As we head towards the end of the calendar year, the break over Christmas sometimes provides an opportunity for us to take stock. For some of us, that may mean a reflection on our plans for retirement. It is important to note, however, that retirement is about more than just having enough money to live on, it's also about having something to live for.

Here are a few statistics: in Australia, the cohort with the highest divorce rate is between the ages of 55-64-year-olds, while the average age of women first becoming widows is 59. These figures perhaps tell the tale of men who "laid it all on the field" during their careers and then moved to the next stage of life without being prepared for it.

Studies show that those people who enjoy the most satisfying retirement are those who follow the steps below:

1. Having a positive attitude. This enables people to roll with the punches better during the retirement years and adapt to the whole gambit of changes the occur, both physically and mentally.

2. Having a clear vision of the kind of life you'd like. Far too many pre-retirees make the mistake of thinking that the financial plan and the retirement plan are the same thing–that the life part will take care of itself. This stage of your life deserves a more holistic look and plan than simply assuming that you are beginning a thirty-year-long weekend. What do you actually want your life to look like?

3. An active social network. As you get older, your social support network becomes increasingly important. You draw your social support network from a much broader social network. Successful retirees generally have robust social networks that provide them with friendship, fulfilling activities and life structure.

4. A balanced approach to leisure. Leisure is a fundamental human need. We use it to recharge our batteries, to act as a diversion in our lives, to create excitement, anticipation or simply to rest and contemplate. Things change, however, when leisure becomes the central focus of our lives. Leisure, by its very nature, loses its luster when it is the norm in our life rather than the diversion. For many retirees, the idea of leisure is associated with "not having to do anything". In the end, a lack of stimulation affects our mental and emotional state and then ultimately our physical well being. Successful retirees balance their leisure over many different activities and take the opportunity to do new things and not get into a rut.

5. Maintaining financial comfort. Some retirees feel that a happy retirement is guaranteed by financial security. However, there is no price tag on successful retirement. As someone once said, "having a million dollars is NOT a retirement plan!" Financial comfort refers to being able to manage your life in a satisfying and fulfilling way using the financial resources that you have. It's important to note that money in retirement is only an enabler, and for most of us, the things that are really important generally involve other people.

We hope these points have given you some food for thought as we head towards the end of the year. And if you'd like to talk to us more about any of these ideas, we're only an email or a phone call away.

Most of the information we are given about retirement is about our finances – will we have enough? What's the best investment strategy? What sized pension will we get? All of this is important, but it's only part of the real story. If you are nearing retirement or you are retired, you have been around long enough to realise that there's more to happiness than the size of your bank account. We realise that retirement, like most things in life, has both positives and negatives. These can be some of the best years of your life when you have the freedom to do what you want when you want and they can also be boring, frustrating and lonely.

Retirement is a big step for most of us. It may be a step taken after much thought and planning or an optimistic leap into the unknown. Given that the number of Australians transitioning into retirement will increase in coming years, it is important to understand about preparing for the transition, and what strategies are successful to ensure a good quality of life when you get there. While most of us plan pre-retirement, research findings also suggest that you should continue planning during retirement in order to promote your well-being and live a full and active life. Planning and reflection on what you want can help you work out whether you have the resources for a successful retirement. Even if you are already retired, continual planning can kick-start a conversation about setting new goals, trying new approaches or seeking help in particular areas that may have been overlooked. Here are our top tips for a terrific retirement:

1. Having a positive attitude towards your future

Your ability to 'roll with the punches' will dictate how you approach most areas of your future life. There are life changes that you can expect in retirement; both positive and challenging. In fact, sociologists have identified at least six separate "life transitions" that will affect most people as they move through their retirement life (which is why we say that retirement isn't one long life phase). Perhaps the greatest transition of all is the one that you see each time you look in a mirror and see yourself change. It is easy to forget that "getting older" is a physical issue, not a mental one. As Satchel Page once asked, "How old would you be…if you didn't know how old you are?"

2. A clear vision of the kind of life that you want.

When you think of the word 'retirement', what vision comes to mind? Is retirement a work issue for you, or maybe a financial and investment plan? Far too many pre-retirees make the mistake of thinking that the financial plan and the retirement plan are the same things. They think that the "life and living" part of retirement will take care of itself. This stage of your life deserves a more holistic look and plan than simply assuming that you are beginning a thirty-year-long weekend. What do you want your life to look like? What changes do you anticipate along the way? How will you get the most out of each and every day? Those are important questions as you contemplate your move into this next phase of your life.

