SMSF

Superannuation: Is it time to review your investments?

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You may be missing out or taking unnecessary risks if you have a set-and-forget strategy for your super.

A lot can happen between the time you start your first job and the time you retire. From building a career, buying a home and raising a family to dealing with setbacks such as redundancy or divorce, life doesn’t stand still and neither should your investments.

In all likelihood, the investment choice you made at age 25 may no longer be appropriate at age 45 or 55. Or you may not have made an active choice, opting for your fund’s default option instead.

In most cases, the default option is a ‘balanced’ portfolio of growth and conservative assets. The mix of investments is chosen by the fund manager to suit the average fund member who might be anywhere from 18 to 65 years of age.

The problem with this approach is that we all have a slightly different appetite for risk and different financial circumstances. What’s more, these things are not set in stone but can and do change as you progress through life.

Check the menu

To make sure your super suits your current needs, start by checking how your money is invested and then compare this with what else is on the fund’s menu.

All super funds have a range of investment options for you to choose from. These vary according to the kinds of assets they hold. Your choice will depend on the amount of risk you are willing to take and the return you can expect to make in the long run.

Most funds these days offer an a la carte menu of single asset options such as Australian shares, international shares, sustainable shares, property and fixed interest, which you can mix and match to suit.

Alternatively, you can choose from a selection of ready-mixed options to suit different risk profiles. Different funds use different labels, but according to ASIC’s MoneySmart website there are four broad categories:

  • Growth options typically hold around 85% of their funds in shares and property with the balance in cash and fixed-interest investments. High growth options can have up to 100% in shares and property. Average returns are higher over the long term – typically several percentage points above inflation - but the ride may be bumpier along the way. Losses tend to be higher in bad years and you can expect a loss in four or five years out of every 20.
  • Conservative options have around 70% in low growth, low risk cash and fixed interest with the balance in shares and property. Average returns are lower than growth options over time but there is less risk of loss in any year.

  • Cash invests in short-term deposits with Australian institutions which offer relatively low, stable returns and no risk of loss. The risk is that returns won’t keep pace with inflation.

  • Balanced or default, option may hold anywhere between 60 and 75% of its investments in shares and property with the rest in cash, bonds and fixed interest. Average returns over the long run will be a little less than the growth option but higher than conservative and cash options.

The balanced option is designed to suit most of the people most of the time, with above average returns for below average risk. But there are other ways to manage risk while maximising returns over the course of your life.

A matter of time

The thing to remember about risk in investment, as in life, is that time often heals wounds. If you have 20 or 30 years left to work and save, you may consider taking a little more risk than someone with less than 10 years till retirement. That’s because you have more time to recover from the swings and roundabouts of global investment markets.

Time can also eat away at your savings if you invest too conservatively. That’s because inflation reduces the buying power of money over time. So, those with at least 10 years to retirement may consider keeping a substantial portion of their retirement savings in a growth or balanced option.

The argument for reducing your investment risk grows stronger as you near retirement and have less time to recover from a market downturn. Even so, people entering retirement nowadays may still have up to 30 years to plan for. Depending on your appetite for risk, it may be appropriate to keep some money in growth assets to avoid depleting your capital too quickly.

Just because super is a long-term investment, it doesn’t mean it should be filed away in a drawer until you retire. Given that many of tomorrow’s retirees can look forward to living well into their 90s, the reward for taking an active interest in your super is that your savings are more likely to last the distance.

Want to know more?

Speaking to a financial adviser can help you identify what mix of investments are appropriate for you. An adviser can work with you to assess your circumstances and invest accordingly to your needs. If you would like to speak to a financial adviser about your superannuation strategy please contact us today on (08) 8372 7826 for a free financial health check.

How a financial adviser can help in the lead up to retirement

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In the last five years before retirement, it’s important to plan for what’s next around the corner, including any changes you might be making as you approach this major milestone.

A financial adviser can help you define what it is you want to achieve in the lead up to retirement and afterwards. They can then give you the confidence and know-how to help you reach your goals.

So what’s on the horizon for you?

1.    Working out how you’ll fund your retirement

Now that retirement is getting closer, you’re probably looking for ways to grow your super savings. How you’ll access that money is also important, as it may affect the tax you pay. A financial adviser can help you:

  • Work out and implement strategies to boost your super.
  • Create saving plans and spending budgets.
  • Decide how to invest your super or other assets and choose investment types that suit you.
  • Choose the best retirement income streams for your financial situation.
  • Work out strategies that may increase your eligibility for the Age Pension.

2.    Selling an investment property

If you feel the time is right to sell, a financial adviser can help you:

  • Decide what to do with the proceeds of the sale.
  • Consider any implications of selling before or after retirement. For example, if you sell your investment property before you retire, the Capital Gains Tax (CGT) you pay may be higher than if you sell it after you retire.

3.    Downsizing or making a sea or tree change

If you’re considering moving into a smaller home or to the coast or country, a financial adviser can help you:

  • Understand any financial implications, such as your eligibility for the Age Pension. Your home is exempt from means testing, but your super and other investments may not be.
  • Budget for moving and buying costs.

