Bronson Financial Services » retirement planning

Australian Share Market Update, March 25, 2011

admin — Sun, 27 Mar 2011 23:30:13 +0000

The All Ordinaries index gained 46.1 points to end the day 1% higher at 4,840.3.

BHP Billiton Limited (BHP) gained 0.1% to close at $44.76 after announcing US$7.4 billion (BHP Billiton share US$6.6 billion) of capital investment to continue production growth in the company’s Western Australia Iron Ore operations.

Major stock rises:

Alumina Limited (AWC) $2.39 4.37%
Transfield Services Limited (TSE) $3.21 4.22%
Primary Health Care Limited (PRY) $3.00 3.45%
SIMS Metal Management Limited (SGM) $17.16 3.12%
QBE Insurance Group (QBE) $17.60 2.98%

Major stock falls:

Metcash Limited (MTS) $4.01 -1.47%
Myer Holdings Limited (MYR) $3.17 -1.25%
Mirvac Group (MGR) $1.24 -1.20%
Incitec Pivot Limited (IPL) $4.30 -0.92%
David Jones Limited (DJS) $4.67 -0.64%

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

Please Note:

This publication has been prepared to provide you with general information only. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. In preparing this information, we did not take into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, you need to consider (with or without the assistance of an adviser) whether this information is appropriate to your needs, objectives and circumstances. This information is provided for persons in Australia only and is not provided for the use of any person who is in any other country.

Changes to bank lending

admin — Wed, 09 Mar 2011 04:36:31 +0000

Early in February a change to mortgage lending rules came in that I think requires a bit of discussion – its also worth bringing up as many people still don’t get that bank lending practices are a key determinant in the growth of the value in residential property.

Under the changes, anybody over the age of 40 who applies for a mortgage on their principal place of residence will need to demonstrate how their mortgage will be fully repaid by the age of 65 either from their superannuation (not a very good move in my opinion) or from other assets.

The new lending guidelines mean that anybody who cannot show how they will repay the loan without selling their house by age 65 will not be approved for a loan.

The impact of this is that people in their 40’s tend to upsize to bigger houses etc, many taking on 25 year loan terms because it makes the mortgage more affordable. This option will may no longer be available.

A person of 45 will need to demonstrate that they will have their loan paid off in 20 years – maximum, a 50 year old in 15 years. I think this may reduce the number of people looking to buy, less buyers may lead to price pressure, hence lower growth.

Actually if memory serves correctly back in the day when bank managers knew your name and your details, this was how lending was done. Deregulation and competition changed this, loans were given out to all and sundry, property prices went through the roof (as did other assets) and we had a little thing called a global financial crisis.

I do not think this will prevent us from another “GFC” type event, but sensible lending guidelines should help, but I think there may be a bit of pain for many along the way.

I also suspect that many people who thought their house would be used to help fund their retirement living costs may need to re-evaluate, particularly if property values growing at the levels we saw from 2000 – 2005 are the basis on which these plans have been made.

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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Aged Care and Family Communication

admin — Thu, 27 Jan 2011 02:38:49 +0000

This week we did some work with a family where the mother of the family, at the sprightly age of 90 has just decided to move into a residential aged care facility.

Sometimes called nursing homes, it’s not until you are faced with helping a person make the transition from independent living that you actually appreciate the complexities and mystery that surrounds what I think is one of the more complex areas of financial planning.

You see when a person makes the decision (or in some cases has it made for them) to move into a facility, the actions they take in that process can have a number of financial impacts. These depend on the level of care the person needs – whether a bond has to be paid, what daily fees etc will be paid.

This is an area that you really should talk to your financial planner about before embarking on this path. This is not what I wish to cover today.

One of the hardest things it seems to me is the decision for a person to go into aged care. What really hit home for me was that after 40 years plus living in the one house, this lady had two days to pack up her memories and make the shift from independent homeowner to aged care facility resident.

