Blog

Sep16

Is your family lifestyle at risk?

Wednesday, September 16, 2015

 

 

 

Protect your most valuable asset


With escalating property prices continuing to make headline news, it’s no surprise that many people consider the family home as their most valuable asset. It’s certainly one they fully insure. But, in most cases, your home is not your most valuable asset. It’s your ability to earn an income.

Over your lifetime, your earning capacity could amount to millions of dollars, putting the value of your family home well and truly in the shade.

 

The math on annual income

For instance, let’s imagine you’re currently aged 40 and are married with two kids, earning $150,000 a year as a logistics manager. Now, let’s say that you plan to work until you’re at least 65 years of age, and you can expect annual increases of a modest two per cent each year.

Over the next 25 years, your accumulated earnings will amount to more than $4.8 million to cover you and your family’s lifestyle and living expenses – everything from the mortgage, to family holidays, your car, school fees, and more. 

Yet only one in three Australians has income protection insurance, putting many families at risk.

 

Peace of mind

While injury or illness may stop your income, it certainly won’t stop the bills. Indeed, Australian cities are among the most expensive in the world. This high cost of living, coupled with the fact that Australians have a one in three chance of being disabled for three months or more before the age of 65 provide compelling reasons to insure your income.

 

Affordability

These days, you can tailor income protection insurance to suit your circumstances and budget. If cash flow is a struggle and finances are tight, you might prefer to get income protection insurance through your super fund.  Being insured through super is generally an easy and more cost-effective option although the amount of cover available is limited compared to holding income protection separately.

So if you’re an established professional with a high income, or if you want to maximise your retirement savings rather than dip into them for insurance  premiums, holding income protection insurance outside your super will probably be more beneficial.  It’s also good to know that, unlike other types of personal insurance, income protection premiums are tax deductible.

 

Two other factors influence the cost of income protection:

Waiting period
Policies typically come with a waiting period – and the shorter this is, the more expensive the premiums will be. So if you have enough savings to manage expenses for three or six months, it’s worth extending this waiting period.

Length of benefit period
You can cover your lost salary for a specific length. The greater your benefit period the more expensive your premiums will be.

To find the most appropriate way to protect your most valuable asset, it’s a good idea to talk with your financial advisor.



Sep09

Aussies Trusting Insurance Needs To Super Funds

Wednesday, September 09, 2015

One in five Australians with life insurance inside super say they have stuck with their default cover option because they trust their super fund or employer to know the correct level of cover for them.

The Life Insurance Literacy Gap report found that the majority of Australians who hold life insurance (52.2%) purchased the cover through their super fund with no assistance from a financial adviser. 

When asked why they chose to stick with the default level of insurance coverage, 24.2% of respondents said it “looked sufficient without needing to do any calculations”, 21.1% said they hadn’t gotten around to reviewing their cover, and 12.9% said they trusted that their super fund had chosen the correct level of insurance cover for them.

Other key findings from the survey include:

  • 42.2% of respondents believe that buying life insurance through super is the cheapest way to purchase cover, with or without assistance from an adviser
  • 23.3% of Australians said that if they were to purchase a new life insurance policy or update their existing cover, they would seek advice from a financial planner
  • 27.6% of Australians were unsure about the accessibility of life insurance through super

Too many Australians still believe that financial planners are only for the wealthy, yet nothing could be further from the truth.

We know from the Investment Trends research that regardless of how much money people have, they feel happier and more in control of their financial future if they take the simple step of consulting a financial planner. 

Please contact us should you have any issues or queries.

 

 

 

 

 



Sep02

Market Volitilaty 2015

Wednesday, September 02, 2015

Whilst there has been market volatility which is clearly outlined below, the fundamentals in Australia are still very strong in that we are experiencing minimal inflation, unemployment is low, interest rates are low. The market is now below the 15 times value which it has traditionally traded at, and company profits generally have been strong.

These sudden market downturns should be a strong reminder about investment fundamentals such as, you will you will only crystallise a loss if you are too reactive and move from your existing structure by selling. The Australian share market has averaged over 11.5% since 1901 and we wont expect that to change in the short term.  

Market Overview

The last few weeks - and especially the last few days - have seen an extraordinary level of instability and volatility in global financial markets – especially in equities and some emerging market (EM) currencies.

