Over the next few years the age at which you can begin to start receiving the Age Pension will gradually increase from age 65 to age 67 (depending on your birthdate), with most people now having to be 65 and a half before they can access the Age Pension. Every time the Age Pension age increases or there’s talk of it increasing, you’ll hear all over the media people who now can’t retire because they have to wait a few more years before they can access the Age Pension.

Unfortunately for some, the Age Pension will be critical to fund their retirement, but the Age Pension age doesn’t need to be your Retirement Age. There’s a few things you can do to help reduce your reliance on the Age Pension and retire when you want to retire, our motto is that we’d rather you be working because you want to, not because you have to.

Super Contributions – Your employer pays 9.50% of your wage into Super as a Super Guarantee Contribution (SGC), but if your cash flow allows for it, you can top that up through a Salary Sacrifice arrangement or making Personal Concessional Contributions, up to an annual cap of $25,000 (which includes your SGC). This allows you to boost your Super Savings while at the same time helping you save tax personally.

You also have the opportunity to put up to $100,000 in as a Non-Concessional (After-Tax) Contribution and even up to $300,000 utilising the bring-forward rule in one year (if you haven’t made large contributions previously). Depending on your Super Fund, this can be a transfer of any cash you may have or even other assets such as shares. Remember that the new $1.6mil balance rules need to be taken into consideration.

Depending on your income, if you make a Non-Concessional Contribution the government may give you a Government Co-Contribution up to $500 on a $1,000 contribution (you can contribute more, but the co-contribution is based on a maximum $1,000). If your income is below $36,813 for FY18 you will receive the full $500 Co-Contribution, and you will receive a pro-rata amount if your income is above $36,813 but below $51,813.

Consolidate your Super – For some you may have multiple Super accounts, each time you start a new job your employer may start a new Super Fund for you if you haven’t given them the details of your existing Super Fund. If you’ve got multiple Super accounts it may be worth consolidating them into the one account which may help to reduce the total fees you’re paying on your Super accounts. However, you need to be careful that when you rollover any Super into another account you will lose any insurance you may hold.

Review your Insurance – Most Super accounts come with default insurance cover, and insurance is a very powerful tool to protect you and your family in case something happens to you. For those later in life, who are empty nesters, paid off the mortgage and are close to retirement, your need for cover may not be as important as someone who’s just starting a family and recently taken on a mortgage. Although insurance may be needed, it is always worth reviewing it on a regular basis to ensure your level of cover is appropriate and you’re paying for what you need, as the premiums come out of your Super balance. In some circumstances it may also be worthwhile holding some of your insurance cover outside Super.

JBS can help provide a full review of your Superannuation and Insurance and help you put strategies in place to ensure that you’re working because you want to, not because you have to. We’d rather you work towards your Retirement Age.

– Peter Folk –

The Global Financial Crisis (GFC) was for the majority of us, the worst financial crisis of our lifetime. What started in 2007 with a US Subprime Mortgage collapse, developed into a full-blown international banking crisis with the collapse of the investment bank Lehman Brothers on 15th September 2008.

These 2 years between 1 January 2007 and 31 December 2008 resulted in the following returns:

The figures show that what started as a mortgage and property crisis, quickly spread and impacted all growth assets (shares) across the globe with double digit negative yearly returns across the 2 years. Only the high returns from the defensive fixed interest assets could have possibly saved you from disastrous returns across your entire portfolio. Diversification across all asset classes, and having a portion of your funds in defensive assets was crucial during this time period.

It’s important to remember however that just before the GFC, growth markets had been booming for years and by having a lot of funds in defensive assets during this time would have resulted in lower returns. If you were to base your investments on the recent past performance, when the GFC hit you would have been overweight in growth assets and suffered the full effect of the GFC.

In the ten years since the GFC it’s been quite a different story

The figures show that no matter the asset class, by staying invested throughout the GFC, you would have not only recovered your losses, you would have a positive return on all asset classes.

