Are You Maturing Before Your Investments Are?

Easter finished over two weeks ago and we are coming up to the end of the financial year.  We would like to take this opportunity to share one important message:

94% of all Australians will be in some way reliant on the government to fund their retirement. That is, in retirement they will be earning less than $58,364 if they are a couple (according to ASIC figures).

“$58,364 ” we hear you say, “I earn more than that now, by myself!”

You would not be alone and most younger people would feel that they are going to retire on a lot more. The reality is that is not the case for a lot of Australians. To determine what you need in retirement, some preliminary questions would be:

(1)    What do you think you will be doing in retirement?

(2)    When do you want to retire?

As these questions help determine the amount you think you need to retire on.

Do you want to mature before your investment nest egg matures?

The most effective way to answer these questions can be established by a complimentary meeting, however here is a real case study to get you thinking:

Jason Allen and Mark Felton met up with a couple, John and Mary. We have changed the name for privacy reasons.

John was a contract Builder and as a contractor was set up as a sole trader. As a result, he was not contributing to superannuation. He was not legally required to. He was on a decent income of about $120,000. Mary was working as a nurse and was on $80,000 plus. He was 64 (nearly 65) and she was 63.

They owned their house but had $40,000 in loans related to a caravan and a car. In total they had under $100,000 in super. They were looking to us for a solution but sadly besides starting some sort of passive income type business/ investments (which they didn’t want to do), Mark saw few options for them. Therefore:

They were forced to rely on the government in retirement. There is nothing a financial planner (nor anyone else) could do for them. Their income in retirement will be approximately $33,716 pa (assuming they get the maximum pension).

A recent study by ASIC and Moneysmart showed to retire comfortably a couple would need $58,364, so this couple have 40% less income then they really need.

Does this concern you???

Given it is coming up to the end of financial year, now is the time to sit down with Mark Felton in our office. Here are a couple of strategies to think about before a meeting with us:

Salary sacrifice into Super

It may make for a much more comfortable retirement by increasing your retirement savings. You may pay as little as 15% tax on these contributions which sure beats paying as much as 49% including Medicare levy.

Protect your income so you don’t get off track

This is the “what if” scenario and a lot of people are sceptical when we talk insurance. This is because generally speaking, people see news stories on Today Tonight or in the paper about insurance companies not paying. This has not been our experience. When it comes time to claim we have not had any issues with insurers being reluctant to pay. In fact:

 Did you know that Australia’s leading life insurance specialist paid out more than $843 million in claims in 2013 alone? And that’s just one insurer!

So it is imperative to protect against the challenges life can sometimes throw at us. It is alarming to think the average Australian has approximately 1 month of income before they would need to sell off assets if illness or injury struck a family member.

For most, Income Protection premiums are tax deductible, and if cover is in place before 30th June 2015, the premium payable may be able to be claimed when you lodge your 2015 tax return. So it is important to get in fast to avoid the rush towards the end of financial year.

Of course before you go and implement any strategy, you should check with your financial planner. You can contact us here or give us a call on 03 9848 5933 and Mark Felton in our office can assist.