like to have an income of $100,000 pa in retirement. To do this I will need $1.2 million when I retire. If I want to leave something to my kids I will need $5,000,000.

I have 20 years to save $1.2 million.

Here is the plan.
1. I will split my return between income and capital growth. This will make sure I am moving ahead in time of low capital growth. (Like now)
2. I will have most of this in Super, as at present this is the most tax effective environment.
3. I am comfortable taking some risk and understand that from time to time my capital will go backwards.
4. I am time poor so I do not want any investments, which will require effort from me. So property is out.
5. I want professional advice so I will factor in there fees into the overall return.
6. I will take a long term view.

To achieve this result in 20 years we will need to salary sacrifice $26,000 into super each year and achieve a return of 8% pa.

Over the past 20 years the All Ords Accumulation index achieved a return of 21.5% pa as such this is where I will invest.

By taking on this challenge, our take home pay will decrease by $1,500 per month. This is a small price to pay to have a rich retirement, the alternative is to do nothing and live on a pension of $23,750 for us both.

Time
When investing, time is on your side. If you are young, these figures play in your favour.
For a 20 year old you will need to invest $4600 pa or $390 per month.
For a 30 year old you will need to invest $10,500 pa or $890 per month.

Would like a rich and rewarding retirement? 

Give us a call on 07 4771 4577 and let us help you put a plan into action.

ELB’s...The Secret to Wealth

How to have $1,000,000 at retirement.

By Jason Fittler

I often hear people tell me what they would do if they won the lotto or somehow received a large amount of money. They talk about how much easier life would be if they just had more money or got lucky. I call these people the “Have When’s”. These people all have two common problems. The objective is too large, they are unable to see how they would be able to obtain great wealth and they are not prepared to do what is necessary to achieve their goal.

“There is no victory without sacrifice”

Like everyone one else, my goals seem insurmountable, until I discovered ELB’s. Extraordinary Little Bits, ELB’s break down a large task into small manageable bits.

Let’s say you would like to have $1,000,000 in retirement, you are currently 40 years old and have around $100,000 in your super fund and a mortgage of $250,000. How can you be debt free and have a $1,000,000 to retire on?

The magic of ELB’s

To pay out your home loan over 20 years at an interest rate of 7% you will need to pay $24,000 per annum off the loan. To save $900,000 inside of your super earning 8% you need to save $23,000 per annum. In short you need to save $47,000 per annum. In Queensland the average annual salary is $61,500 after $12,500 goes to the tax man you will be left with $49,000. The task still looks insurmountable?

Let’s break it down; you have a couple of decisions to make. No one said it would be easy.

1.    Get a higher paying job.
2.    Both husband and wife work.
3.    Back grade your house.

For now I will go with example two, both husband and wife are working.

Step one salary sacrifice into super, as detailed above you will need $23,000 going into super for the year or $11,500 each. On $61,500 salary your employer will have to pay $5500 so both husband and wife, each need to salary sacrifice $6000. This will reduce your take home pay to $45,000 per annum. Or a household take home income of $90,000 per annum. Step one is complete, stick to the above plan and you will have your $1,000,000 in retirement. Keep in mind that $1,000,000 will provide you a super pension of approx $90,000 for 25 years.

Step two, pay out the house. As detailed above you have a $90,000 take home income. To pay the loan out you need to put 26% of this towards your home loan. Leaving you $66,000 per annum to live off, anyone who thinks that this would be a problem needs to trim some fat. As such step two is done and the above objective has been achieved.

ELB's breaks down a big problem into small manageable parts. By focusing on these smaller goals we can achieve our dreams.

The catch is you will need to make some hard decisions, this is where most fail. Will you?

Let’s take the ELB’s one step further with the above example. Paying out a $250,000 loan over 20 years at 7% will cost you $215,179 in interest. By increasing your payments to 30% of household take home pay or $30,000 per annum you will pay the house off in 12 years and save $100,000 in interest. If you then continue to pay the $30,000 per annum into savings at 8% you would have an extra $300,000 in retirement. Again ELB’s at work.

If you employ ELB’s into your life there is one golden rule. Never go to bed without taking at least one small step towards the end goal for that day.

Good luck.

