Why Get a Financial Plan

A lot of people ask themselves Why get a financial plan ? What benefit would i get ?

Some good reasons include

You will feel better knowing you have a track to follow and you know where you are on that track.
You have confidence that your lifestyle is sustainable when you stop work.
You feel better as you know what actions you need to take to have your home loan repaid on a timely basis.
You will pay less income tax.
You will pay less interest on your loans
You will get more government benefits if you are entitled to some.
You will earn higher returns on your investments
You will have greater confidence in the sustainability of your lifestyle.
You can consider the disaster scenario’s and take action to protect yourself from those scenario’s.

As a summary you will have a lot more confidence in your future.

If you want more from your plan ask your planner to cover it and they will be happy to.

It is never too early to start planning so contact your planner now and take some strong steps along your path to prosperity.

When will I Retire ?

The Australian Bureau of Statistics conducted a survey in 2015 about the retirement plans of Australians. It has found that 71% of people said they intend to retire at age 65 or 66. The proportion of people that said that they would work beyond 70 has grown 4 fold.

Is this because we are enjoying our jobs more ? living longer ? the age pension is pushing out ? or we just dont have enough money to fund our lifestyle ?

Only you can determine what the answer is in your case however i think a lot of the people planning to work to 70 are doing it for economic reasons and not from a position of choice. When will you retire ?

Retirement is the day that you are working for fun. There is a range of very wealthy people that work beyond 60,70 and 80 because they want too not because they have too. Those people are actually retired as they can stop working and do what ever they like whenever they want to. They just choose to work. Assume you win $20m in lotto on the weekend. For most people that would be enough to sustain them and their families for 100 years however you may still choose to work because you want to. That is retirement.

Warren Buffett works because he enjoys his job. Bill Gates decided he had enough at Microsoft and now devotes his time, energy and considerable expertise and influence to great social causes in poor parts of the world.

You only have to listen to either of them speak to know they love what they are doing and will do it until they die. They have enough resources to do anything they want and they are spending their lives doing exactly what they want to do. A lot of people would say they are working full time at a great pace. They are both retired to my way of thinking.

Retirement is the day that you have enough money to fund your lifestyle and on that day you may stop work or continue the choice is yours.

Ask yourself When will i retire ? and What is my retirement plan?

Is Prison part of your Retirement Planning

I was reading an editorial in the Financial Standard April 4 2016. In a broader editorial about the UK pension system compared to Australia, editor Mark Smith referred to a report out of Japan where the aging population is a real issue and 40 years ahead of Australia. It was the Japanese section that sparked my interest in some of the retirement plans of the aging Japanese.

It appears that the low State pension the equivalent of $9,100 per year has lead to an interesting increase in the crime statistics in Japan.

There is significant growth in the shop lifting stats in the Elderly segment of the economy from 20.4% in 2005 to 35.1% in 2014. As you can imagine this growth in crime requires further explanation and the answers are revealing.

The report cited the crime wave is motivated by a desire to be locked up in prison where free food, accommodation and healthcare is provided.

What is your financial plan ?  It is never too early to start your Retirement planning.

Canadians see Australia’s commissions removal as a fail

http://www.moneymanagement.com.au/news/financial-planning/canadians-see-australia%E2%80%99s-commissions-removal-fail

This article by Mike Taylor in Money Management Nov 26 2015 regarding how the Canadians see Australia’s removal of commission as a fail is discussing the advantages that the commission system has over a fee for service business structure for some consumers. ONeil Financial Planning runs predominantly on a fee for service basis however this is an issue that has resonated with me for a number of years.

Under the commissions system a consumer could see an adviser and pay very little or nothing for the plan and then the adviser would get paid on the implementation of the recommendations. The consumer does not need to pay anything upfront for the advice and if you dont like the advice when received you are free to walk away and see someone else. Normally you can see two or three advisers and then proceed with the plan that you feel bests suits the outcomes that you are looking for.