3. A healthy approach to mental and physical ageing.

It is one thing to say that you want to be positive about the future. If that is true for you, then healthy ageing will be a major part of your retirement plans and lifestyle. While the ageing process is normal and affects us all in different ways, there are some things that we can all do to ensure that we "put time on our side" by looking after ourselves. Most people think that being healthy physically is the key to healthy ageing. In retirement, healthy mental ageing is just as important (and some would say even more so.) How much do you understand the basic principles of healthy physical and mental ageing? Are you doing something each and every day to nourish your need to use and expand your mind or to honour your body and do what you can to maintain your physical health?

4. A positive definition of 'Work'

Your work is the thing that you do to contribute your skills, experience, labour or knowledge to society in some way. It is also a way for you to "self-actualise" and create positive stress in your life. Even when you leave the traditional workplace, you will still have a need to share your workplace strengths and transferable skills. If you have a positive attitude towards the workplace, then the desire to have a retirement free from any kind of work becomes irrelevant. A wise person once said, "If you love what you do, you never have to work again!" By the way, work doesn't have to be full-time, it doesn't have to be something you don't like to do, and it doesn't even have to be for pay! Many retirees use volunteering as a way to replace the things that they miss most about their previous work.

5. Nurturing family and personal relationships

Our close personal relationships define us, give us a purpose for living our lives and encourage us to create life goals. We all have a basic need to share our lives, experiences and life journey with those closest to us. In retirement, our friendships and close relationships may offer us the validation that we may have received in the workplace. Those relationships give us the opportunity to "connect" on many levels with someone close and to share ourselves. Psychologists have identified our desire to share ourselves as a basic human need. This need is often satisfied in the activities that we enjoy with our spouse or partner, friends and family. Researchers have found that people in satisfying personal relationships have fewer illnesses and higher levels of good overall health. That's the clinical rationale. In real life terms, having people close to you who will share your life and be there for you will not only add to your overall life enjoyment but will also add years on to your life!

6. An active social network

As you get older, your social support network becomes increasingly important. You draw your social support network from a much broader social and friendship network. Successful retirees generally have robust social networks that provide them with friendship, fulfilling activities and life structure. As part of your retirement plan, you might want to think about the quality of the social network that you have today and your plans to build it. One of the lessons that we can learn about the ageing process is that our social networks begin to shrink–if we aren't continually adding to them. You can join clubs, meet new people and get out of the house to do new things. In retirement, you are going to want a lot of people who you can count on and it makes good sense to continue to seek out new opportunities to socialise.

7. A balanced approach to leisure

Leisure is a fundamental human need. We use it to recharge our batteries, to act as a diversion in our lives, to create excitement, anticipation or simply to rest and contemplate. Things change, however, when leisure becomes the central focus of our lives. Leisure, by its very nature, loses its lustre when it is the norm in our life rather than the diversion. For many retirees, the idea of leisure is associated with "not having to do anything". In the end, a lack of stimulation affects our mental and emotional state and then ultimately our physical well being. There is a big difference between "time-filling" activities and "fulfilling" activities that we look forward to. In retirement, leisure activities often replace workplace functions to meet the basic needs that we have. Successful retirees balance their leisure over many different activities and take the opportunity to do new things and not get into a rut.

8. Maintaining 'financial comfort'

Some retirees feel that a happy retirement is guaranteed by financial security. However, there is no price tag on successful retirement. As someone once said, "having a million dollars is NOT a retirement plan!" Financial comfort refers to being able to manage your life in a satisfying and fulfilling way using the financial resources that you have. If financial discomfort contributes to retirement stress, then your financial plan becomes a negative rather than a positive. The keys to achieving financial comfort are to have a clear understanding of the financial resources you have and the demands on your money that will come from the life you lead (both now and in the future). One good way to look at your financial situation in this next life phase is to think about the three "buckets" that you will have to keep filled in order to achieve financial comfort:

  • Your "essentials" bucket, which will pay for all of your basic needs
  • Your "lifestyle" bucket, which will fund those fun things that you dream of doing in retirement
  • Your "nest egg" bucket, which will fund any emergencies that may arise, provide you with a sense of security through good and challenging times and ultimately will form part of your legacy

  • A wise person once said "While there are lots of books available on retirement, the only book that really matters is the one that you write yourself!"

