» superannuation

House Prices – Are they too high and implications for retirement

admin — Tue, 15 Jun 2010 18:46:05 +0000

I had a meeting with some potential clients yesterday and the discussion turned to their (to me anyway) lack of preparation for retirement.

The husband (like all good dominant alpha males with a strong case of denial) advised that given that they had not accumulated anything other than their house, would be able to sell that to fund their retirement.

This always concerns me when I hear it for a couple of reasons:

1) Yes you can sell your house – but you will still need to live somewhere and very few people want to move from where they are comfortable to a smaller house in a less affluent suburb;

2) There is a social stigma to doing this – “It doesn’t bother me,” they say – 10 years before they have to, but when they do have to, they cannot move. Actually it also amazes me when people say they can live quite frugally if they have to but have a house full of plasma televisions;

3) Downsizing for many people is a smaller property – but usually at the same price; and

4) I am yet to actually witness a family selling their house to fund their retirement – have seen a few have to sell their house because they hit hard times or the breadwinner died, but that is a story for another day.

So it is with interest that I again read that market commentators say that our housing market is one of the 2 most overvalued in the world and needs to fall by 42% to reach its long term price ratio compared with family incomes – I have mentioned this a number of times in the past, see the following link : http://www.thebfsreport.com.au/featured/house-prices-again-is-it-a-bubble-or-not/

But I do think that Australians need to be aware of housing trends, particularly if they do think it will be the mainstay of their retirement income – have a look at this article, the link is attached and let me know what you think: http://www.theaustralian.com.au/business/housing-market-a-time-bomb-says-investment-legend/story-e6frg8zx-1225880119320

PS – The couple won’t be clients; they didn’t pass my screening tests.

If you do have any questions about this or would like to know more about us, please email me at paul@bronsonfs.com.au or visit us at www.bronsonfs.com.au

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.

Cost of Living Increases – the Past decade and the implications for investors

admin — Fri, 11 Jun 2010 09:15:22 +0000

For the past 2 years we have heard how tough all people are finding it in the real world.

An article in the Financial Review on Saturday June 5 actually quantified price increases for the past decade – given my view that we are now post GFC more accountable for meeting our income needs in retirement and this actually made me a bit nervous – am I doing enough, are you doing enough, but look at the table below to see what has increased by how much over the past decade:

Item	10 year Increase
Fruit and Vegetables	60%
Milk	36%
Cheese	66%
Bread	49%
Beef and Veal	44%
Lamb and Mutton	109%
Beer	64%
National Electricity Prices	91%
*Wages*	*44%*

In the past 10 years, household indebtedness as a percentage of disposable income – what you owe divided by what you earn has grown from 90% to 156% – this is far greater than in the UK and the US – and they are supposed to be the basket cases – we better hope China does not slow down.

Interestingly, according to RP data, house prices have risen by 146% nationally in that time with Brisbane showing the highest gain of 185%. Melbourne rose by 153% and Sydney by only 83% – I think this could be the better than building a gate at the border to stop the southerners coming on – they simply won’t be able to buy a house here, actually none of us will, last person out, please turn off the overpriced electricity.

What this means for the average investor is that you really do need to ensure you discuss with your advisor the strategies you can employ to ensure that your portfolio manages to keep pace with inflation, capital growth needs to be an important part of your forward planning.

If you do have any questions about this or would like to know more about us, please email me at paul@bronsonfs.com.au or visit us at www.bronsonfs.com.au

Please Note:

Refuelling the cash flow

admin — Mon, 03 Nov 2008 01:49:21 +0000

We’ve just spent Sunday enjoying some corporate hospitality as guests at the 2008 Gold Coast Indy. It was a glorious spring day, all warm sunshine and light sea breezes.

Sitting opposite the pit lane, you couldn’t help but be impressed with the efficiency of the pit teams who operated like a well oiled machine. As drivers entered the pit, wheels were changed and cars refuelled in a matter of – not hours, not minutes – but seconds. It makes you wonder why it takes hours to change the tyres on the family sedan doesn’t it?

When thinking of Indy, fast money, fast cars and fast women tend to spring to mind, and maybe not in that order depending on whose doing the thinking. When times are good and drivers are on a roll, earnings accelerate through generous sponsorships, prize money and team contracts. But I can’t help but feel given the gathering stormy economic clouds that the brakes may be biting on the good times and drivers may find their income slowing down.