4.    Transitioning to retirement

You may be able to take advantage of a transition to retirement strategy that lets you start drawing down your super while you continue to work full time or drop down to part time hours. A financial adviser can help you:

  • Make the most of the tax concessions available if you opt to work full-time, top up your super and draw a transition to retirement pension from your super.
  • Work out if you can afford to cut down your working hours and use a transition to retirement pension to top up your income.

5.    Planning your estate

Estate planning can be one of the most important things you can do to make sure your family is provided for. It’s more than just having a current will. Together with your legal adviser, a financial adviser can help you:

What fees and charges are involved with seeing an adviser?

The initial consultation is free of charge and gives you an opportunity to sit with an expert and identify what areas of advice will benefit your individual circumstances. If you decide to proceed with advice, preparation costs will be discussed and agreed upon before any work is commenced.

Advice costs generally depend on how complex your financial plan needs to be and the amount you have to invest. Whatever the charges, the financial adviser will explain them clearly when they take you through their Financial Services Guide (FSG) during the initial consultation.

Want to know more?

If you feel like you’d like to speak to a financial adviser about your retirement plans please contact us today on (08) 8372 7826 for an obligation-free consultation.

When is the right time to seek financial advice?

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There’s no bad time to seek financial advice, however here are five situations where it’s more important than ever to see a financial adviser.

If you think financial advice is just about helping you save more for your retirement, think again. No matter where you are in life, getting good financial advice can help put you in the best possible place to achieve your life dreams, and protect you if things don’t go to plan.

Here’s how your adviser can help you through some of life’s big events.

1. Moving in with your partner

Starting a new relationship can be an exciting time – and it can be easy to get carried away. As you start your life together, a financial adviser can help you plan a new budget, so you can start saving for mutual goals.

Your adviser can also make sure you’re both protected with adequate insurance – something that’s particularly important if you have joint debt or children.

2. Setting up house

These days, buying your first home is harder than ever, with property prices at record highs in most Australian cities. An adviser can help you create a realistic plan to save for a deposit, helping you get your start in the property market.

Once you’ve found the right property, your adviser can help you choose a mortgage and manage your repayments – potentially saving you thousands of dollars in interest over the life of your loan.

3. Ending a relationship

Not every relationship lasts, and break ups can be painful – and often financially detrimental.

Your adviser can help you realign your goals and provide financial structure during a very stressful time. They can also help you get your finances back on track, with a budget to suit your new situation and lifestyle.

4. Changing direction

It’s unlikely that you’ll stay with the same job for your entire lifetime. So if you’re thinking of changing your workplace or embarking on a new career, it’s time to sit down with your adviser. They can help you understand the financial implications of working less, or help you make the most of a promotion or pay increase.

If you’re nearing retirement, you may want to discuss a transition to retirement strategy, so you can spend less time in the office and more time at home. Or if you want to be your own boss, make sure you talk to your adviser about making tax-effective contributions to your super, so you don’t retire without a nest egg.

5. Taking time out

There may be times in your life when commitments like parenting, taking care of elderly parents, studying or travelling will take priority over full time work.

If you’re planning on taking a break from work, your adviser can help you understand your financial options for funding this time off. Remember that while you’re not working you won’t receive any employer contributions to your super. So it’s important to talk to your adviser to help make sure your retirement savings don’t fall behind.

Want a SMSF without ongoing compliance? A Super Wrap Platform may be for you!

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A common theme that has emerged in recent years is the popularity of the Self-Managed Super Fund (SMSF).

Some investors choose this option for the control it brings over their investments, others for the ability to invest in direct property; or simply because it can prove to be a cost-effective option (for balances over $250,000).

However, many people are unaware of the responsibilities and ongoing compliance burdens related to maintaining a SMSF - or that alternative options are available - which also allow high levels of control over your super investments.

An alternative option to an SMSF is a ‘Super Wrap Platform’.

The option is called a ‘Super Wrap Platform’ because it does exactly that, it gives you the ability to invest your super into managed funds, term deposits and direct equities such as listed shares, Exchange Traded Funds (ETFs) and Listed Investment Companies (LICs) in one easy and accessible portal.

Super Wrap Platforms have been very popular with our clients who wish to invest directly into the market, which can help keep costs down, while still providing strong levels of diversification and growth opportunity.

The beauty of customising your portfolio is that it allows you to ‘sell’ or ‘increase’ selected holdings, without affecting the rest of your investments (unlike the traditional managed fund options used by most super funds). This can be particularly beneficial for people drawing a pension from their super fund and looking for more income, or for those looking to take advantage of currency fluctuations or changes in international interest rates.

We can help you create a customised portfolio that meets your individual needs, and provide ongoing assistance in managing your investments, to ensure you meet you goals and objectives. We will help you identify value opportunities and provide insight to financial markets, which is based on access to comprehensive filtered research and proven results.

If you would like to know more about Super Wrap Platform options, or feel this is suitable for your individual circumstances, please contact us today for an obligation-free consultation.

Related links: Exchange Traded Funds, Listed Investment Companies, Approaching Retirement, Superannuation/ SMSF