Most of us can only dream about leaving our work forever to do as we please. For those who are close to retirement however, this can be a time of excitement and relaxation. Spending countless days at the golf course or with our community groups, families and friends sounds like heaven on earth. The transition from full time work to full time play however may have some unforeseen pitfalls. Here are 5 facts about retirement that you should consider before retiring.

Time
One of the first things retirees quickly discover is that they have too much time on their hands with nothing to do. Playing a round of golf with mates or enjoying a drink at the bar will only fill up a certain amount of time in the day and you can’t go doing the same thing every day. Retired couples and singles alike will quickly become very unhappy once they run out of things to do.

Having ideas in your head about what to do in retirement is one thing; however actually doing them is another. Some experts are suggesting retirees have a day to day plan on what they want to do and even seek an adviser leading up to retirement. You will never be as busy as you were pre-retirement so it’s important to map out ongoing hobbies, part time work and social events before embarking on retirement.

Retired husband syndrome
Many couples get very excited about retiring together, travelling the world together and spending a lot of time together. If this is you then consider the fact that you and your other half may have been together for the past 30 years working full time. Aside from weekends and holidays, you never have to see each other for more than a couple of hours in the morning and night. Now all of a sudden you see each other 24 / 7 and may even start to discover that you can’t stand being together for a prolonged period of time. Determining your own hobbies, goals and friends will assist to avoid “retired husband syndrome’. Again, seeking help from an adviser may also assist in preparing you and your loving partner for retirement.

Not having enough money to fund retirement
Once retired you might have the goal to travel, see the world and complete your bucket list, unfortunately you might not have the funds to do so. Travelling can become very costly. A single international trip can set you back several thousand dollars if not more. By the time your second trip comes around you may find that your retirement funds are not adequate and you’ll need to start tightening the belt. Having a good financial planner early on can prepare you and set realistic goals for your retirement. This way you will have a clear expectation of what you can afford in retirement and prevent any nasty surprises once you’ve retired.

Entitlement to social security
At the moment the Australian pension age is age 65.5 and increasing with each year. During retirement some retirees aren’t aware of what social security benefits they’re entitled to. Even if you are receiving funds from your Superannuation benefits, you may still be entitled to a government age pension (subject to the income and asset tests). Having a good financial adviser by your side will ensure you’re kept up to date regarding any social security payments you’re entitled to.

Losing your identity from not being at work
For those of us who are passionate about our profession, this becomes our identity. Anytime your friends or family think of Engineer, Accountant or Doctor, they think of you. So it’s no surprise that once you retire you may feel like you’ve lost your identity, which may lead to discontent and even depression. Without the daily interaction of your work colleagues your mental and even physical health may start to deteriorate. Retirees who are not very active tend to decline rather quickly mentally and physically. Joining up to the local gym, taking up classes and just continuing to meet new people will have a longer lasting effect for you.

Financial independence gives you the freedom to make your own choices, speak to the team at JBS to start your retirement journey today.

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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 –

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 –

I’m one of those people that love to make others happy, especially my wonderful husband. I’ve written before about how he is a massive Arnold Schwarzenegger fan and this year will be his 70th birthday (Arnie…not my husband).  Anyway, I thought that as a fantastic wife, I’d organise for my hubby to go to Austria, Arnold’s birth country, to celebrate Arnold’s birthday at his childhood home that has now been converted into a museum. Now don’t worry, this blog piece isn’t going to be all about Arnie so you can keep reading. It gets better I promise.

What I actually wanted to write about was the process of how I did this. We have two (2) small kids now both at schools, a sizable mortgage (like everyone), our normal expenses and a few unexpected ones too. But what made this doable was deciding to do it. I’ve got the flights booked and paid for, accommodation all booked and deposits made, I just have transfers between places to organise and pay for. But how on earth did I find the casholla to fund it all – short answer is “I have no idea” but the long answer is that I decided that hubby should go. The timeframe was already set for me as everyone knows that Arnold’s birthday is the 30th July, so next was to get the money together and once you’ve decided to do something, the world moves in mysterious ways and it happens. It also happens through savings, selling unwanted stuff, birthday and Christmas presents, but because this was a priority to me, it happened.

Looking back in my life, there’s been a number of achievements like that. While I haven’t actively decided and written down specific life goals, I have decided the next thing that I want to do to the house, or with the kids or for my family. I’ve always got something on the go. The last major thing was fake grass in the backyard that set us back a bit, but I found the money as I knew I wanted it before Christmas a couple of years ago as I was hosting the festive celebrations and thought it would look nice for my guests. Before that I hated having lights on in the middle of the day but my kitchen was always so dark and thus a skylight was installed after some money management skills were put to work.

I’ve now decided that I need to keep this up. I’ve taken the Christmas break to decide what the next dream I can turn into reality. It seems I’ve already been doing it for a long time and never noticed it. I’ve also worked out that if I don’t have my next goal to work on, that I seem to have no money to do anything. It gets spent and I have no idea on what. I know I’ll never have enough money – most of us won’t – for everything that we want so let’s start focusing on the big things and try to get them. Achieve them. Tick them off a list.

It’s also an infectious process with my mum now taking baby steps to achieving the kitchen she wants. She know that she’ll never have the lump sum to do a massive kitchen reno so let’s plan bit by bit. Monday she had an electric cooktop installed that she’s always wanted. Tick and a step closer to her dream. I’m hoping by writing this blog piece that it will inspire you. What’s your next big ticket goal? I’m already saving for a family holiday to Disneyland in Orlando for my 40th birthday…(a few years away – I know you were thinking I looked too young to be 40 – thank you for your kind thoughts 🙂

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).

Australians are becoming healthier and living longer than ever before, and the Australian population is ageing.  Each year an increasing number of people retire and many rely either in full or partly on the Age Pension to help fund their retirement.  The Australian Government has made some changes to the Assets Test under the Age Pension which came into effect from 1st of January 2017. The aim of the changes is to make the system more sustainable for the future.

Essentially if you’re assessed under the Assets test, that is you receive a lower Age Pension under the Assets test than under the Incomes test, then you may be affected by these changes. These changes are summarised below:

The tapering rates for the Age Pension are also changing, under the current rules, your payment is reduced by $1.50 per fortnight for every $1,000 of assets over the lower asset test threshold. Under the new rules, the reduction is now $3 per fortnight for every $1,000 in assets over the lower threshold.

With these changes, those with lower assets will benefit from a higher lower assets test threshold, but those with higher assets may receive a reduced amount of Age Pension or none at all.

If you are to lose your Age Pension from the 1st of January 2017 you will be automatically eligible for a Low Income Health Care Card, and most likely eligible for a Commonwealth Seniors Health Care Card.

Given the changes to the Age Pension Assets test, now may be a good time to reset your current strategies and look at ways that may help maximise your Age Pension entitlements. There are a few little things you can do to help maximise your Age Pension:
–  Re-value assets – Especially in the case of Home Contents and Vehicles, for Centrelink purposes you only need to record the “Fire Sale” value not the insured value.

–  Gifting of assets – You can gift assets up to an allowable limit of $10,000 and $30,000 over a rolling 5 year period.

–  Superannuation – Money held in the superannuation (accumulation phase) for someone under age 65 is exempt from the Age Pension Assets test. This can be particularly helpful when an individual in a couple is below Age Pension age.

Although the above tips may help to maximise your Age Pension there are traps to each one which need to be considered. JBS are pre-retirement and retirement specialists and may be able to help you maximise your Age Pension.  If you or a friend need help with the changes to the Age Pension feel free to give JBS a call.