Like help with your ELB's? Give us a call (07) 4771 4577.

Passion

By Jason Fittler

Do not spend your whole life waiting to find your passion. Passion does not come from divine intervention, it comes from commitment.

Make the commitment to those people and pursuits which are important to you and passion will find you.

I suspect most people are not passionate about superannuation, shares, options, warrants, term deposits, economics, managed funds, exchange rates, transition to retirement pensions or investments.

I bet you are however passionate about what you can spend your money on, things such as holidays, cars, boats, family, friends, property, jewellery and retirement.

I however, take a laptop on holidays, log in to the market every day to keep in touch with  what is going on. I sit up late at night to read the latest prospectus or research on a company.  Reading the financial review to see what happened yesterday and to keep abreast of the latest news is a morning ritual, I can not start the day without it. (I do not drink coffee)

Finance is not a job for me it is a lifestyle and I am not alone. We do this job because we love the job, we are passionate about the job. It is much a part of our lives as breathing.

I remember the first time in primary school when the Commonwealth Bank came to our class, we received a free piggy bank (you remember them, they look like a small bank, were made of tin and had no hole in the bottom to get your money out, if you wanted your money you had to cut them open) and a ruler. There is a common saying amongst stockbrokers, “he will retire when he is dead”, investing is very much a part of our lives.

Message:
If you are not passionate about investing, find someone who is, have them look after your investments, leaving you time to pursue your passion.

(Beware of the adviser who is passionate about money, this is totally different to being passionate about finance)

Is Your Super Enough?

By Jason Fittler

"If you do not take care of your super, it will not take care of you."

The average Australian wage is $57,000 pa, lets assume that you receive this amount for 35 years from age 30 to age 65. Each year you would receive $5,130 super contributions, if you compound a return of 8% pa on this investments this would give you $880,000 in retirement. Adjusted for inflation of 3%, you would have the same as $312,000 today.

Could you retire today on $312,000? On an average return of 8% this would give you a pension of $31,000pa for 20 years. This is 45% below today’s average income. In short, yes you could live on it but your life style would suffer.

Many people believe that their super will take care of them in retirement, the simple fact is, if you do not take care of your super it will not take care of you. I hear a lot of arguing about Industry Funds verse Retail funds, the main issue is fees, industry funds are cheaper.

At the end of the day it is like two fleas arguing about who owns the dogs they live on. To enjoy your retirement you need to do more. Fees are irrelevant, net return and savings are important. To achieve the lifestyle you want in retirement you need to put more effort into your super, this means stop spending as much as you do and start saving.

To retire with the same as today’s average wage you will need $560,000 today dollars in your super fund. In 35 years you will need $1.5 million.

To achieve this you have one of two choices;

1.    Increase your super contributions from $5130 to $8700 pa. You could do this through salary sacrifice and save tax. In real terms this means salary sacrificing around $68 per week.
2.    Achieve a better overall return in your super fund, if you could achieve a net return of 10.55 as opposed to 8% you would achieve the required $1.5 million super in retirement.

If you did both you would end up with $2.6 million giving you a $92,000 income in today’s dollars, this is a 61% better income than what the average Australian receives now.

Message

Stop worrying about the fees you pay and start worrying about what advice you are getting. This advice was given to you for free, for those who listen you will have a great retirement. For those of you who understood, then seek and pay for advice you will have a far better retirement.

What sort of retirement will you have?

If you would like to learn more, give me a call on 07 4771 4577.

Timeless Principles: Seven Cures for a Lean Purse

By Matthew Smith

The gathering of wealth is but one facet of life that many individuals have sought to achieve from the time of antiquity and which still continues today. Individuals seek to accumulate wealth for a variety of reasons; one of which would be considered the most wise and noble is to provide a secure income for your family.

A problem that is prevalent in the vast majority of households in our modern society is that niggling 'want' for a more secure and comfortable lifestyle for our family. This 'want' boils down into a need for ever-lasting financial security.

Most individuals see the best way to solve this problem is by seeking increases in their salary or wages. This misconception, along with another, is that high income earners are definitely wealthy - these are both common fallacies among the vast majority. An increase in household income is fantastic but it will not ultimately solve your problem.