Financial Checklist For 'Empty Nesters'

Well, they've finally left the nest and now you're trying to get reacquainted with your spouse! The kids leaving home can either give you a great sense of freedom or leave you struggling to find other activities to fill in your time. Either way, it's the perfect time to review your financial plans and set yourself on course for the next stage of life.

It's important to do some planning around this stage, as it's also a time when we see many people making major financial mistakes. This can manifest in a few ways – either blowing the spending budget on lavish holidays or regular dinners out or finally launching into a major house renovation that unfortunately sets you back for years. Examine again what's important for you and plan a smart strategy to move ahead. Here are some tips to help with this phase:

1. Check in on the retirement savings.
Even though you'll feel like you can only just put your head above water now, consider how many more years you'll want to work for and what you'd like your retirement income to look like. It may be an ideal time to increase that salary sacrificing into super, and finally clear that mortgage once and for all.

2. Re-evaluate your cashflow
Now that the kids are gone, you probably don't even have to buy as much food! We'd always suggest looking at your budget at least every two years, so make it a priority to get clear again on what your living expenses are. This will help you determine what surplus cashflow you have and where it would be best to direct these funds.

3. Cut the money cord between you and your kids
While you'll always want to be there for your kids, you're not doing them any favours by continuing to pay for their expenses or to give them money. Give your kids the gift of financial independence and encourage them to take care of this area on their own. You also don't want to drain your own retirement position by having to pay for things that your adult children are now more than able to cover themselves. Stop doing their washing, buying them food or paying the phone bills – they can do it themselves now!

4. Reassess your insurance needs
Now may be a perfect time to reduce the amount of insurance you're holding if your family needs have changed. Insurance is not meant to be something you hold forever – it's a tool to ensure the family position is stable when an unforeseen event happens. If your asset position has improved, you may not need as much cover as you did once upon a time.

5. Check in on your estate plan
Now that the kids are grown up you may have noticed that some of them are more financially able than others. You may also want to name one or some of your children to act in estate roles, such as being a backup executor for your Wills or as a second power of attorney. Also, consider how much you may like to leave your children and what you need to do now in order to make that a reality.

Your transition from active parent to empty-nester can be a challenging one, but with smart financial moves to guide you, it can be a joyous one, filled with new opportunities and new challenges. And to help all of our clients in this transition phase we will be holding one of our Retire Right nights in the coming months. The Retire Right evening takes you through all of the areas you need to consider and provides you with a solid understanding of your options for investment, saving and retirement funding, so that you can live your future the way you choose and maybe leave a bit for the kids too!

If you would like more information on the next Retire Right night near you, register here.

Our goal is to work with you to not only maximise your financial viability and opportunity now, as well as to ensure that we provide you with the guidance, advice, and support to plan for security later in life. Today more than ever, with ongoing inflation and rising living costs, it is important that people consider and plan for how they will live post-retirement. This is especially true for Gen X's and later.

In an article published on in recent weeks, it was reported that only 19 per cent of us will retire comfortably, and Gen X Aussies will have to save up to $4 million dollars to enjoy their golden years, according to new research. These stats mean that the majority of Australians – over 80 % of us are at risk of "falling short" when it comes to the affordability of comfort in our later years. Furthermore, the article shared research statistics that forecast "anyone born after 1984, will likely need between $2.09 - $3.98 million dollars for a comfortable self-funded retirement in 26 years' time"

Obviously, the idea of comfortable is subjective and can change from person to person, however, according to SuperGuide, they suggest that a couple today can generally enjoy a comfortable retirement on about $60,000/year – which will require a significant lump sum investment, with the aged pension only covering a small percentage of living needs. For the coming generations such as millenials, the reality is much more stark with lump sum figures hitting the millions. The report continued to indicate that there were enormous - around$3.5 trillion dollars – in funds expected to be passed on from Australian Baby Boomers to their children over the next 20 years suggesting that about 75 per cent of all Gen X and Y with surviving parents will inherit an average of $110,000. If invested wisely, these funds could set up their future.

And that is the most important take-out from this discussion – that it is important to use what is available today to start investing for the future. It was also suggested that Australians, in general, have a limited understanding of smart, long-term investment options, which can cause feelings of being overwhelmed and lead to inaction. The key is to start learning now. Regardless of what stage of life you are at it is important to seek out the right advice from trusted sources. It is also important for parents and grandparents to actively work with their children to set up Estates and Investment portfolios that work for the whole family over the very long-term.

