Regarding preparation for retirement, the terms ‘create,’ ‘protect’ and ‘enjoy’ encompass a variety of challenges; however, the acknowledgement of these challenges, and the subsequent methods of dealing with these problems can lead to success in the future.

The following two tables which show the lump sum requirements for both couples and singles when taking into account lifestyle upon requirement.

According to “The 2017 ASX Investors Survey,” the 2013/14 mean superannuation balances for households and individuals were $355,000 and $214,000 respectively; these figures, coupled with the data above, are indicative of some of the problems faced regarding ‘enjoy,’ as super balances somewhat dictate your quality of life.

Therefore, in order to ensure that enjoyment occurs upon retirement, creating wealth is imperative. The same ASX report states that 60% of Australian adults participate in at least one form of investment, however, the lack of activity by younger generations and engagement with their super contributes to lower super balances, across the board.

A global survey in “The Future of Retirement” report released in April 2017 by HSBC; indicates that only 34% of working aged people believe that they will be financially comfortable in retirement, whilst 58% thought that they will continue working to some extent in retirement because they have to.

In Australia the Superannuation system forces people to start saving for their retirement from an early age, however it still doesn’t ensure that these savings are working to their full potential.

These statistics further highlight the importance of seeking financial advice and putting a retirement plan in place from an early age because in our experience, clients who engage with an adviser will significantly improve their chances of being able to achieve your goals and enjoy their retirement.

At JBS, we run a Cash Coach and Retire Right program to specifically address these needs and help you to achieve the success you desire upon retirement.

– Richard Smart –

Are you coming up to retirement? During the December 2015 quarter, the Association of Superannuation Funds of Australia (ASFA) issued new figures, which showed an increase in the costs of retirement. The average cost of retirement for people retiring at age 65 is approximately $59,236 per annum for couples and $43,184 for singles for a ‘comfortable standard of living’, both up 0.5% from the previous quarter.

So then the question is raised, how much money do you need when you retire? It seems to be the age old question. Based on the figures released by ASFA, an average single retiree would require approximately $545,000 in super benefits in order to fund their retirement and couples would require around $645,000. But what do all these numbers mean to you and your retirement? Well, really all these numbers are just that, ‘numbers’. It’s important to understand that a comfortable lifestyle for one person may not be the same for the next.  Some retirees may require $100,000 per annum to live comfortably and others may only require $30,000.  One thing that is certain however is thecost of living will go up in the future and more importantly you will have to prepare for it.

Instead of worrying about the large sums of money required to retire on, it’s more important to have an understanding of the level of income you require once you’ve retired and work out from there how much you require in order to retire comfortably, taking into account your assets and other entitlements such as the Age Pension. A good starting point to determining how much you’ll need is to take into account your current living expenses. A common mistake here is most people will use the “off the top of my head” figures to determine expected living expenses. The issue with that is, often we under and over estimate expenses, which leads to very misleading results.

At JBS, we use technology to assist us to determine the exact expenses of our clients. This results in both efficiency as clients’ spend less time having to deal with their budgets and at the same time we attain very accurate information on our client’s actual living expenses. Once you’ve determined your living expenses, the next step is to review whether certain expenditures you’re paying today will still be payable once you’ve retired. Often these expenditures include your mortgage repayments, which we all want repaid as soon as possible, and work related expenses, such as commuting costs. Once retired, there’ll be of course no need to pay the tax man for income generated from employment and savings you’ve been putting away each month for retirement will also cease. It’s important that we capture all these points in order to get an accurate figure of your expected retirement expenses.

Take this example for instance.  Say you’re a 45 year old male, you’ve done your sums and calculated you’ll require $40,000 per annum in retirement. How do you then determine the following?

–   How much do you require to put into super each year to meet your retirement goals?
–   Will your super benefits be enough to fund your retirement expenses until your life expectancy?

–   When is your life expectancy?

–   How often should you review your retirement benefits to ensure you’re on track to meeting your goals?

From what you’ve read so far, we’d imagine you’re beginning to understand the complexity in determining how much you require to retire on.  The main point we wish to highlight is that you need to take time and be realistic with your budgeted retirement expenses. Know what your money goes on now (before your retire) so you can determine if you will spend the same in retirement. Doing all this yourself can become very complex and seeking professional advice is the best way to get an accurate estimate.  Having a professional on your side means there’s someone there to assist you in achieving your retirement goals by implementing different strategies to suit your needs. And more than anything, you don’t have to worry about your retirement as you’ve outsourced that!

I started gardening four years ago as a way of relaxing. What started as one small garden bed in the backyard quickly turned into me redesigning the entire front yard! My favourite time of year has to be end of winter through to spring. That is when all the bulbs that are hidden in the various garden beds come to life again and dazzle us with their colour.