Leaving a house of possessions and memories and moving into a bedroom (the facility is new and quite nice, but still after 4o years in your own home….) can be a major shock to the system in itself.

But let’s get back to the 2 days issue. This decision was really a few years too late. There have been a lot of family arguments about the family house, who gets what and how it’s done. Brother is against brother and its all getting messy.

The solution – family communication. This is easier said than done, after all it’s just not right for a child to ask their parents about their financial situation, or is it.

This is a conversation all middle aged children need to have with their parents – who gets what, when the plug gets pulled and at stage of life do we make the move from independent living and on what terms and conditions. Ignore this conversation at your peril – it’s only a matter of time before you have to act.

Finally go hug your children, tell your parents you forgive them for your childhood (only kidding), life is fleeting and as this lady said to me, those 40 years have gone by so quickly and the decision to move had to be made so fast that they couldn’t say a proper goodbye to all their friends in the area.

Make sure you and yours don’t ever miss the chance to say goodbye.

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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Attitudes towards Superannuation

admin — Thu, 27 Jan 2011 02:34:56 +0000

Recently the Australian Institute of Superannuation Trustees (AIST) commissioned a report into attitudes on superannuation.

A list of the key findings and a thought or two are listed below:

35% of those surveyed thought paying off the house produced a much better return than superannuation;

Many Australians do see their house as a cashable asset they can sell to fund their retirement. The reality is that many of those who do downsize to fund their retirement expenses find that they cannot find a house or suburb of similar standing to that to which they had become accustomed – they end up having to reestablish themselves in a community they do not like.

41% of respondents thought the Age Pension would not exist when they retire;

If that is you I hope you have made provision for your retirement – even I think this will be the case – one day, just not sure when.

66% believe that the government would change the rules by the time they retired;

Many people tell me that they won’t invest into super because the government always changes the rules. Let’s look at a few of those changes – the Superannuation Guarantee levy – that’s good, Tax free after 60 – that s great, Preservation – makes sure it is there for its original purposes, The tax on contributions – can’t fathom the logic behind that – let’s hope that the changes that people think will happen relate to the contributions tax. It’s hard really to find fault with many of the changes – super really is super.

30% were worried that their fund would go broke and their nest egg will be gone;

So what are they doing about it? Diversification could probably help in this regard, as would paying a little attention to your investments.

30% said they knew nothing or very little about their superannuation;

Probably the same people who complain about government being involved in everything they do and then complaining that government needs to do something because they didn’t.

Only 6% were confident they would have enough to retire on;

And probably expect someone else to take responsibility for their inaction.

20% don’t know how much superannuation they have;

I really wonder what these people think will happen when they retire – this is really scary, we as individuals and adults need to be responsible for our own financial well being.

27% could not imagine the day they will stop work.

Me neither, but it’s going to happen one day – either we die, get made redundant or too sick to work, but everything ends one day.

I apologise if any of this seems harsh, but really our laissez faire attitude while endearing is a recipe for disaster especially when it comes to taking responsibility for our own retirements. It has been said many times that the average person will live about 20 years in retirement while their investments will live about 3 years – I hope you are not one of the people destined to a life of poverty after all those years of hard work.

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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Superannuation – Who has enough?

admin — Thu, 27 Jan 2011 02:32:16 +0000

A survey was released a year or so ago by AMP highlighting the shortfall Australians have in their superannuation savings with approximately 31% of all Australians being on average 11% behind in their savings needs.

While many will be quick to point out that we have recently seen a fairly significant fall in the value of global share markets, I think that we all need to look at ourselves and ask why this is the case – as I would contend that either I see more people unprepared for retirement than the average financial planner or that maybe these statistics understate the real issue.

What I find is that until a person is faced with their actual retirement date – be it as a result of retirement, illness or redundancy, most people just don’t care.

However tell a person that there is only 6 months left until they retire and all of a sudden they cannot stop thinking about how much (or little) they have put away. The reality is of course that by then it is just too late.