Education is key to success when it comes to financial investment and no matter how daunting things may seem, when you are proactive and sensible in your approach anything is possible. If you would like any information or advice regarding your personal estate and retirement planning please contact us today for an obligation-free consultation with our Wealth Advisory team.

How is Your Retirement Planning Coming Along?

The Australian sharemarket fell to a four-month closing low as banks fell again and resource stocks were dragged down by sharp falls in oil prices. Wall Street reversed 0.7 per cent Tuesday night, but the S&P/ASX 200 index tumbled to close down 91.6 points, or 1.59 per cent, at 5665.7 as bullish global sentiment wilted along with commodity markets. The Australian dollar fell US0.4¢ to US75.60¢ as the US dollar rallied against major currencies on the US Federal Reserve's "hawkish" interest rate outlook. 

What this means for you: 

Are you on track for retirement? It's never too early or too late to start planning! With an ageing population and ever changing rules around superannuation and retirement, it's more important than ever to start planning ahead for your retirement. We are living longer than previous generations so we need to make sure now, that we are going to have adequate funds and assets in retirement to meet not only our lifestyle goals but to make sure that our retirement funds are going to last the distance. In a perfect world people should start looking at their retirement in their 20's or 30's (you can't beat 30 to 40 years of compound interest working on your savings) but in saying that don't panic if you think you may have left it a little too late. People of any age can start boosting their retirement savings and get on track to have the lifestyle they want once they retire. 

If you haven't started planning for your retirement, or need your retirement planning reviewed our services include: 

1. Calculating how much you'll need in retirement to enjoy the lifestyle you want
2. Preparing and implementing retirement planning strategies
3. Superannuation planning and SMSF's
4. Budgeting and cash flow management
5. Transition to retirement strategies
6. Centrelink eligibility ad calculating your potential entitlements
7. Help with estate planning 

We are all going to retire at some point so make sure you are in the best possible position when that day comes by making an appointment with Dominique to review you retirement strategy. If you would like to review your current structures, contact us today on 5482 2855.

From 1 January 2017, changes are coming to pension payments. Anyone who is currently receiving a pension or part-pension needs to be fully aware of these changes so that they can take appropriate action and caution. The changes will be based around the assessments of asset limits, and will mean some pensioners will see a reduction in their payments, while others will see increases in their payments.

Full Pensions: 
On the lower end of the scale, there will be a number of pensioners who will be better off under the government's changes and now receive the full pension.

Full pension, Home Owners: 
If you own a home, the new assets thresholds will allow you to hold assessable assets up to $250,000 (singles) and $375,000 (couples) without impacting your full-pension entitlements. Some single homeowners under the threshold will see about $30 a week added to their pension, while couple homeowners under the threshold will see around $19 each, per week, added to their pensions.

Full pension, Non Home Owners: 
The new assets thresholds for those who don't own a home will be $450,000 (singles) and $575,000 (couples) without impacting full-pension entitlements. Some single Non Home Owners under the new threshold will see around $27 per week added to their pensions, while couple Non Home Owners included in the new threshold will see between $18-37 each, per week, added to their pensions.

Part Pensions:
From 1 January 2017, around 90,000 part-pensioners will lose their Age Pension and about 235,000 part-pensioners' payments will be reduced.

Part Pension, Home Owners:
Single Home Owners will stop receiving the pension when they have more than $542,2500 in assets, this is down from $791,750. Home Owner couples will no longer receive the pension when their assets reach $816,000 in value, this is down from $1,175,000.

Part pension, Non-Home Owners:
Single Non-Home Owners will no longer qualify for the pension if their assets total $742,500, down from $943,250. And couple Non-Home Owners will no longer qualify after they've accumulated more than $1,016,000 in assets, down from $1,326,500.

There is some silver lining for those who have lost their pension for 2017. They will automatically be entitled to receive a Commonwealth senior's health card or a low-income health card. These cards will provide access to Medicare bulk billing and less expensive pharmaceuticals.

If You Will or Could Be Affected by These Changes, it is Important to Plan For Them Now, Rather Than Waiting to See After January 1

There are a few minor strategies (with minor being the key word) if a pensioner is on the cusp with regards to pension eligibility. There has been some angst out there regarding these pension changes, with angry pensioners floating dubious ideas online of how to maintain their pension eligibility. On the extreme side, there have been pensioners talking of knocking down a house to build another (while living in a caravan on site for 18 months!), massive extensions and wholesale renovations, or just buying a more expensive house.