If we look at the returns based from the end of December 2008, growth assets have grown substantially once again showing that relying on the recent short term past performance would have resulted in poor returns as you would have allocated less money towards the growth assets due to their disastrous GFC performance and more towards the defensive assets.

The GFC was not the first big market downturn that we’ve had and it won’t be the last. It’s often hard during these times to ignore emotions and stay the course with your investments. When things are going well we tend to become overconfident and take on more risk (increased growth assets) than what we should. In contrast, when things are going badly, we tend to become pessimistic and be too cautious (not investing enough in growth assets).

Having a financial adviser by your side during these times can help guide you through the tough times. They can help you keep your emotions out of investing, have you stick to the plan, and ensure that you reach your financial goals. Remaining disciplined is the key.

To speak to a financial adviser to help you avoid making wrong decisions during emotional times, call JBS Financial Strategists on 03 8677 0688.

– Liam Rutty –

An article on moneymag.com.au cited that “retirees with modest savings can be better off than those with more than twice as much”. The argument was that due to the new age pension rules introduced in January 2017, there was a ‘sweet spot’ where the income from the age pension and the return from your pension savings would be equal to the income received by someone with more savings who would not qualify for the age pension.

The below table sets out the results.

The assumption was that you would take the minimum amount from your pension account and combine it with your age pension entitlement. As you can see a couple with $1,050,000 will have the same amount of income as a couple with $400,000. What the analysis conveniently doesn’t include however is the capital value. It also only looked at 1 year and did not take into account what would happen in future years.

From a very simplistic view, lets assume that no capital is being drawn in either scenario and hence the capital values remain the same. This means that when the retirees die, they will have $605,000 more money available to pass onto their beneficiaries than in the scenario where the couple only has $400,000. Yes, the income is the same but the actual wealth is way different.

A second and more complicated scenario outlining how the person with more money is in fact way better off is if the capital is drawn down. Let’s assume an extra $10,000 per year, with an earnings rate within the pension account of a modest 5%.

The below table sets out the results.

In the above example, the person with $1,050,000 has a significantly higher regular income over time due to the higher amount of capital available to them and the requirement to draw down an increased minimum amount from their pension accounts as they get older.

The above graph also shows that even with the increased withdrawals, in this particular scenario you will still have considerably more assets throughout your life that you can also draw down on if you need to. Not only that but you need to remember that even if you do not qualify for any age pension at the start of your retirement, as your assets decrease over time you may end up qualifying for the age pension later on in retirement.

In fairness to the author of the original article, it was probably designed to indicate that in order to have a ‘comfortable’ retirement, due to the age pension, you can get by on a smaller pension savings balance. To suggest however that “retirees with modest savings can be better off than those with more than twice as much” is just plain wrong and doesn’t take into account all the pieces of the puzzle.

To speak to someone about growing your retirement wealth so you can have a better lifestyle in retirement speak to one of our advisers at JBS Financial Strategists.

– Liam Rutty –

Employees, you can now get a tax deduction for Lump Sum Super Contributions Prior to the 30th of June.

Previously, as an employee you could only make tax deductible contributions into Super via Salary Sacrifice Contributions. The nature of Salary Sacrifice Contributions are that they must be pre-scriptive, therefore in the event that you have a windfall, sell some assets or decide late in the financial year that you have the capacity to make extra  superannuation contributions, historically it has been difficult or you haven’t been able to.

Since July 1 2017, the ten percent employment rule regarding tax-deductible super contributions has been replaced. The rule meant that a person could not claim a tax deduction on personal Super Contributions if more than ten percent of their assessable income was obtained as an employee. The new rule is now any person under age 65 now may be able to claim a tax deduction on their contributions regardless of their employment arrangement, whilst those aged between 65 and 74 need to satisfy the Work Test in order to be eligible to make a contribution, and subsequently claim a tax deduction.