It got me thinking, what does a racing car driver do when it looks like their source of cash is drying up; in fact how does anyone who relies on an erratic means of earning a living manage their cash flow?

If the business you’re in means your activity and income is concentrated in a few months of the year, you may find it difficult to organise your money so you can meet your outgoings all year round. There are ways of managing an erratic money flow and working with a financial planner can help you fine-tune your wealth management.

If your cash flow is slowing down, your adviser can work with you to even out the bumps such as putting your insurances into super, or reviewing your lifestyle to see if it can move down a gear or two. This will help you avoid resorting to fast but costly forms of finance such as credit cards.

It’s never too soon to prepare for the future and your adviser can help you to start an investment portfolio that will last the distance until your retire. You don’t need a large amount of capital to start, just a steady contribution that can be adjusted along with your lifestyle.

Lastly, make sure you organise a meeting with your financial planner a few months before the end of the financial year. By this stage, most people have a good idea on what their yearly income is likely to be and your adviser will work with you to put in place some tax effective strategies.

Remember, working with your financial planner will help stop the wheels from falling off in your life when the road gets rough.

Please Note:

What is a superannuation binding nomination?

admin — Wed, 22 Oct 2008 00:43:06 +0000

Does your superannuation fund allow you to provide a binding nomination? Do you know what a binding nomination is? Don’t get confused with the nominated beneficiary box you ticked when filling out the superannuation paperwork that came with the new job you just started.

Few people understand the difference between binding nominations and nominated beneficiaries and few superannuation funds clearly explain the different nominations to their members. Some don’t even offer the provision to nominate anyone. Unless you’re lucky enough to stumble across the paragraph on nominations in the super fund’s member booklet full of fine print that’s too wordy or too legalistic for the average person to understand; or worse, the prints so small that you will need your strongest nana glasses to read it, many people aren’t even aware that such nominations exist.

You may have thought you had all bases covered when you initially filled out your super paperwork and nominated who you wanted to receive your super in the event that you died. While your intentions may have been that it was your spouse or children who would financially benefit from your super and any insurance payouts in the event of your death, unless you have a binding nomination it is the trustee of your super fund who ultimately decides on who receives your benefits.

Generally a fund’s trust deed states that a benefit is paid to a dependant or anyone who is financially dependent in any way on the member. While the deed may in fact reflect your intentions, the super trustees must also go through a claim staking process, which involves notifying anyone who may be entitled to claim on your super. This may encourage people to make a claim, purely because it has come to their intention that they may be entitled to a benefit.

As a result the distribution of a member’s super death benefit can become a time consuming and sometimes costly process. Beneficiaries can appeal the trustee’s decision through the Superannuation Claims Tribunal and due to the processes involved, the distribution of the superannuation proceeds can take many months and even years.

In the meantime, your loved ones are left to deal with the financial, emotional and physical devastation of no longer having you in their life. To add to their difficulties, they are left to deal with the stress of the superannuation claim appeals process, not to mention the disintegrating family relationships that may result from such a process.

Completing a binding nominate will stop this situation from arising. A binding nomination binds the trustee of your super fund to follow your wishes and distribute your benefits to those you have nominated.

You will need to keep your nominations up to date, especially if you marry, re-marry or have children. You will also be asked to update or confirm these nominations every three years, which provides a timely reminder to review your estate and ensure your estate planning is to date.

For more information on binding nominations, contact your super fund and ask for a binding nomination form. If they can’t help you, talk to your financial planner or give us a call on 1300 766 323.

Please Note:

Women understanding money

admin — Mon, 08 Sep 2008 01:50:09 +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 1300 766 323.

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The super facts of life

admin — Wed, 20 Aug 2008 04:51:05 +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.

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Self Managed Super Funds – Are they for You?

admin — Wed, 04 Jun 2008 22:52:58 +0000

An article appears in today’s Australian Financial Review 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 $1,500 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 the 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.

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.

Your Superannuation – Your Responsibility

admin — Wed, 28 May 2008 10:21:10 +0000

A survey was released yesterday 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….

Your House or Your Superannuation?

admin — Tue, 20 May 2008 07:48:11 +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.