I was talking with a 36 year old male today who made the comment that retirement is so far away that he would rather use his super now. This of course gets me thinking what would you do with it now?

Spend it? Maybe, but I am not sure a new flat screen television will keep you fed when your income does not come in.

Invest it maybe? That’s a good idea, what would you invest in – shares, property, term deposits – the same thing your superannuation invests in – but without the taxation advantages.

If you take the time to look at your superannuation and realise that it is one of your most important investments you will ever have, you will see how if you do take the time to review your portfolio with your adviser on a regular basis that it is something you can be involved in and have an influence on.

If however you take the ostrich route and keep your head buried in the sand, then you will only have yourself to blame when you realise that you have just received your last pay cheque and financial oblivion is not too far away….

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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Retirement – Are you ready?

admin — Thu, 27 Jan 2011 02:23:07 +0000

It’s not hard to lose a couple of hours daydreaming about THE TRIP whether it be touring through Europe, or tripping round Australia caravanning under the stars surrounded by miles of emptiness. Most of us hope to do such a trip when we retire along with the hobbies and activities that so far have been pushed aside as we grapple with the mortgage and the school fees.

But how well prepared for retirement are you? It’s never too early to start planning so if you haven’t thought about your retirement yet, here are a couple of facts to get you thinking ….

Surprisingly Australians are one of the world’s greatest investors, beating the Americans, the French and the Swedes in the investment stakes. But we still fall short of the investment needed for a comfortable retirement. If you wanted to retire on a comfortable income equivalent to about $48,000 in today’s terms you need a lump sum of at least $600,000. How do you compare? The average super balance for those over 60 is about a third of what investors need to comfortably retire on. You may need to save more than you expect.

I’m not sure how the Americans, French and Swedes intend financing their retirement but for us Aussies, super is an excellent incentive to save. It provides great tax benefits and it’s also convenient because it’s compulsory and often done automatically by an employer. Super gives you access to a wide range of investments and as a long term investment, it has time to grow. A long term investment strategy also helps smooth the highs and lows that inevitably occur with any quality investment.

Retirement doesn’t happen overnight yet I am still amazed at how many people are financially unprepared for this major life event. For those aged 45 and above, on average 42 percent of their wealth is tied up in the family home with only 17 percent of their wealth held in super. Your home is a worthy asset, but bricks and mortar don’t pay the bills – that is unless you intend selling the family home. Take an active role in preparing for your future by creating an investment plan. Planning investment strategies to suit your circumstances will give you flexibility and choices in your retirement. It’s a good idea to do your homework but with so much information around … where do you start?

From our research we know most people want to learn more about investing and planning for their retirement. Almost one third of Australian use a financial planner, and 84% of those who saw their financial planner in the last 12 months said they were fairly confident they would have enough money to retire on. As a professional, it’s our job to keep abreast of investment information so we can advise you on setting your financial goals, superannuation, retirement planning, managing debt and much more.

So, if you haven’t had a chat to a financial planner about your future, now is as good a time as any to pick up the phone and make that appointment.

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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Women Managing Money

admin — Thu, 27 Jan 2011 01:38:39 +0000

I had a bit of a flick through the Financial Literacy Foundation’s recent report Financial Literacy Women Understanding Money and came across some positive results for women in general.

The report confirmed what is already well known about the ladies, that is that the fairer sex have budgeting and saving habits down pat. It is a well known industry fact that women control over 80 percent of household spending and influence 99 percent of household purchasing decisions. It was no surprise then to read that women in general are highly confident in their ability to budget, their ability to save and their ability to manage debt. This is good news for the ladies because good budgeting and saving habits are vital steps for good money management.

It was also no surprise to read that the ladies tend to let themselves down a little when it comes to their retirement planning. Many said they hadn’t thought about their long-term financial plans for their future and retirement or considered retirement to be too far away for them to think about. The real worry however was that some of them felt financial planning was only important for those who had lots of money. I’m not quite sure how much “lots of money” is, but every woman needs to take responsibility for her financial planning regardless of how much or how little money she has.