In order to prepare for our spring garden we need to start planning now in January. I have learned that with gardening, I am always focussed at least 6 months ahead. Spring bulbs need to be planted in February/March, the exception being Tulips. Tulips need to be placed in the fridge for five weeks and then can be planted in May. It sounds odd, putting bulbs into the fridge before planting, but they need to be chilled in order to flower.

This year we will be shuffling bulbs around, what I refer to as my ‘Bluebell garden’ will be dug up and halved to make room for more Tulips. The Ranunculus and Anemone gardens will be added to as well. The hardest part is limiting myself each year with how many bulbs to purchase! It is very easy to get carried away with ideas about what I want to add, I have to remember that it is very important to look after what is already there, the bulbs need fertilising and fresh compost every year. The same principle can be applied to retirement savings, it is important to look after what is there; because once it is gone it is costly to start again.

It is always sad when the spring flowers start to fade and the garden looks lifeless once again. But, then I remember that summertime means David Austin Roses will bloom, colour will be restored and the next project begins: planting sunflower seeds!

One of the major concerns for people when they retire is, ‘how long will my savings last in order to support my lifestyle of choice’? This is what we often refer to as ‘Longevity Risk’, or the risk of outliving our money.

We are advised of the importance of putting money away into savings or superannuation to ensure that we are able to enjoy our retirement. However there is another perspective to consider – your health.

We need to take one step back and remember our health in retirement is just as important as our wealth. In the same way that we are diligent about saving for retirement while we are working, we need to also focus on our health during our working life.

A person’s health experiences later in life can be affected by their behaviours during their younger years.

So, you may ask ‘what is the health experience that could reduce longevity risk’? It could have something to do with our growing waist-lines:

More than five million Australians are obese;

– If weight gain continues at current levels, by 2025, close to 80% of all Australian adults and a third of all children will be overweight or obese;

– Obesity has overtaken smoking as the leading cause of premature death and illness in Australia;

– Obesity has become the single biggest threat to public health in Australia;

– On the basis of present trends, by the time our kids reach the age of 20 they will have a shorter life expectancy than earlier generations simply because of obesity.

Dr. Joanna McMillan a leading nutrition and healthy lifestyle expert was recently speaking about the obesity epidemic and emphasised the need and importance of a balanced diet and the dangers of a sedentary life.

Inactivity is the second silent killer which can contribute to a person’s shortened life expectancy. Evidence is emerging that sedentary behaviour, such as sitting or lying down for long periods of time is not good for your health. Technology has made our lives easier, but also made us lazy. There are fewer of us doing manual work, many of us have jobs which involve very little physical effort. As a general guide, we should be looking to achieve 150 minutes of moderate intense physical activity in a week.

Tips for a healthy and happy retirement:

– Maintain a balanced diet, including vegetables and legumes, fruit, bread, cereals, rice, pasta and noodles, lean meat, fish, poultry, eggs, nuts and tofu, milk, yoghurt and cheese;

– Try to limit fizzy drinks, alcohol, chocolate, chips and fatty fast foods;

– Stay active – try to get 30 minutes of physical activity every day;

– Get involved with a social group or sports club, this can have many benefits – meeting new people, learning a new skill and overall keeping your mind and body active.

Whilst a planner can assist you with building a sufficient amount of assets to fund your retirement, your health is about you.   You are the one who has most control over a healthy lifestyle.  So get out there, get active, and enjoy life to the fullest, for the longest amount of time possible.  That’s what retirement is all about!

For the majority of us leaving our office desks forever is something we can only imagine about as it’s so far away.  For the luckier ones that are much closer to retirement this can be a time of excitement and relaxation.  Spending our days at the golf course or with our community groups, families and friends all day every day sounds like heaven on earth.  The transition from full time work to full time play however may become unbearable.  Here are 5 facts about retirement that you should be looking at before retiring.

1 – One of the first things retirees discover about retirement 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 routine day after day.  Couples and singles alike will quickly become very unhappy once they run out of ideas on what to do with their time.  Having ideas in your head on 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 a therapist 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.

2 – Retired husband syndrome – Many couples get very excited about retiring together, travelling the world together and spending intensive 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 prolong period of time.  Each of you having your own hobbies, goals and friends will ensure you don’t spend intensive time together.

3 – 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 you don’t have enough funds anymore, so eating out may be out of the question and this year you won’t be able to travel overseas to see your grandchildren.  Having a good financial planner early on can prepare you and set realistic goals for your retirement.  This way at least you have a more clear expectation of what you can afford in retirement and prevent any nasty surprises once you’ve retired.

4 – Entitlement to social security – At present, the Australian pension age is age 65, which is subject to rules, regulations and changes in the future.  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 government age pension (subject to income and asset tests).  Having a good financial adviser will ensure you’re kept up to date regarding any social security payments you’re entitled to.