Key factors behind the market volatility

 
Much of what has taken place in global financial markets in recent days/weeks has been driven by fresh concerns over the pace of growth in China and further volatility on Chinese equity markets. Chinese policy makers appear to be prioritising the slowing economy and stabilising the currency over protecting the equity market – as a result of the apparent lack of immediate policy action on the latter, the Chinese equity market continues to fall sharply and this has led to falls in global equity markets. There have been no other signs of a broader global economic slowdown.

 

 



Aug19

Ways to Weigh a Stock Tip

Wednesday, August 19, 2015

 
Share tips are a great Australian tradition, whether they're passed on by your brother-in-law at a dinner party or by a stranger in an online chat room. The obvious problem for investors is; do you just take the bait.

Always remember, when you buy a stock, someone else has to believe just as passionately that it's a sell," says Elio DÁmato, chief executive officer at financial research firm Lincoln Indicators, which operates the Stock Doctor fundamental analysis subscription website.

Investment require a lot of work and following tips from a workmate is just not going to work. You might get the odd one right through sheer luck, but its not going to make you money in the long run.

DÁmato says investors have to understand the business behind the stock, what it's worth and what its risk level is. But even before that, he says they have to understand what kind of investor they are - a trader or a long-term investor.

For a start, investors have to understand the share price "means nothing", he says, other than what entering the stock will cost you. Nor does the usual method of expressing a stock's risk, its standard deviation measure (volatility of the share price around a mean). "When it comes to risk, the actual risk of an investment is the financial risk of the business.

Best tip is get professional advice. otherwise it is comparable to backing a horse tip at the races.



Aug07

Industry Funds - Generation X

Friday, August 07, 2015

 

Through education especially over the last decade most people understand the importance of superannuation and trying to reach that nest egg for retirement. This financial literacy has seen the Gen X's pay more attention to super at a younger age than previous generations.

In saying that our business is seeing a massive hole in client's knowledge and understanding of what insurance cover held within their Industry Super Fund's. Our goal is for every one of our clients to implement a comprehensive Wealth Protection Plan, this designed to protect your pool of future earnings if a major health event were to take you out of the workplace.

Over the last 2 years we have seen a rapid increase in the cost of cover within industry funds, in some cases a 100-150% increase.

If you have one of the below funds we urge you to contact our office for an obligation free review:

 

Industry Fund Case Study

This was a recent case within our practice, the client has a young family and works in a manual trade. As you can see there is a significant difference in levels of cover against premium.

CBUS Super

Life $416,000
Total & Permanent Disablement $208,000
Yearly Premium $1,489

Our Recommendation

Life $1,220,000
Total & Permanent Disablement $1,220,000
Yearly Premium $1,313

Understanding of our superannuation has increased dramatically over the last decade. We hear the radio ad's telling us we can find your lost super, you should consolidate your super.

When I ask clients what insurance cover they have within their super - they struggle to tell me.



Jul17

A Boost to Small Business - how to benefit from tax cuts!

Friday, July 17, 2015

 

 

One of the most talked about changes in this year’s budget was Treasurer Joe Hockey’s announcement of an immediate deduction for small businesses for acquired assets up to the value of $20,000, a generous increase from the current $1,000 threshold. From July 1, small businesses tax will also be cut to 28.5%.

So why is the government so keen to give small business a boost? And if you’re one of the two million small business owners in Australia, what can you do to make the most of the changes in the lead up to the end of financial year?

Urging small businesses to 'have a go'

 
The $5.5billion small business package designed to stimulate the economy by encouraging small business owners to spend now – anything from “cars and vans to kitchens and machinery,” according to Mr Hockey in his budget speech.

Given 96 per cent of Australia’s businesses are small, they employ over 4.5million people and they are typically able to make purchase and hiring decisions quickly, boosting small business confidence and investment can have a significant and almost immediate impact.

 
read more



Jul10

Trauma Insurance and the Big 4

Friday, July 10, 2015

 

 

 The very first successful human to human heart transplant was performed in 1967 by a team of specialists including Heart Surgeon Dr Marius Barnard. Not only was Dr Barnard part of the team that changed medical history, but he’s also responsible for the introduction of Trauma insurance in Australia.