The real worry about the ladies’ retirement planning is that over a lifetime women on average earn less, have lower super balances, broken work patterns often because of family commitments and statistically speaking live longer. Because of these trends, long term retirement planning should be a must for all the ladies, not one of those jobs that they will eventually get around to.

Interestingly the report found women are very confident in their ability to get information about money with a majority having sought financial information from professionals such as a financial planner, accountant or banks. Even better, women are more likely than men to consider getting information and advice to help with the financial management. It’s a bit like women’s insistence on asking for directions when lost in comparison to the blokes who insist on driving around, in circles if they have to, rather than admitting that they need help!

The ladies do feel a bit intimidated when it comes to complex issues like investing or understanding financial language. This is a bit of a wake call for us in the financial planning industry to ensure that we speak in every day language and not financial gobblygook , an easy habit to get into when you are surrounded by financial staff every day.

Overall women make great clients. They’re thirsty for knowledge, willing to consider all options and fiercely loyal when they find someone they trust. If you’re looking for someone you can trust, that’s interested in your financial needs, then give us a call on (07) 5577 8653.

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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How your lifestyle effects your insurance

admin — Thu, 27 Jan 2011 01:28:09 +0000

Did you know a third of our population is on a diet and another third of our population is trying to maintain their weight at any one time!

Australians are spending bucketloads of money in an effort to lose weight. We all know the benefits of slimming and keeping active. But losing weight won’t just trim your waistline, it could trim your insurance premiums too.

Around seven million Australians are now overweight or obese? While there are more overweight men than women (67 per cent compared to 52 per cent), obesity is more common among women (22 per cent) than men (18 per cent). In Australia, it is estimated 20 per cent of children are also overweight or obese.

Rather than assuming scientific advances will continue to add to our life expectancy, Professor Ilona Kickbusch, an independent health consultant who previously worked with the World Health Organisation (WHO), has said that today’s generation of children may be the first to be sicker and die younger than their parents.

We all know that obesity increases the risk of many chronic and potentially lethal diseases such as heart disease, high blood pressure, stroke, kidney disease, diabetes, liver problems such as fatty liver, sleep apnoea, gout and joint and back problems.

But did you know that it may also be fattening your insurance premium? Not only is obesity becoming a problem for society, it is increasingly becoming an issue for life insurers. In the USA for example, studies have shown that there has been a substantial rise in disability claims for those under 60 with obesity related disorders.

As a result insurers are charging higher premiums for those people with a high body mass index (BMI). A person’s BMI is calculated by dividing their weight in kilograms by their height in metres squared. The higher a person’s BMI, the higher their premium.

Rates of obesity are rising rapidly both in Australia and worldwide which is having a major impact on health and health care costs. It is considered to be a preventable disease and can be managed through counselling, support and lifestyle changes.

So congratulations if you have managed to significantly reduce your weight. However, unless you can keep that weight off and tell your insurer – you will still pay your higher premiums.

Get in touch with your adviser and get him/her to let your insurer know so that you can start saving money now – after all advisers get paid ongoing commission to look after you, and if you aren’t talking regularly, they are getting paid for doing nothing.

This also applies by the way if you have given up any hazardous pursuits or smoking.

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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Mortgage Stress and your life insurance

admin — Thu, 27 Jan 2011 01:24:32 +0000

The other day while I was having a reshuffle of some paperwork on my desk, I came across an article showing a breakdown on what causes mortgage stress. With yo-yoing interest rates, mortgage stress is the flavour of the month.

Before your eyes glaze over with boredom, what do you think is the main cause of mortgage stress? Most people are quick to point their finger at the banks, people’s lifestyles and the economy in general. But a report from Genworth Financial, one of Australia’s largest mortgage insurers, found that while rising mortgage repayments did put pressure on the household budget, generally it was a significant lifestyle event that acted as a trigger for a borrower’s inability to meet their debts.

