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Shift to Shares

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ShiftToSharesOver the last couple of years, a lot of Australians have been wary of risk when investing and have invested in cash or term deposits. But the latest figures show that shares have outperformed cash and property, so is it time to think about different investment options?

 

The Reserve Bank of Australia has reduced the official interest rate several times and it is now as low as it was in 2008 at the height of the GFC when businesses such as Lehman Brothers were collapsing. Mortgage holders have been rejoicing, hoping that the banks will pass on some of the interest rate cuts.

Meanwhile, investors with significant cash or term deposit holdings have been experiencing lower returns.

CASH AND TERM DEPOSITS

With the interest rates so low, six month term deposit rate are now sitting at less than 4 per cent. This has fallen significantly from the high of 2008 when they were around 9 per cent. This means that people who are relying on cash or term deposits to provide income or returns have not had as much discretionary income as they would have liked. The predictions are that interest rates will continue to fall, and if this happens, returns from cash and term deposits are going to continue to fall as well.

PROPERTY

Over the last couple of decades, property was a significant way to generate great returns, but after the GFC confidence fell and there were a lot of forced sales. Over the last 10 years, property has only returned 5.5 per cent*. One of the major deterrents right now is that with the taxes and levies on purchasing a property, the cost of buying is around 6 per cent of the purchase price*. Some experts are predicting property growth to slow even more going forward, saying that the late 90s boom was a once in a lifetime high.

SHARES

Over the last five years the share market has been pretty low, it is down a third from their highs in 2007, but when you look at the ten year return rate of shares it has returned 8.7 per cent, which looks pretty good.*

SO WHAT SHOULD YOU DO?

The key is to look at diversifying across cash, shares and property. You need to understand the historical information, your appetite for risk and where you are in the investment cycle. By balancing long and short term investments with your objectives you will be on the path to success.

We would love to talk to you about the different options to find one that suits your needs.

Source : IOOF

* http://www.news.com.au/money/investing/shares-still-beat-property-and-cash-analysis-finds/story-e6frfmdr-1226545416014

Time to reflect

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imagesCA814TBQReady or not, the end of the year is fast approaching and now is the perfect time to start thinking about the year ahead.

 

 

 

In particular, this time of the year presents a great opportunity to meet with us to review your financial strategies and goals.

 

Many people use the Christmas/ New Year period to reflect on the year that has just passed, often in a blur and to begin thinking about the year(s) ahead. In particular, this time of year presents a great opportunity for you to review your financial strategies and goals in preparation for 2014 and beyond.

THE IMPORTANCE OF REVIEWS

Reviews should take place on a regular basis, where you have the opportunity to make informed decisions and factor any changes into your financial plan.

Below is a simple guide to tidy up your finances for the year ahead.

1.         HAVE YOUR KEY FINANCIAL GOALS CHANGED?

Our lives are not constant and our goals change slightly (or greatly) from year to year. Also, major life events such as serious illness, the birth of a child, inheritance, marriage and the death of a parent or spouse can all result in significant changes to our wealth management goals.

2.         PRIORITISE YOUR GOALS

It is important to rank and prioritise goals and decide in what timeframe you want to achieve them. Being realistic about your timeframe is essential to ensuring that your goals will be achieved.

3.         SHORT, MEDIUM OR LONG TERM?

Most industry experts agree that a short-term goal is one that can be achieved within a year or so. Medium- term goals typically require two to five years, and long-term goals usually take longer than five years.

For example, reducing credit card debt is likely to be a short-term goal, whereas saving for a home deposit would often be a medium-term goal. Depending on your age, providing for retirement is a long-term goal.

4.         IF YOUR FINANCIAL GOALS HAVE CHANGED, HOW WILL THIS AFFECT YOUR FINANCIAL STRATEGY?

This is where the advice of a financial adviser is critical. An adviser has the tools and knowledge to create projections that take into account changes to your goals and changes to your timeframes for achieving them. These projections will help you to see where your plans for savings, investment contributions or assets may need updating.

5.         BE SAVVY

Make sure that your investments and level of protection support your level of risk and your goals. An adviser can develop a tailored analysis that best suits your individual needs and provide ongoing portfolio advice.

Reflecting and thinking about your financial position, as well as setting a clear path, is critical to making sure you can reach your goals. You don’t have to wait until the first day of January to review your financial situation. Contact us today so that you can get the help you need to achieve your “New Year” resolutions.

Source I Zurich

Pre-retirement catch-up strategies

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4-ways-to-catch-up-on-your-retirement-savingsMany people become concerned later in their working lives that their superannuation savings may not be enough to give them the retirement lifestyle they had hoped for. If you think you may have left your super run a little late, consider these catch-up strategies.

 

Salary sacrifice into super

Where your employer allows it, you should consider making additional contributions to your super fund directly from your pre-tax salary. You can contribute up to $25,000 per year and only pay the concessional rate of tax – up to just 15% compared to your marginal tax rate. However, because the Superannuation Guarantee contributions made by your employer on your behalf also count towards this limit, you need to make sure you don’t exceed this limit as you may incur penalty tax.

 Spouse contributions

By contributing to a superannuation fund for your spouse, you can boost your joint retirement savings, maximise your retirement income and pay significantly less tax. If your spouse or partner is on a low income you may also be able to claim a generous tax rebate. Most importantly, splitting your super gives you a more tax-effective joint income in retirement.