5 – 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 affect for you.  After all, we all need something exciting to look forward to in the future.

If you are one of the lucky ones thinking about retirement, make sure you talk to the team at JBS so there are no nasty surprises.

Do you hold some of your cash in a term deposit? Maybe you have term deposits in your self-managed super fund? Or do you plan on investing in one in order to earn a higher rate of interest than your standard savings account? Well, recent changes to banking legislation may affect you and how you save your money.

The key difference is that banks will now demand at least a 31 day notice period if you try to withdraw your money early from a term deposit. This means that if you want to quickly access the cash you have locked away, you cannot just pay a fee and lose part of your interest, but will have to wait at least a month as well.

These new requirements were introduced on 1 January 2015 in response to the new “Basel III Liquidity Reforms” which demand higher levels of liquid assets to be held by banks in order to provide protection against short term events that may prove a threat to the bank’s ability to pay its obligations, such as a bank run. The reforms expect banks to hold enough high quality liquid assets (such as cash) to cover total net cash outflows for up to 30 days and, in order to achieve this, the banks have applied these new restrictions on term deposits, ensuring that the money held as term deposits does not count as part of the total net cash outflows.

So what does this change for you?  In most cases this should, hopefully, not cause much concern. If you intend to hold your term deposit for the full term until maturity, this legislation will not cause anything to happen differently. If you believe, however, that you may be relying on accessing the funds in your term deposit before the term deposit matures, then you should consider alternative arrangements such as holding part of your funds in a savings account. While some banks have stated that they would relax this requirement in the case of financial hardship, this would be reliant on their assessment.

If you’re concerned about what this change may mean for your savings plans or your retirement savings then please contact the team at JBS to discuss your personal situation.

Superannuation, it’s a bit of mine field when it comes to knowing how to maximise your super contributions. But don’t worry, we’ll break it down for you:

Maximise concessional superannuation contributions

Concessional superannuation contributions for the 2014/15 financial year are limited to $30,000. However, if you were aged 49 or older on 1 July 2014, a transitional limit of $35,000 applies giving you the opportunity to maximise your concessional contributions before the end of the current financial year.

Claiming a tax deduction for personal superannuation contributions

If you’re intending to claim a tax deduction for personal superannuation contributions, a “Notice of Intention to Claim a Tax Deduction” (s.290-170 Notice) must be lodged with your superannuation fund before any one of the following events occurs, whichever is first:

–    lodgement of the income tax return for the financial year in which the tax deduction is being claimed
–    commencing a pension
–    withdrawing superannuation benefits
–    rolling over your superannuation to another superannuation fund

Maximise non-concessional contributions

Non-concessional contributions are personal contributions made from after-tax income. For the 2014/15 financial year, non-concessional contributions are limited to a maximum of $180,000. If aged 64 or under on 1 July 2014, you’re able to bring forward up to three years’ worth of contributions (up to $540,000) provided you haven’t done this previously.

Making large non-concessional contributions is a big decision and advice from a financial planner is recommended before any contribution is made.

Salary sacrificed contributions

Foregoing part of your salary in favour of having additional concessional contributions made to super by an employer may deliver tax advantages.

Existing salary sacrifice arrangements should be reviewed on a regular basis, at least annually. Reviewing a salary sacrifice arrangement before the end of the financial year and amending for the following financial year represents good planning.

Your superannuation contributions at 65

If you’re aged 65-74, your superannuation fund is only able to accept contributions if you have been gainfully employed or self-employed for a minimum period of 40 hours, worked  over not more than 30 consecutive days, in the financial year in which the contribution is being made.

If you’re approaching 65 and not working, consider making superannuation contributions before your 65th birthday.

Government co-contributions for low income earners

If you earn less than $49,488 a year and make a non-concessional contribution to superannuation you may be eligible to receive a Government contribution of up to an additional $500. The actual amount, and eligibility for the co-contribution, depends on a number of factors including the proportion of total income derived from employment, age and taxable income.

Spouse contributions

Where you make a non-concessional contribution to superannuation for your spouse, you may be entitled to receive a tax offset of up to $540 if your spouse has an income of less than $10,800. The tax offset reduces if your spouse’s income is between $10,800 and $13,800. You will not receive a tax offset if your spouse’s income exceeds $13,800. The maximum offset available is 18% of the contribution made, subject to a maximum offset of $540.

Spouse contribution splitting

Superannuation laws allow for a person to split their concessional contributions with an eligible spouse to build up retirement savings for the other. Up to 85% of concessional contributions made in the 2013/14 financial year may be split with a spouse prior to 1 July 2015. Splitting superannuation contributions allows for couples to balance their superannuation savings between partners.

Life insurance held in super

On 1 July 2014, restrictions came into effect in relation to the types of insurance held through superannuation.