Dr Barnard noticed that improvements in medical care meant that many more patients were now surviving and recovering fully from their medical conditions but in doing so were suffering from financial stress and the financial burden associated with the cost of treatment and recovery, not to mention time out of work.

So in 1983 Dr Barnard launched an insurance product called “dread disease insurance” which covered four major medical conditions being heart attack, stroke, cancer and coronary artery bypass surgery, also known in the industry as the “Big Four” medical events. 

Whilst the trauma insurance product has evolved significantly since 1983, the Big Four :

  • heart attack
  • stroke
  • cancer
  • coronary bypass surgery

Statistics show that more than $621 million was paid out in Trauma claims in Australia in 2013 *. This is likely to increase with the Cancer Council of Australia forecasting 149,990 new cases of cancer to be diagnosed in 2020, up from just 47,388 cases diagnosed in 1982. 
 

Calculating the exact level of cover needed will be different for everyone. A trauma policy can provide funds to help prepare the unexpected. It can assist by providing funding to pursue top-level medical treatment, travel to seek medical assistance or allow a partner or spouse to take some time off work to provide care. It could also cover medical and treatment costs and out of pocket medical expenses, replace income in the event that you can’t work and go towards reducing or repaying debt.

To work out an appropriate sum insured for Trauma cover, typically a needs analysis will be required to take into consideration your own personal and financial requirements.

 



Jun19

Do you feel like spending?

Friday, June 19, 2015

How consumer confidence influences the economy

When the Reserve Bank of Australia lowered interest rates, Treasurer Joe Hockey immediately urged Australian households and businesses to make the most of this opportunity, and to borrow, invest and spend.  But why does how we ‘feel’ as consumers matter? And why do policy makers and the RBA care how confident we are in the economy and in the financial decisions we make?

It’s partly because consumer confidence is an important economic indicator, and when the ANZ-Roy Morgan confidence gauge fell 0.9 per cent to an eight-month low in April 20151, it created cause for concern. ‘Confidence’ may seem like a vague term for economic data, but the economy is driven by people – and people don’t always act or spend logically. Our decisions are influenced by our emotions and beliefs, and these decisions affect overall economic performance.

What this means is that measuring consumer confidence is a bit like measuring a ‘vibe’. It’s commonly accepted that economic news influences consumer confidence. Negative headlines about the budget or economy can drive confidence down, while good news might drive it up. And sometimes waves of optimism and pessimism are more unpredictable.

In some ways, it’s a self-fulfilling prophecy. If you as a consumer feel optimistic about the state of the economy, you’ll probably feel more secure in your job. You might believe a pay rise is a possibility or that your investments will go up. Confident consumers are more likely to spend rather than save, driving economic activity. Soon it will start to look like you were right to feel optimistic.

But if you feel pessimistic you’re much more likely to hold tight to your money. When confidence is down, consumers tend to spend less and economic activity suffers.

And that’s when policy makers start to move the levers they can to help stimulate confidence. About half of Australians have a mortgage2, so lowering interest rates puts money back into the pockets of a significant proportion of the population. Rate cuts can also stimulate business investment and, by potentially lowering the exchange rate, help local exporters be more competitive. Whether all this happens as a result of the May interest rate cut remains to be seen.

With all this in mind, it’s not surprising the Federal Budget also aimed to reassure consumers3. So, while consumer confidence looked vulnerable ahead of the Federal Budget, it’s entirely possible the new measures announced on 12 May will do the job of raising confidence in ourselves – even if we’re still not sure about the economy.

____________________________________________________________

1 http://www.theaustralian.com.au/business/latest/consumer-confidence-hits-8-month-low/story-e6frg90f-1227313145711
2 http://www.smh.com.au/business/the-economy/six-ways-a-rate-cut-could-affect-your-household-and-business-budget-20150203-134hck.html

3 http://www.businessinsider.com.au/australian-consumers-confident-about-themselves-but-not-the-economy-2015-5

 

 

 



Jun10

Living longer means changes in Super

Wednesday, June 10, 2015

Nothing can be taken for granted when it comes to superannuation and aged pension policy.

Do you know how much money you need to maintain the standard of living you’re used to when you retire?

According to the latest Association of Superannuation Funds of Australia (ASFA figures), a couple currently aged 65 wishing to live a comfortable lifestyle need an annual income of $58,444 – and under the current age pension assets test framework that means they’ll need a joint superannuation balance of at least $510,000.