Everyone wants to take less risk the older they get, but from an investment position these ideas are dubious for one reason – they all involve essentially spending several hundred thousand dollars that may not be realised in the same value at a later date. Not to mention, these 'strategies' are taken, because the investor doesn't want to take market risk and potentially suffer a decline in the value of their asset base. Note the contradiction here – churning through a significant amount of money and potentially overcapitalising on a house to get extra pension payments is regarded as no risk, but investing and enduring possible market volatility to achieve an income stream is regarded as high risk!

However, there are some options that may support you to stay "pension-eligible" that don't have to wipe out hundreds of thousands in capital and may provide some ACTUAL VALUE:

Smart Renovations – ie. renovations you may have done anyway because your house requires them, or a renovation that may make your residence more practical for your needs as you age. There may be other improvements that slightly lower an asset base, while also providing some financial relief in other areas, like solar panels.
Gifting – this is a strategy that may be better to start in advance of hitting pension age, as it should be remembered there is a $30,000 five-year aggregate or a maximum of $10,000 that can be gifted in any one year.
Asset Transfer to younger partner's Superannuation – this works when one partner is younger than the other and the superannuation of the younger partner is not included in the assets test if they are not of pension age. Putting some assets into the younger partner's superannuation account means Centrelink will still assess combined assets but will exclude the younger partner's super balance.
Prepaid Funeral – this is as it suggests, a prepaid funeral isn't assessable by Centrelink under the assets test, so it's another way to lower assets to maintain pension eligibility.
Take a holiday – probably not the best strategy unless it was already seriously considered, but we all need a break!
The smartest strategy right now though is to seek advice. Regardless of what position you are in it is always advisable to review your individual situation to ensure that you secure the best outcome for you and your family. 

To support all Schuh Group Clients and their families, the Schuh Group Wealth Advisors are offering obligation-free independent reviews from November 7th to December 16th. If you would like to take advantage of an independent review contact us today on 07 5482 2855 figure out the best strategy for you, or email

This week, the share market recovered some of its early falls but still closed in negative territory as sentiment remained subdued on strengthened expectations of a rate hike by the US Federal Reserve. The benchmark S&P/ASX200 index dropped 0.6 per cent, with materials, industrials and real estate stocks among the worst performers. The Australian dollar has slipped against the greenback after global risk sentiment fell on expectations the European Central Bank will probably wind down its bond purchases. At 1700 AEDT on Wednesday, the local unit was trading at 76.26 US cents, down from 76.74 US cents on Tuesday.

What does this mean for you?

The Australian Financial review published an interesting article during the week about UBS Australia Boss Matthew Grounds, who was saying there's no point in just buying into the ASX 200 if you'd like to make money as an investor. Our philosophy differs from this, mainly due to the results of those who do try to beat the market. Over 60% of trained fund managers failed to beat the index last year, and the results seldom differ from this on an annual basis. We'd recommend you get the returns you're entitled to as an investor and apply an index investment approach.

This week the IMF (International Monetary Fund) warned of exploding private debt on an international level. Our observations would be that those people who can afford a comfortable retirement are also those who have worked hard to pay down private debt in their working years. Start by focusing on the highest interest rate debt first – personal loans and credit cards, and then move on to the home loan. A focused debt reduction approach is just as important as having a focused investment plan.

If you would like to review your current structures, contact us today on 5482 2855.

The share market has closed slightly higher following a lead from Wall Street. Investors have still been cautious ahead of the US and Japanese monetary policy statements being released in the coming days. Most Australian investors shrugged off the Reserve Bank board meeting minutes which pointed to a neutral monetary policy outlook until economic data changed either way.

What does this mean for you?

There are some changes in the air for the financial strategy of those nearing retirement. Last week we heard the government has scrapped the proposed $500,000 non-concessional lifetime super contribution limit, and instead replaced it with an annual non-concessional limit of $100,000 when super balances are under $1.6 million. These changes will take effect from 1 July 2017.
Next month more than 690,000 people will receive letters from the Federal Government warning them they could lose all or part of their age pension. Yesterday, the Government unveiled a further tightening of aged care eligibility. On January 1, couples with assets worth more than $816,000, down from $823,000, will lose every cent of their pension. Single pensioners who own their home will lose payments if they have assets worth $542,500, down from the $547,000 envisaged when the changes were unveiled last year. This means it's important to have the bulk of your retirement investments held in something that you'll be able to draw an income from on a regular basis. Keep non-financial asset balances such as cars and caravans to a minimum.