The new restrictions affect insurance policies that provide for the payment for an insured event that is aligned to a superannuation condition of release. In essence, the only new policies that can be taken out through superannuation after 1 July 2014 are those covering the following events:

–    death
–    terminal illness
–    total and permanent incapacity – any occupation
–    temporary incapacity

The new restrictions mean that you will no longer be able to take out a policy with your superannuation fund that covers trauma insurance, total and permanent disablement – any occupation and income protection insurance that provides ancillary (such as rehabilitation) benefits in addition to income replacement. Policies taken out prior to 1 July 2014 will not be affected by these new restrictions.

If you are a Gen X or Y retirement is an average of 33.6 years away, for some it will be up to 50 if the retirement age is increased.  Not only is the age at which we retire creeping up but the time in retirement and money required to fund it growing too.  Forced super contributions have not been increased in line with this growth and as a result there is now a broadening gap between what one has saved for retirement and their actual needs.

Recent studies have shown that for a male to have a truly comfortable retirement he needs to contribute 17.5% of his annual salary to super until retirement and for females the figure is 19.5%.

9.5% of that is currently taken care of by your employer and the rest is up to you!  Is it really feasible to contribute 8-10% more of your income into super?  Let’s put it into dollar figures to make it simpler.  For an individual earning $60,000 this equates to an average $103 per week of extra savings.

If you committed to that saving plan at age 30 by the time you reached 40, it would have made an average $79,262 increase to your super balance.  If we extend that out to retirement (age 70) we are looking at a $1,041,108 difference.

What would you give up for an extra million dollars in retirement?  Your morning coffee? Buying lunch at work? Using non-preferred bank ATM machines?  Combining these simple techniques could easily get you on your way to saving $100 per week.

Unfortunately what we find for the Gen X & Y demographic is that if they cannot see an immediate benefit for themselves, they will not give it much attention.  They are extremely quick to take on debt to satisfy a want for a new car, piece of clothing or electronics, yet extremely slow to put any money away as they cannot see any present day tangible benefit.

It all comes down to education, JBS can assist the Gen X & Y’s with their financial needs. It’s about taking control today and you will thank yourself when it comes to retirement.  Start with what you can afford, get yourself into a saving rhythm and mindset that is sustainable and doesn’t impinge too much on your lifestyle.  Keeping your savings plan manageable is key to its success.

For every 1 dollar saved before age 35 you will have 7 more in retirement.  Would you turn down a 600% return anywhere else?

For some, knowing that one day we get to retire and never work again keeps us going. Knowing that we’ll one day have all the time in the world to do what we want, when we want. But what will actually happen to our money in retirement? How does it all work?

What happens to your super when you retire?
A vital element of retirement involves choosing how to use your super savings. To set yourself up for retirement and providing your future income, you will need to make decisions regarding how you are going to invest your funds, when it will begin, how much you wish to receive and how often you will need to receive payments.

When can you access your super?
While Preservation rules may allow you to access a portion of funds early, to access your superannuation benefits for retirement you need to meet a condition of release which includes:

• Reach Preservation Age which is anywhere from 55 to 60 depending on your date of birth.
• If aged 60 to 65, you must have ceased employment and if you are under age 60 there is a further requirement that you never intend to be gainfully employed for 10 or more hours a week.
• If you hit age 65, there are no restriction and you have full access to your funds.

What retirement options are available to you?
Retirement shouldn’t mean – Now I can access my funds so give me my lump sum. There are many options available that need consideration to ensure that your entire retirement life is taken care of.

• An Account–based pension (previously known as an Allocated Pension) allows you to invest your funds the same as you would under a super plan, however pays a regular pension payment from your balance. Any funds remaining after your passing forms part of your estate.
• An Annuity is an investment that is commenced with a lump sum and provides the investor with a guaranteed income for specific term but you have no say in the investment of funds and you may forfeit any balance upon your death after a qualifying period.
• Lump Sum Withdrawal to live off the balance of funds.
• Leave it in Super. You can now leave your benefits in superannuation (accumulation phase) indefinitely and there is no requirement for withdrawals to be made.

What about tax?
Tax should be a big consideration in retirement. It seems to be a common belief that once you retire, you don’t pay tax but that’s not necessarily the truth.

Tax laws still apply to everyone regardless of your age. If your 100 and have taxable income, then you should be lodging a tax return. But the way you structure your funds in retirement could dramatically reduce your tax bill.

For each of your retirement options there are tax consequences which are explained in further detail in the full article.

So with all these options and considerations, what should you do with your super at retirement? You should seek the advice of a good financial planner as you could be considerably worse off by not knowing what you can do and what it will mean for you and the future generation. Retirement should be about enjoyment and family not worry about whether your funds will last and pension payments.

Let JBS do the worrying for you.
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