In this case the cost of implementing the overall recommendations could be $3-5,000 however it is only paid once to the adviser who you felt best understood your goals and reflected those with recommendations that you could see achieved the outcomes that you wanted.

Under the fee for service model you generally pay upfront for the plan and you are obligated to pay for the plan whether you like the advice or not. When you then consider that the plan may cost $3-4,000 with a $1,000 implementation fee the overall cost is largely the same however you can not get two or three opinions as you can do under the Commission model.

On this level and forgetting anything else the consumer is biased toward the commission model as it is the only way that you can see a few planners to see who best connects with you.

At the 2005 FPA conference there was a CFP day on the day before the conference and the then Deputy Commissioner of ASIC Jeremy Cooper was presenting an open forum with the advisers.

During question time i asked him about shadow shopping and whether the ASIC ever asked the shadow shoppers which advisers they saw and why. He said they did not seek that feedback from the shadow shoppers.

I wanted to ask a few more questions around this subject however i was asked to sit down by the MC so i wasnt able to discuss any of these issues in the ASIC Open Forum with advisers.

ASIC Shadow shoppers are real consumers looking for real advice and the only instructions that the ASIC give them is that they must see 3 or 4 advisers.

That being the only requirement it could cost a shadow shopper between $9,000 and $20,000 to see the planners that the ASIC require them to see. As a result you can imagine they see planners that are giving free plans and that is because this consumer is biased toward the commission model.

The Canadian research highlights the same issues and that is that the fee for service model makes it expensive for the average person or the young person to see and adviser. I am not saying that the commission model is good and as stated previously we charge for our advice as that is where the value is to you however that does not mean that it is easy to pay for the advice.

We are happy to advise all clients including younger people and the plan fees can be an issue that needs to be addressed with them.

We have had a few cases with clients where we charge our usual fees for advice and we then arrange a suitable payment schedule that is acceptable to us and the client. This ensures that the clients receive good advice and we can get paid and stay in business so we can assist our clients long term.

This issue highlights the importance of asking your friends, parents or people that you respect who they deal with for their financial matters. You need to get onto a professional adviser with integrity the first time and that is best done by having a strong introduction by someone you respect and trust.

It is never to early to start planning.

http://www.moneymanagement.com.au/news/financial-planning/canadians-see-australia%E2%80%99s-commissions-removal-fail

Important changes to the Centrelink age pension in 2017

From 1 January 2017, there are some important changes to the Centrelink age pension changes that could impact your benefits and warrant some pre-emptive action.

What’s changing?

The lower asset threshold that determines your eligibility for the full Centrelink age pension will increase. This threshold varies, depending on your relationship status and whether or not you own a home. It is also indexed periodically by the Government. To find the current thresholds visit .http://www.humanservices.gov.au/

The age pension payable will also be reduced by $3, for every $1,000 you hold in assets above this threshold. The current reduction amount, known as the ‘taper rate’, is $1.50 per $1,000.

How will these changes impact your entitlements?

Currently, your age pension entitlements are assessed under both an income and assets test and the impact of these assets test changes will depend on a range of factors. Generally speaking, you will:

not be impacted if your assessable assets are well below the current and 2017 thresholds, at which the full pension entitlement starts to reduce
receive higher payments if you only have assets which are not classified as ‘financial investments’, and your age pension entitlement is determined by the assets test
receive lower payments if your financial investments are above the current threshold whereby the full pension starts to reduce, but below the amount that will apply from 1 January 2017, and lose your entitlement altogether if your assets exceed the threshold from 1 July 2017 where the age pension payments will cease completely.

Broader implications

The thresholds apply exclusively to home-owning couples and the dollar values would be different if you are single and/or not a home-owner. The best way to determine how you may be affected is to make an appointment with your adviser to review your financial position. The earlier you do this, the more you may be able to take advantage of strategies that could retain your current entitlement, increase your entitlement and improve your overall financial position.

Strategies that could help you

Strategies you may benefit from could include:

  • improving or upgrading your home
  • pre-paying your funeral expenses, and
  • gifting money within the permitted limits to relatives or others.