Their research found illness or injury was the biggest cause of hardship, representing 38% of hardship applications in comparison with just 2% of applications because of over commitment to a mortgage.

These interesting statistics lead me to my next favourite topic, underinsurance, where you don’t have enough insurance to protect yourself, your home or your family if a catastrophic event occurs. I have already written about the massive problem of underinsurance in my earlier blog Life Cover – Protect your family from life’s surprises so I won’t revisit the figures in this article. But if you’re curious, have look at my blog as it has some interesting figures about life insurance, or rather the lack of, life insurance in Australia.

In any event the article did give me cause to ponder, once again, on why people aren’t taking out life insurance. It might be that people are not sure how personal insurances work or believe it is out of their budget. Maybe people feel intimidated approaching an insurance adviser for advice.

If you think you’re underinsured, the biggest favour you can do for yourself and your family is at least take the first step and contact your financial planner or insurance adviser to allow them to assess your situation. Don’t be shy – whatever your budget, whatever your situation, there is an insurance plan out there that suits you and your family.

If you’re still not convinced that you need insurance to protect your families, consider this. Life insurance isn’t about you, it’s about the people you leave behind who have to pick up the financial pieces after you’re gone.

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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Self Managed Superannuation – Is it for You?

admin — Thu, 27 Jan 2011 01:20:06 +0000

Articles regularly appear the financial press about the growth in Self managed Superannuation funds (SMSFs) and the fact that many people do not understand the requirements placed on them by the legislation and indeed whether or not it is actually appropriate for an investor actually hold their superannuation funds in such a vehicle.

Now what must be stressed first and foremost before we go any further is that superannuation is not an investment – it is a legal structure for holding investments on behalf of the investor until the investor has reached retirement.

Therefore comments about how good an “investment” superannuation is actually reflect a lack of understanding by the commentator on the topic. The same investments that appear in a superannuation fund (whether it be retail, industry, wholesale or self managed) can basically be owned by an individual – shares, property cash and fixed interest investments.

What I see happen is that a person gets “advised” that a Self Managed Superannuation Fund is the best way to hold their assets for retirement. Now this might be the case and in all reality you should have a long discussion with your Financial Planner about the appropriateness of such a legal structure. You also need to look at the costs involved and whether you have the skills, interest and desire to manage the investment process along with all the other things you do with your life.

While there are many stories of people who have managed their SMSFs quite successfully and have actually been able to grow their funds better than if they were invested in another option, I put to you that there are far more who have gone nowhere and in fact have destroyed any chance of a comfortable retirement by taking on a job they cannot really do.

Let me share with you 4 stories about actual people who owned Self Managed Super Funds and could not understand why they did not make much money (please note that these people are not clients, but people who have passed through our practice over the past couple of years):

Case 1: Client was short of cash, had recently lost a court case so he took $50,000 out of his fund to pay his legal fees – there are so many breaches there that I shudder to think to how this fund could pass an audit.

Case 2: Client gets told by a mate that he should look after his own superannuation, as he will get better returns. End result client rolls over his $25,000 into an SMSF at a cost $3,500 to set up the fund, does nothing for 2 years and wonders why his superannuation goes nowhere. At the age of 50, this person has problems.

Case 3: Client sets up a Self Managed with $300,000. Puts the cash into a cheque account for 3 years. When I asked why, the client said he did not know where he should invest the money and could not be bothered learning about the stock market. Hello, don’t the words self managed mean anything to you?

Case 4: Another client set up a fund with about $80,000 and then proceeds to put all the funds into a wrap account. The wrap account has fees of about 1.6% of the balance and the client pays accounting fees of about $1,500 per annum. Why bother?

So before you get involved in the hype you really should talk to a Financial Planner who works in this area as I have not even touched on any of the other issues and obligations that you take on as a trustee. SMSFs – good for some, but maybe not for all.

Please note if you would like to learn more about Self Managed Superannuation, please send us an email to admin@bronsonfs.com.au and we will send you a copy of our e-book – Self Managed Superannuation – is it for you?

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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