 Super investment strategy

If your super is invested in cash or other conservative investments, you may be able to increase your investment returns with a higher proportion of growth investments, for example shares. A difference of just 2% pa can make a vast difference to the sum you have at retirement.

 Check how your super is invested and with the advice of your financial planner consider an investment strategy that will build your super savings faster. 

Shares into super

Where you have invested in your own shares then you may be able to move them into your super fund. The primary benefit is the lower tax on investment earnings within the tax-effective super environment – a maximum of 15% instead of up to 46.5% outside super – which means your investment capital will grow much faster.  

Save sooner, save more

There are of course other ways in which you can build up assets for your retirement, although super is generally more tax-effective than most. Whichever way you save, don’t put it off or you will reduce the benefits of compounding investment returns (interest earned upon reinvested interest).

 Take a close look at your budget and assess how much you could put aside, then contact us to discuss re-retirement catch-up strategies.


Source | IOOF

Becoming Money Smart

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Smart-Money-300x300Results from a recent survey on financial literacy in Australia revealed that one in every three people find dealing with money stressful, even when things are going well.

If this sounds a little like you, you’re not alone. Financial matters can sometimes seem overwhelming and it may be difficult to know where to begin.

The key to overcoming this stress is to boost your financial IQ so you can make informed judgements and effective decisions regarding the use and management of your money.

A great place to start is by visiting the MoneySmart website (www.moneysmart.gov.au). Run by the Australian Securities and Investments Commission (ASIC), the MoneySmart website offers free, independent information to help everyday Australians make smart choices about their personal finances.

The website provides tips on managing and investing money, borrowing and saving, superannuation and retirement; plus the latest consumer finance news and scams to avoid. There are also handy calculators

to check your financial health status and forecast your financial position based on a variety of scenarios.

Taking control of your finances doesn’t mean you have to go at it alone though. As your financial adviser, we can provide you with guidance to help you set your financial goals and reach them sooner. This may involve providing advice on how to:

  • Manage debt
  • Create a savings plan
  • Invest for wealth
  • Achieve tax savings
  • Make the most of your super, and
  • Plan for your retirement.

Why not take the next step in your financial health by speaking to us so we can help you further.

Source | IOOF

Wealth Health Checklist

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Wealth-CheckAre you keeping your finances healthy by doing the right thing at the right time? Taking the best action at the optimum time can be crucial to your financial future.

 

 

Accumulators (aged 25–45)

Start a monthly investment plan

  • ‘Pay yourself first’ rather than create unrealistic budgets.
  • Salary sacrifice into super while other financial obligations are low and stop when current needs are more important.
  • Use any pay rises to fund your regular savings.
  • Be clear about what you’re saving for and the best structure and investment options for that.

Control debt

  • Reduce unnecessary spending.
  • Pay off the credit card, it’s probably costing you more than 15% pa interest.
  • Consider consolidating credit card debt into a personal loan and potentially paying less interest. If you do this, resist the temptation to accumulate more debt into your credit card.

Check out the government co-contribution

  • If eligible you could get up to $500 added to your super for free every year.

Consider using a mortgage offset account

  • This could reduce your loan interest while giving you access to the cash if you need it.
  • Make sure you have sufficient death, disability and income protection insurance.

 Builders/Pre-retirees (aged 45–65)

Stay cash flow positive

  • Live within your means.
  • Reduce the mortgage and other non-deductible debt such as credit cards and personal loans. This may free up cash flow for other investment opportunities.
  • Consider part-time work for a non-working spouse.

Increase contributions to super

  • At age 50, the concessional (pre-tax) contribution cap is $25,000.
  • Consider transferring non-super assets to super. You’ll need to take into account any capital gains tax on the transfer and the super rules covering what assets you can transfer.

Split income where possible to save tax

  • Consider investing money in the name of the spouse who pays the lowest tax.
  • Consider splitting super contributions between spouses. Up to 85% of concessional contributions within the contribution cap, including Super Guarantee and salary sacrifice contributions, can be split.

Look into a pre-retirement pension if you’re aged 55 or more

  • Consider salary sacrificing, and drawing down regular income from your super to replace the lost income – this saves tax and builds your super without affecting your cash flow.
  • Make sure you have sufficient death, disability and income protection insurance. Also consider taking out trauma insurance.

Retirees (aged 65+)

Ensure you don’t run out of money

  • Understand your plan for spending in retirement – set a budget for essential expenses and additional lifestyle expenses and how you’ll fund each.
  • Ask yourself if you’ve invested your assets too conservatively – maintaining and growing your capital today can help you provide the income you’ll need in the future.
  • Consider whether you need to downsize your home.
  • Investigate how your income and assets affect your Centrelink benefits. Simple changes can help ensure that you maximise your total income.
  • Consider setting up investments to help grandchildren with education costs, a deposit on their first home or an investment nest egg. You’ll need to include this in your retirement spending or estate plan.
  • Think about aged care now. When the time comes, decisions often have to be made very quickly, so plan ahead for which care options you’d like to use and how they’ll be paid for.

Review your estate plan

  • Consider a Non-Lapsing Death Benefit Nomination for your super or a reversionary beneficiary for your pension.

Ensure your Wills and enduring power are in order.