If you would like to review your current structures, contact us today here or call us: 5482 2855

In the debate around government policy and the age pension, much is made of those people who receive the age pension, and the adequacy of it as a retirement income stream. Similarly, much is made of what is happening to the self- funded retiree as superannuation policy changes. Stuck in the middle is a group that does not seem to be as vocal, but is large in number – those people funding their retirement with a mix of their own investments and some part age pension. 

National Commission of Audit figures show that 50% of people in retirement rely on the full age pension, 20% are self funded (receive no age pension) and 30% receive some age pension. This 30% group is faced with a "perfect storm" ?of low cash interest rates, changing superannuation rules and changing age pension legislation that is making their navigation of retirement particularly challenging. 

More punitive asset test coming 
The first factor that those people who are receiving a part age pension, or are likely to receive one once they get to retirement age, need to consider is the looming change to the asset test for the age pension. Currently, people lose $1.50 of part age pension a fortnight for every extra $1,000 of assets that they have over the minimum asset test threshold, which starts at $350,000 (the assessable amount includes money that may be in superannuation accounts). From January 1, 2017 the "taper rate" will increase to $3.00 of age pension lost for every extra $1,000 of assets. The impact of this is that people funding their retirement with a mix of their own superannuation and investment assets, and some part age pension, will more than likely receive a reduction in their age pension payments. 

Record low interest rates
As part age pensioners see their age pension payments reduce and have to rely more on their own investments and superannuation to fund their lifestyle, it is understandable that they will look to shift some assets into the lower risk asset class of cash. The problem here is with returns – with record low interest rates it is hard to generate an income from cash investments. From the January 1, 2017 a home owning couple with $850,000 of investment assets will receive no part age pension. If they tend toward a cautious asset allocation, they might choose to have 40% of their assets in Australian shares and 60% in cash. Assuming a gross yield on the Australian shares of 5.5%, and 2% income from their cash, this income will produce total income of $28,900. This is significantly less than the current amount of age pension for a couple of $34,250 (basic rate). 

This leads to some really tough questions for someone in this situation. Do they accept higher volatility to try and increase their portfolio income through exposure to more shares? Do they try and chase a higher yield through some higher risk fixed interest investments? Do they draw down some of their investment capital, and use that to supplement their lifestyle? What can be done? 

Take 3 steps ... The tough question is – what to do about all these changes? Three key steps seem to present themselves. 

1. For those approaching retirement, a focus on making more superannuation contributions earlier becomes more important. This allows the growth assets in the superannuation fund to be providing compounding returns earlier, as well as avoiding some of the restrictions of limited superannuation contributions.
2. An income planning approach to asset allocation, whereby the next five to seven years' worth of income is invested in cash like investments, might help build some confidence about exposing more of the remaining portfolio to growth assets.
3. Finally, modelling the consequences of effectively withdrawing some capital from superannuation assets each year might encourage higher withdrawals earlier in retirement, and then rely more on the age pension later. Of course, the difficulty with this is the possible impact of future changes to age pension rules.    

The Australian sharemarket has finished the past week strongly, despite a slight dip on Tuesday due to growing speculation of an August rate cut from the RBA. If a rate cut does indeed ensue, it is likely to be due to sluggish local consumer prices rather than any global fears from Brexit. Due to the possibility of a rate cut, the Australian dollar has also fallen slightly against the Greenback to finish at US 75.11c.

What does this mean for you?
If rates continue to drop, the reality of lower investment returns may well and truly be upon us. Gone are the good old days of high inflation, which made property prices skyrocket, and interest rates soar to match. Our previous financial returns modelling was conducted on an average rate of return of 9% per year, but now we're working more conservatively. Around 6% pa is more realistic in today's climate, for a balanced portfolio. This means you need to consider the following: If overall returns are staying lower than they have in the past, will you have enough to retire? 

It is important to start thinking about this now and make the changes required so that you are able to safely retire to a standard of living that is not dramatically compromised. You might consider strategies such as working longer, downsizing your house, spending less, saving more, or taking on more risk with your investments. 

Achieving the right balance so that you can plan for a secure and peaceful retirement is something we can help you with. If you would like to review your current structures, contact us today on 5482 2855.