The following example shows how John was able to save $3,300 in tax by taking advantage of the New Rules:

John works as an employee. He has a salary of $100,000 plus Super Guarantee Contributions of $9,500. He is focusing on reducing his mortgage and at the moment doesn’t have the cash flow to do any additional Salary Sacrifice Contributions. He has however recently decided to take a profit on some shares that he has held for a long period of time. This sale has caused a Capital Gain of $15,000 (after 50% discount).

Prior to the 1st of July 2017, as his income from employment was more than 10% of his total assessable income for the financial year, he wasn’t eligible to do anything about this gain and would simply have to add the $15,000 to his assessable income and pay approximately $5,550 in tax (plus Medicare).

Because of the changes on the 1 July 2017, he is now eligible to make a Lump Sum Tax Deductible Contribution into Super to offset the Capital Gain and reduce his taxable income by $15,000.

By contributing $15,000 into his super as a Lump Sum Tax Deductible Contribution, John is able to save $3,300 in net tax and move his wealth into the concessionally taxed super environment for future investment.

Like all strategies, your own personal circumstances need to be considered as factors such as your level of superannuation contributions (including employer contributions and the contributions caps), can trip you up and cause issues. However, when implemented correctly the new changes do open up a number of opportunities previously unavailable.

If you would like to discuss how these changes could benefit you, please contact the team at JBS.

– Warren Hanna –

It’s been more than 6 months since the Superannuation reforms came into force on the 1st of July 2017, and now with the Christmas break over and done with and most likely back to your day to day routine, now is as good a time as any to re-focus on your Superannuation.

One of the more prominent changes to Super that came into effect was the removal of the concessional tax treatment of Transition to Retirement Pensions (TTR Pension). Pre 1 July 2017 any money held within a TTR pension received a 0% tax rate on any income or realised capital gains, however post 1 July 2017 money held within the TTR pension is taxed at 15% (same as accumulation).

However, any funds that are held within an Account-Based Pension still receive the 0% tax rate (for balances up to $1.6 million). Unless you’ve met a condition of release, such as attaining age 65, you’re unable to commence an Account-Based Pension. The most common conditions of release are:

– Reaching preservation age (currently age 57 – depending on your date of birth) and retiring
– Reaching age 65

For superannuation purposes, a member’s retirement depends on their age and future employment intentions. A person cannot access Superannuation benefits under the retirement condition of release until they reach preservation age. At this stage, the definition of retirement depends on whether the person has reached age 60.

If you’re under age 60, then meeting a condition of release is a bit harder, effectively you generally have to completely cease employment and have the intention never to again work more than 10 hours per week. However, if you’re over age 60 (but under age 65), simply having a change of employment post age 60 means you may be able to satisfy a condition of release, opening up an opportunity to move your Super wealth into the tax-free pension environment.

For example, let’s say John (age 62) works full-time in a Supermarket, but for 6 weeks he was contracted to work on the Weekends as a Labourer. After 6 weeks John has stopped work as a Labourer, because of this John has now met a condition of release and can move his Superannuation savings into the tax-free environment. However, any later contributions made (employer and personal) and earnings will be preserved (i.e. can’t be accessed until a new condition of release is met).

Based on the above, if you’ve been operating a TTR Pension and potentially could meet a condition of release, you may be able to continue to receive the tax-free pension on your Superannuation benefits. Here at JBS we can help assess your options in relation to meeting a condition of release.

– Peter Folk –

Towards the end of each year we always focus a lot on celebrating Christmas and New Years, however there’s something else we could also celebrate post-Christmas. We’re talking about celebrating your family’s financial security by having personal insurance in place. Having personal insurance cover in place means you and your family won’t have to deal with financial stress in the event of you being unable to earn an income or even passing away. Ideally all your personal insurance covers should be in place prior to the “Silly Season”, however if you haven’t done so already the new year is a perfect time to review your insurance needs.