However, nothing can be taken for granted when it comes to superannuation and aged pension policy. Recent industry discussion about changes to aged pension entitlements and the potential to reform superannuation tax concessions means it’s more important than ever to ensure you are financially self-sufficient for your future.

Why are changes required?


As the Government’s 2015 Intergenerational Report highlighted, Australians are living longer – and this will place increasing unsustainable pressure on our aged pension system. By 2055, the average woman in Australia will live to 96.6 years and men to 95.5, and the gap between life expectancy and the age of pension eligibility is widening. Meanwhile, the proportion of people aged over 65 will continue to grow.

There are several ways to address this. First, it is likely Australians will continue working for longer. Government policy is also likely to continue to encourage more people to be self-funded retirees – while making changes to the system to ensure it is fair for all.

Minor moves for the greater good

While the 2015 Federal Budget avoided ‘tinkering’ with the superannuation system, it did announce stricter asset testing to determine eligibility for the age pension. Now, retired couples with more than $823,000 of assets (excluding the family home) will no longer be eligible for the government pension, and others will have their part pension cut. This means those affected may need to make sure they top up their super – or delay their retirement.

It’s a clear sign that people are expected to take control of their own financial future, rather than depend on public support.

Your superannuation is still the best way to save for retirement, and it will continue to benefit from attractive tax concessions. It may be worth considering putting extra money into your fund to benefit from the effects of compound growth, and new measures to make it simpler to find lost super should help consolidate accounts to reduce costs.

The budget changes will not kick in until January 2017, so there’s still time to re-think your retirement strategy. And if you’re thinking about changing your goals, it’s a good idea to talk with your adviser first.

 



Jun05

Preparing for End Of Financial Year - EOFY

Friday, June 05, 2015

 

With the end of the financial year on our doorsteps, its a good time to reflect on your financial situation.

Here is a list of common changes to consider...

Has your income changed?

The income you received during the year may not be the same as when your advice was put in place. Maybe you received a pay increase, earned some overtime or received other payments such as extra commission or a bonus. How might this affect you?

If you are making salary sacrifice contributions to super

There is a limit, known as the concessional contributions cap, on the amount you can contribute to superannuation each year from your pre-tax income. Contributions your employer makes on your behalf, such as Superannuation Guarantee and salary sacrifice contributions, count towards this limit.
If you have arranged with your employer to contribute part of your salary to superannuation via a salary sacrifice arrangement, it is important to review your contributions to ensure they are still within the concessional contribution cap.

If, for example, you’ve earned more than expected then the amount you have salary sacrificed, together with the compulsory contributions made by your employer, may be in excess of the contributions cap. This could result in additional tax penalties and administration issues. Detecting this before the end of the year can allow time to minimise any impacts.

Making tax deductible personal super contributions

You must meet certain criteria to be eligible to claim a tax deduction for a personal superannuation contribution you make. If you haven’t earned as much as you thought:

You may not to be able to claim a deduction for the full amount of the contribution. You can only claim a tax deduction for your contribution if you have assessable income to offset.

Will your spouse earn less than $13,800 this year?

If your spouse has a low income, you may be eligible to claim a tax offset of up to $500 after making a contribution to their superannuation fund. Tax offsets have a greater impact on your underlying tax liability than deductions because they directly reduce your tax bill dollar by dollar – rather than deductions which simply reduce the income you include in your tax return.

Is your insurance still appropriate for you?

Have any of these happened to you through the year?

  • A change in your salary
  • The purchase of a new home
  • Changes to your home loan repayments – such as an increase in your rate of repayment or lump sum repayments
  • Purchase of an asset funded by borrowings
  • Marriage or divorce
  • New children.

If so, you may need to review your insurance cover.

Do you have a self managed super fund (SMSF)?


You’ll be aware that having an SMSF means you have extra responsibilities as trustee of the fund. As 30 June approaches, two important considerations include:

  • If you are in pension phase, have the minimum pension payments requirements been met?
  • If your SMSF is receiving contributions from an unrelated employer, it must be able to receive contribution information through the new SuperStream data standards. If you have recently changed employers or intend to change employers, it’s important to make sure your fund can receive contributions using the data standards so you are not in breach of your duties.