You can save for a lot of things, but saving your way to prosperous retirement is near impossible. Historically (and this isn't expected to change any time soon) unless you're enjoying a truly significant wage and saving a massive amount of it, the conspiring elements of taxation, inflation and less than market returns will ensure your savings won't meet your long term expectations – unless you're intending to live extremely frugally. Yet despite all evidence pointing to the contrary, people still see cash as "safe" and investing is akin to "gambling".

A new survey by BlackRock of Americans and Canadians has shown a big disconnect when it comes to saving and investing. 51% of Canadians believe investing is like gambling, while 72% of Americans don't see investing in financial markets as a way to put money toward their long-term goals.

Their feelings towards cash seem very positive though, with 60% of the Canadians surveyed holding all their money in cash, with the figure being 65% for surveyed Americans. The attention grabbing thing about these responses is the environment they exist in. The US and Canada have spent more than half a decade stuck in an ultra-low interest rate environment, 0.25% in the US, and from 1% to the current 0.5% in Canada. 

At the same time rates have been held at these lows, the Canadian TSX has increased 78%, while the US Dow Jones 500 has increased 166%. That's a significant return forgone to enjoy the feeling of safety. For Americans it seemed the attachment to cash came from family influences. With almost half recalling positive childhood memories of saving and starting bank accounts, but 78% suggested they were not raised to feel comfortable about investing. In Canada, 62% of those surveyed were not using a financial adviser. As you might notice, this appears to line up with the 60% of Canadians surveyed who hold all their money in cash.

If we're to draw any conclusions, it's that financial education plays a big part in the type of lifestyle or retirement people are likely to have. Assuming investing is a risk while having a deep seated attachment to dropping money in a piggy bank will have consequences. The biggest will be an ongoing loss of purchasing power as the very real risks of inflation and taxation are ignored. Finally, another survey and we find more cash dragging on potential returns. Every year Vanguard releases a Self-Managed Super Fund report and this year cash held by funds has grown to 35%, to those SMSF trustees surveyed.

In 2013 that figure was at 26% and the reason for the increase was due to market uncertainty. With the Australian cash rate now at record lows the surveyed SMSFs seem to have seen something spooky in their crystal balls that has them accumulating cash. Given the local share market is still slightly in the red for the year this might seem a smart move – except when cash is lined up against the returns of every other major asset class in 2015. 

Cash looks fantastic against the local market, but lags Australian & international bonds, international shares and Australian and international listed real estate. As with our cash happy friends in the US and Canada there appears to be an education gap with local SMSFs. As SMSFs cash holdings grew over the previous 12 months, the number of surveyed SMSFs using a financial planner fell to only 36%.

And that's the thing about good financial advice and education, without it, you don't know what you don't know.


WE keep hearing about debt and what needs to be cut. Recently retirement options have again been under the microscope. The sustainability of the age pension is questioned. The ability to continue superannuation tax breaks is questioned. And with rocketing home prices in some parts of the country, there's talk of the family home being subject to pension means testing.
For some of the very house rich/cash poor pensioners and their families, this last suggestion has triggered some consternation. There's the potential loss of the pension for the home owner and the assumed loss of inheritance for 'concerned' family members. Yet the frothing only highlights the lack of financial literacy and strange addiction to a small pension and its associated benefits. Especially strange when for many of these people there are significantly more rewarding options available.

Here is a fantastic case study to illustrate this situation from The Australian
Juliet, a company executive, and her barrister husband John have led upright and financially successful lives. Their combined net assets are now about $6 million - not too far above the average for Mosman but still more than 10 times the national average. Juliet's 75-year-old mother, Nancy, lives a few streets away in Juliet's childhood home, an Edwardian four- bedder, on a large block worth an estimated $4.5m. In the past year alone its value jumped by at least $500,000 thanks to cuts in official interest rates by the Reserve Bank. We further learn that Nancy is down to her last $200,000 in cash and is now claiming the age pension. Along with associated benefits, it's worth $22,200 a year to her. Juliet even thought it was ridiculous her mother was on the pension given her assets, but if that was changed her mother may have to take out a reverse mortgage and she'd likely lose a significant amount of her inheritance.