With all the festivities and celebrations over and done with, for most of us it’s now time to pick up the pieces and start the New Year a fresh, which is a perfect time to review your personal insurance needs. Research from one of Australia’s largest personal insurance companies have found that only 37% of Aussies aged between 18-69 actually have life insurance and even more disturbingly only 18% have disability cover and income protection insurance. Further findings include how Australians are grossly underinsured. It’s estimated that the underinsurance gap in Australia is approximately $1.8 Billion, meaning there are a lot of Aussies out there who believe they have sufficient insurance cover, but in fact don’t. For most of us, we don’t like to think about insurance and when asked about how much we have, the first response is usually “I don’t know”.

So we come to a point where you should ask yourself, do you need personal insurance? The main reason you would put in place insurance cover, is to secure your family’s financial wellbeing. So if you have a mortgage, loans, kids etc… chances are you will need personal insurance. The question you have to ask yourself is, “if I’m unable to earn an income tomorrow, what would happen”? Then for those of you that already have some form of insurance cover in place, the question you should ask is “how do I know the level of insurance I already have in place now is adequate?” The short answer is to seek professional advice.

Whether you don’t have any insurance at all or looking to review your insurance needs, the best thing to do is see someone who is a professional in the area. Financial Planning firms such as JBS Financial Strategists will be able to determine what your insurance needs are and then formulate a strategy to ensure you have the correct and adequate cover in place. So as a new year’s resolution, do yourself a favour by ensuring you have adequate cover in place so you’ve got something else to celebrate about (your family’s financial security).

– Andy Lay –

As 2017 draws to a close, we look back and reflect on the year which has seen the JBS Team grow and change both individually and as a group. Peter purchased his first house and got engaged, Glenn and Andy both welcomed baby girls. The SMSF team recruited a new team member Richard, Aakash graduated with an MBA and a Master of International Finance from Deakin University (with high distinction). Warren won Division 1 golf pennant and added a puppy to his family, Liam renovated his house and back patio and Pj booked a European trip which is now in planning phase for next year. Jen and Bren also made a huge lifestyle change and moved from the city to the sea. From a business perspective, JBS launched three educational series Join with Jen, Retire Right and Cash Coach so if you haven’t yet seen any of our videos, jump on our website and take a look. Keep an eye out for the launch of a new series in 2018.

As we reflect on the positive year our team has shared together, there will be people going into this holiday season who are less fortunate than ourselves. Throughout the year, JBS has supported Make A Wish Australia, and in the spirit of giving we have again decided to donate to this charity instead of sending Christmas cards to our valued colleagues, clients and team. You too can make a donation to Make A Wish who grant the wishes of children suffering from life threatening medical conditions.

Holiday Opening Hours

JBS Financial Strategists will be closing at 4pm on Thursday, 21st December and reopening on Wednesday, 3rd January, 2018. During the holiday closure the business will be supported via email or Jen’s mobile phone on 0418 990 988 for urgent issues.

We would like to thank you for your ongoing support and commitment throughout 2017.

From all the team at JBS, we would like to wish you, your family and your friends a wonderful holiday break, a safe & prosperous New Year and we look forward to seeing you in 2018.

Below is a little snippet from our recent Team Christmas Event – it was a fantastic day, what a great team we have!

With the holidays fast approaching, it’s time to start to consider how you will fund your holidays / shopping / all-round fun. After all, the summer months are a great time and you definitely want to show your loved ones how much you care, but breaking the bank isn’t an option.

Saving on a tight budget can be quite difficult. To ensure you reach your holiday saving goals it is important to start saving early on. Another key to success is to set a concrete and achievable goal for yourself, and decide how exactly you will achieve that goal.

Perhaps your goal is to purchase gifts for all of your children, or fund a nice holiday away. Whatever it is, firstly determine the total cost. Break the total down by how many weeks you have left to save, and figure out where you can trim your budget to set that amount aside each week.