The doctor or lawyer may have a large home and drive a much fancier car than the school teacher or carpenter, but, the same problem arises with higher income earners as it does with lower income earners. The higher income earners generally become higher consumers…it is likely that the more you earn the more you will spend.

The vast majority of households don’t yet understand that the income they earn does not belong to them. It belongs to the grocer, petrol station and butcher and so forth.

To provide a solution to this problem is easier than you may think. To gain financial security you must learn and embrace the rules that govern money. These rules are timeless principles and are adapted from the novel 'The Richest Man in Babylon', which also gave cause for this piece to be written.

Timeless Principles: Seven Cures for a Lean Purse

Cure 1 - Pay yourself no less than 10% of your income
This is where the bulk of your wealth will be created from. Paying yourself no less than 10% of income and saving it for investment will reap untold rewards. By living on 90% of your current income you will not notice a difference in lifestyle. Never stop paying yourself no less than 10% of your income first.

Cure 2 - Control your expenses
By controlling your expenses you are able to identify your needs from wants and take charge of your outgoings.

Cure 3 - Make your investments work for you
Once your investment starts producing income let it multiply by re-investing the income and watch your investments compound over time.

Cure 4 - Consult wise men so you do not lose your savings
You do not seek out the advice of a taxi driver to complete your income tax return; you seek the knowledge and advice of an accountant. You are wise to seek the counsel of individuals who are knowledgeable in handling money.

Cure 5 - Own your own home
By owning your own home you have the cheapest form of housing available. Apart from insurance and taxes, it is far cheaper than renting a home.

Cure 6 - Ensure an income for your retirement and that of your family
You will not be able to work forever. You should focus on working and saving hard to provide a passive income for your retirement. The earlier you start the greater the compounding effect will be.

Cure 7 - Increase your ability to earn
By increasing your knowledge you will be better equipped to make wiser decisions in regards to your investments. Never pass on an opportunity to expand your knowledge. Educate your children on these rules from a young age so that the next generation may out perform the previous.

Those who are wealthy and are financially secure simply know and understand these rules that govern money, and more importantly…obey them.

Want to know more... please give me a call on (07) 4771 4577

Self Managed Super Funds:- Are they for you?

By Jason Fittler

Below are the benefits of having a self managed super fund.

1. Lower costs.
2. More control over your investments.
3. You can gear up your investments through specialised products.
4. They are nimble, you can buy and sell and take advantage of market opportunities when they are available.

Self Managed Super Funds are becoming more popular in the current market environment as people are taking control of their future. This trend will continue to grow over the next decade.

We are in a stock picker market, to do well in this market you will need more control over what you are invested in, to do this you need a Self Managed Super Fund.

If you would like to squeeze more out of your super then give us a call and we can see if this is for you.

Give us a call 07 4771 4577.

Superannuation, Is It Worth It?

By Jason Fittler

Super funds are currently preparing their end of 2009 tax reports. You are not going to be happy with the results.

The market fell from 5100 points to 3900 points or 23.5% over this period, some sectors such as the property sector fell 46% over the same period.

Many people will only now find out, how they have been effected by the fall in the market. This will in a lot of cases lead to a feeling that super is not worthy investment. It will also lead to people drawing the wrong conclusions about super and making rash decisions which will cost them a lot more over time.

Tips and Traps

1. Super is the best environment to have money invested in at present. It has a low tax rate and provides you with tax free income in retirement. You would have lost just as much if the money was invested outside of super, it is not the vehicle but the investments which have dropped.

2. Salary Sacrificing into super is still the best way to reduce the amount of tax you pay.

3. All super funds lost money, industry super did not out perform. To understand how your super fund performed you need to understand what they are invested in. See note below on industry super funds.

4. Do not complain about fees to advisers, now is when you really need their advice. Go it alone now and prepare to be poor. It is easy to complain to your adviser, but the drop in the market happened to everyone. What is important is what you do now, a good adviser will make back your money through restructuring your portfolio.

5. Do not cash out of the market, those who cash out over the past 6 months have missed a 35% gain and a chance to make back their losses.

6. Restructure your portfolio, get rid of the dogs and buy into the investments which will recover first. Holding a dead stocks is like is like putting lipstick on a pig, at the end of the day it is still a pig.