Strangely, there's no consideration of any other option. Let's even forget the assumption the home could be means tested, it just seems illogical for Nancy to stay in the house whatever the rules. Mosman is one of Sydney's pricier suburbs, yet real estate listings show Nancy could downgrade to a $2 million home and remain in Mosman near her family. Or if she wanted, there's a significant choice of units in Mosman under the $1 million dollar mark. There's even the option of renting, but we'll stay conservative and keep Nancy as a homeowner.

But what about Nancy's pension? Yes, assuming a downgrade to a $2 million house, leaving her with liquid assets of $2.5 million, Nancy would no longer be eligible for the pension. She'd need to pay $96k for stamp duty and assume another $90k in agent fees (assuming 2% on the sale), leaving her with $14,000 from her spare $200,000. However, she now has $2.5 million free that could be invested very conservatively to potentially yield 4% per annum.
The return to Nancy in distributions would be $100,000pa before tax. Assuming the basic (and unlikely) scenario of no franking credits, Nancy is left with a $73,000 yearly income opposed to $22,200 of age pension.
You could be certain any further pension related discounts wouldn't add up to covering that $50,000 income difference. You could also be certain any Edwardian home on a large block in Sydney isn't without ongoing maintenance costs, further eroding that age pension.

Asset rich millionaires and their families bristling at the thought of the family home being pension means tested are upset at the wrong issue. They really need to question why they're clinging to a small government pension when there's a much higher paying alternative. For some, a liquid portfolio could provide a better standard of living and less of a cash crunch down the line if their home became a costly maintenance burden.


How Much Income Do You Need To Retire?

 How much money should you withdraw in retirement? Anyone who is getting closer to retirement needs to think seriously about how much income they will need in the years the?y are not working.
This is a crucial decision for two reasons. The first is that it will dictate how much income you will have after your finish work. The second is that for those who are planning for retirement, this figure will dictate the level of assets you need to accumulate for any given level of income.

Let's use the example of a couple who retires with $1.3 million in investment assets. They are trying to work out what this means for them in retirement. Should they be
planning to spend $40,000 a year, $60,000 a year or $100,000 a year?

Spending investment income 
A simple but very legitimate approach to this problem is to suggest that a retiree with a range of investments might choose simply to spend the income that their investments earn. With a well-balanced portfolio, this is reasonably sound thinking.
Let's assume that our couple with $1.3 million in investment assets 
decides that they are going to leave one-third in cash, one-third in Australian shares and one third in residential property. At the moment they should be able to get at least 3.5% income on their cash investments, find a residential property with an after-cost yield of 4% and receive income (including franking credits) of 5.5% on a portfolio of Australian shares.

Their total income: $56,290. What is wrong with just spending this amount each year? The answer would be not much. It is a reasonable way to look at your retirement situation. Over time you would expect the income from the Australian shares and property investment to increase, providing an important buffer against inflation and effectively increasing the income that you have to spend. 

Having $433,000 in cash style investments provides a great deal of liquidity for any cash needs. Spending the income of the portfolio preserves the underlying investments (although inflation will eat away at the $433,000 invested in cash), meaning the portfolio will be well placed to fund a retirement over many years.
The biggest risk in this situation would be an economic shock that saw very low interest rates and decreased share dividends and rental income. If you were prepared to cut your spending to cope with such an outcome, then this approach to funding your retirement is certainly sound.

For the person thinking about the amount of money that they need for retirement, a drawing rate of 4% suggests a withdrawal rate of  $400,000 for every $100,000 invested, up to a withdrawal rate of $5,000 for every $100,000 invested if you use a 5% figure.
In Australia, we have factors that might support a higher portfolio withdrawal rate, including franking credits that provide a tax return for most Australian share investments and an age pension system that provides a safety net for people, even with levels of assets of $1 million.

These factors might lead to someone being comfortable drawing at a higher rate for different reasons - franking credits because of the extra source of returns, and the age pension because of the safety net it provides if portfolio funds are depleted too quickly. With this in mind, an Australian investor may be able to withdraw 5.5% or 6% and still be reasonably comfortable with preserving their capital.

There are other non-financial factors that might cause a person to decide to withdraw at a higher rate early in their retirement including the assumption that they will spend decreasing amounts of money on things like entertainment and travel as they get older.
In conclusion, the rate at which you draw from your portfolio is a crucial personal finance decision. It will determine the type of lifestyle you will be able to enjoy in your retirement years.
If you would like a no obligation review of your retirement plan and your investment structures, please contact Dominique Schuh on 07 5480 4877 or at







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