Some of the best areas to cut your budget include:

No more buying coffee or eating out — You’ll be surprised how much you can save by doing this.

Foxtel – Replace TV-watching with reading, cooking, games with your family, or other fun-yet-free activities. Take advantage of the warmer weather outside (when it decides to arrive).

High Interest Bank Account – Put any savings / loose change etc into a high interest bank account and save regularly. Having a separate bank account makes it more difficult to touch until you really need it (like for holidays).

And just as important, find ways to motivate yourself to keep saving.

It’s easy to become discouraged when your savings aren’t growing as fast as you would like, so it’s important to find ways to motivate yourself to keep saving.

I personally like to think about what it is exactly I am saving for and what I am achieving every time I deposit some money into the savings account. For example, if we are saving for a trip to Thailand and our travel budget is $100 a day, then every time I save $100 I know that’s one day of our holiday I have just paid for. Simple, but very effective.

Saving money and being thrifty isn’t fun but remember the end product will be! When you are lazing on the beach at your desired location, visiting Disneyland, or camping at your favourite spot, there is no doubt that you will be glad you saved every cent!

Make a commitment now to plan ahead, and it is very likely those savings will lead to a fun-filled time over summer.

There’s something about starting a new year that brings with it a tonne of motivation. That fresh start where you can re-set, clean-up, and where energy levels are high and excitement at its peak. Where our passion for giving those dreams of ours a really good shot is reignited and our visions of living bigger and better are at the forefront of our thinking.

However, we get to March and the motivation starts to taper off and by April most goals have been abandoned or forgotten about. Research shows, in the end only about 8% of people stick with their good intentions.

So what do this 8% do differently? Are they just more willing to invest wholeheartedly to work towards their goals? Maybe, but experts say it has more to do with how they set themselves up for success. Specifically, they use January to re-set themselves and clean up any messes from the previous year, then invest the time and effort into effective goal planning.

So with the new year having now kicked off, here’s a list of the best results-driven tactics to ensure you are part of that 8% and make 2017 your best year yet:
Get Super Clear

Vague or generalised goals such as ‘save more’ won’t serve you. They need to be specific and well defined so that they can be measured.

–  What?

–  When?

–  And How?

Specific goals such as ‘pay off credit cards by March’ are easier to measure. By then mapping out the action steps required it is then easier to achieve the goal than not.

But there’s also the why? Connecting emotion with your goals will help you remember why they were important in the first place and will reignite your passion for reaching them when things get difficult.

Write it Down

Study after study has shown that those who write down their goals accomplish significantly more than those who don’t. Why? Putting pen to paper forces you to clarify what you want, it motivates you to take action and it makes it easier for you to see your progress and celebrate your successes.

Get Support & Accountability

We’ve all heard the importance of being around the right people, especially when chasing our goals.  When you’re in pursuit of a dream, there are many elements that can resist your path and block your forward motion.  Surrounding yourself with people that are genuinely cheering for you will help you disengage from this resistance and keep you moving forward.

That’s where JBS fits in. We believe (and know!) that the biggest influence of you achieving your financial and lifestyle goals is firstly to have clarity on what your goals are, then aligning your cash flow to help you achieve those goals. Fortunately for you we have a program designed to help you achieve this.

The JBS Cash Coach program is tailored to you, your needs, your goals, and the actions you need to take to achieve those goals.  We take the time to understand you, then design solutions to help you achieve your goals. We help you create a spending and savings plan that is aligned to your goals, and keep you accountable and motivated on a monthly basis to maximise the probability of achieving your goals so you can have the lifestyle you are entitled too in 2017 and into the future.

The early part of 2017 is the perfect time de-clutter your life of the excess build up from last year, clean up, clear your head, set motivating goals, and get moving towards those goals.

The JBS Cash Coach program will help you get the most out of 2017 but only if you take action. Make time and join the best support network around (aka JBS Cash Coach).