Listed Assets Vs Unlisted Assets

I hear people tell me all the time that their super fund out performed another, but to truly know this for sure you need to take a look at the assets held by the fund. Break the assets down into listed assets (those listed on the stock exchange) and unlisted assets (those not listed on the stock exchange).

Listed assets are priced daily, as such it is very easy to value these assets on a daily bases. Unlisted assets are normally only valued when they are sold or every 3-5 years, as such it is not easy to know at any one point in time to know what that asset is worth. Now here is the trick.

If a super fund holds a unlisted assets and they believe that it has gone up in value, they are likely to have that asset revalued as at the end of the financial year so that they can report that gain in the end of year financial statements. This will increase the over all return of the super fund.

However, if the unlisted asset is thought to have gone down in value they may not have it revalued as such they do not report the loss. Producing a better result then what has occurred. The other issue is that a valuation is only subjective as such may not reflect the true value of the asset. So before you simple compare the return of one super fund to another make sure that you take a look at how the return has been calculated. Compare apples with apples before you make any rash decisions.

For most people in a Industry super fund you have no other option. As such you really can not withdraw your funds out and place them with a retail fund. This is called sticky money. This sticky money also improves the performance of the industry fund, as regardless of the result you can not take your money anyway.

On the other hand if you are in a retail fund which has not performed you can switch to another fund straight away, the withdrawal of funds from a fund will also effect the performance of the fund as it forces the fund manager to sell assets at time which might not be best.

Sticky money is another factor in the industry fund myth.

Moral

Keep putting money into super regardless of the 2009 result, your super will look after you when you retire.

The Budget - What it Means for Your Investments

By Jason Fittler

Below is a PDF download. It contains details of how the budget will impact your investments.

This was produced by ABN AMRO Morgan’s and not all sections may be relevant for you. Please scan the document and read that which relates to you.

If you have any queries give me a call, 07 4771 4577.

Click here to download PDF.

How is Your Life Structured?

Discretionary Trusts & Self Managed Super Funds

By Jason Fittler

If you have over $100,000 invested, you should start to think about discretionary trusts.

Discretionary trusts will protect your investments from bankruptcy and relationship breakdowns. They provide a easy mechanism for estate planning and keep your tax rate at 30%.

Are you self-employed? Then you should have a Self Managed Super Fund.

If you are self-employed you are already a person who likes to control their own destine, so you should also take control of your retirement. The first step is to set up a Self Managed Super Fund, this way you can decide how to invest your super. It also allows you to do better tax planning prior to the end of the financial year.

Above are two examples of how structuring your financial life will protect your assets, save you tax and give you more control. Lets face it, many things in life are beyond your control, it is therefore important to make sure that you do pay attention to the ones which are within your control.

To make sure you have the right structure… get the right advice before you start investing or set up a self managed super fund. Education first… action second.

Mark Twain once said, “ I can show anyone how to get want they want, the problem is I can not find anyone who knows what they want.”

If you want to be wealthy, let us show you how. Call (07) 4771 4577.

Budget for the Budget

By Jason Fittler

Wayne Swann has come out warning of a horror budget, seizing on China’s slumping economy to highlight the slow down in the resources sector. This will lead to a fall in taxes collected at the same time as the Government needs to increase spending to stimulate the economy.

What the actual budget will bring I do not know but what I am expecting is some sort of increase in taxes for the higher income earner, a reduction in the number of people who qualify for government benefits including the health care card and an increase in taxes on Superannuation. I am also cautious on transition to retirement pensions and account based pensions as they could look to change how these work or are treated in the future.

For most of us there is little we can do to get ourselves prepared for any change nor should you given we don’t know what might happen. But for those who are close to retirement or thinking about setting up a transition to retirement pension, now would be a good time take a closer look and perhaps get set up. I can not guarantee that there will be any changes but I am fairly sure that if there is a change made in relation to pensions it will not be in your favor. To be eligible to start a pension you must be over 55 years old.

The budget will be handed down on the 12th of May, I am expecting a tough budget given the spending which the government has committed to, complied with the issue of a expected reduction on tax collected I would be surprised if anyone walks away happy this May.