But great care should be taken when considering strategies that could dramatically lower your assessable assets, as they may be short-sighted. For example, if the income test deeming rates (which are at historically low levels) were to rise significantly the benefits of reducing your assessable assets, could be reduced considerably. To find out how the changes could impact you and discuss strategies that may assist you, contact your Adviser.

Source: NAB Group

 

Australian with Super Age pension eligibility concern

If you are an Australian approaching retirement with Superannuation and you are concerned about what your age pension eligibility may be there are a number of things that you can do.

Obviously you can see your local financial planner and they will be able to assist with strategies that will assist you in maximising your age pension benefits.

You can contact Centrelink and ask to see a Financial Information Service (FIS) officer and they will explain to you what the rules are and what strategies you should consider to maximise your age pension entitlements. The FIS officers cannot give advice however they can explain the types of products or strategies that you can use. They will generally then tell you to go and see a financial planner to get more advice if they feel that you will benefit from getting detailed advice directly related to your circumstances.

There are also calculators on the ASIC website and hopefully we will be able to build links into our site here so that you will be able to get the information that you require here without going elsewhere however the smart money website has good calculators and you can copy  the address and put it in your browser and that will give you some good information.  https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/super-and-pension-age-calculator

We certainly think there is great benefits in taking specialist advice relating to your retirement planning however there is nothing wrong with doing some base research before you engage a planner as having some base knowledge will always be of great assistance to you.

 

Annuities as part of Retirement Income

This was a great ABC interview with Challenger CEO Brian Benari. We use annuities in our retirement plans for clients to produce secure income in retirement.

The tone of this interview in the early stages suggests the government may change the rules regarding the use of annuities in the future. Are you planning to receive 100% lump sum to repay your home loan at retirement ? That may not be a good plan. The Government after concentrating for the past 20 years on getting money into superannuation are now starting to ponder what should be done with that capital at retirement.

What the Government does not want (Liberal or ALP) is people taking large home loans for big houses just before retirement and then using the super balance to repay the home loan and then having no assessable assets and then get the full age pension. This was never the plan for superannuation and there is not a lot of evidence that this has happened in the past however the government certainly does not want this to happen in the future.

This is not a good strategy anyway as you would have an expensive house and no money to enjoy living in the home or travelling or doing anything else and certainly the Murray review has triggered the Government to give some consideration to what superannuation should look like in the future.

What do you think

 

 

http://www.abc.net.au/news/2015-11-02/challenger’s-ceo-on-superannuation-system/6906626

 

 

Annuities as Retirement income strategy

This was a great ABC interview with Challenger CEO Brian Benari. We use annuities in our retirement plans for clients to produce secure income in retirement.

The tone of this interview in the early stages suggests the government may change the rules regarding the use of annuities in the future. Are you planning to receive 100% lump sum to repay your home loan at retirement ? That may not be a good plan. The Government after concentrating for the past 20 years on getting money into superannuation are now starting to ponder what should be done with that capital at retirement.

What the Government does not want (Liberal or ALP) is people taking large home loans for big houses just before retirement and then using the super balance to repay the home loan and then having no assessable assets and then get the full age pension. This was never the plan for superannuation and there is not a lot of evidence that this has happened in the past however the government certainly does not want this to happen in the future.

This is not a good strategy anyway as you would have an expensive house and no money to enjoy living in the home or travelling or doing anything else and certainly the Murray review has triggered the Government to give some consideration to what superannuation should look like in the future.

What do you think

http://www.abc.net.au/news/2015-11-02/challenger’s-ceo-on-superannuation-system/6906626

Salary Sacrifice to Super or Repay home loan what is best

It was good to see the Channel 7 news in Perth show a good Financial Planning story in the Sunday night news on 26 July 2015 relating to salary sacrificing to super or repaying your home loan and what is best.

 

 

Have a look at the story and you might also see some familiar faces and very happy 25 year clients who are very happy with the financial advice they have received during that time despite a lot of economic calamities.