SECURING YOURFUTUREGET ON TRACK FOR RETIREMENT• How much super is enough?

• Making sense of the pension

• What type of retiree are you?

• Unlock your home’s value

• Is DIY super right for you?

• When to panic about your nest egg

August 22, 2016

THE ESSENTIAL GUIDE TO SAFEGUARD YOUR FINANCES

WESTBUSINESS

A

special

A s chief executive officer ofthe Financial PlanningAssociation of Australia,

I deeply believe in the power offinancial advice as a catalystfor unlocking dreams, andultimately, happiness.

Our 16th Financial PlanningWeek is all about dreaming;dreaming about what thefuture could hold if we over-came the common barriers tofinancial success.

These barriers might befear, self-doubt, apathy or lackof planning, for example.

Our research shows that weare dreaming more as a nation,but where we fall short isturning those dreams into reality.

Build a betterfinancial future

How much super is enough?Is it really a million-dollar question?

Centrelink confusionMaking sense of the age pension

Tick the boxWhat type of retiree are you?

Unlocking wealthHow to make use of your house value

Doing it yourselfIs self-managed super rightfor you?

Risky businessWhen are your investments in peril?

SECURING YOURFUTURE

WESTBUSINESS

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There are many aspects of your retirement years theSecuring Your Future team can’t help you with.

We can’t do anything about the dicky knees, erratictickers or overly enthusiastic bladders which at some point willdo their best to disrupt your retirement plans.

And you are on your own when it comes to having thegrandkids lumped on you with ever-increasing frequency.

What we can do is demystify the retirement industry, andthat’s no small job because, as anyone who has ever read asuperannuation statement or tried to get through toCentrelink knows, the finances of retirement can be quitebewildering.

We hope that if you spend a bit of time going throughthese pages you will feel a little more on top of yourgolden years.

At the very least, we hope we will shine a light onthe things you don’t know and afford you the chanceto do some more research or get some advice.

Making the right financial decisions as you close inon your retirement is crucially important to astress-free life after work. It’s even more important tomake the right calls when you are actually retired — theabsence of a regular wage seems to magnify errors offinancial judgment!

Ben HarveyGroup Business EditorWest Australian Newspapers

A warm welcome

Meet the advice team behindSecuring Your Future 2016

Dare to make your dreams areality, says Dante De Gori

Pajoda Investments Pty Ltd ABN 33 127 407 238 trading as ipac Western Australia is a corporate authorised representative (CAR number 328419) of Charter Financial Planning Limited (AFSL 234665). All information and advice is for the private use of the person to whom it is provided. We provide you with services in accordance with our Financial Services Guide. Charter Financial Planning is responsible to you for all conduct.

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Contact us on or email info@ipacwa.com.au. For more information visit ipacwa.com.au

At ipac Western Australia we start by understanding the story of our client’s lives.

We plan for the person you are, not just the money you have.

Because life is for living.

3Monday, August 22, 2016 SECURING YOUR FUTURE2 Monday, August 22, 2016SECURING YOUR FUTURE

Back row: Ben Harvey (Group Business Editor, West Australian Newspapers), John Cameron (BlackSwan Event Financial Planning), Brenton Jones (Future Wealth Planners), Brad Martin (BlueprintWealth), Ben Devenish (Shadforth Financial Group) Front row: Julia Schortinghuis (Lighthouse Capital), David Andrew (Capital Partners), Kelly Pillay (KLI Accountants & Wealth Managers)

A s chief executive officer ofthe Financial PlanningAssociation of Australia,

I deeply believe in the power offinancial advice as a catalystfor unlocking dreams, andultimately, happiness.

Our 16th Financial PlanningWeek is all about dreaming;dreaming about what thefuture could hold if we over-came the common barriers tofinancial success.

These barriers might befear, self-doubt, apathy or lackof planning, for example.

Our research shows that weare dreaming more as a nation,but where we fall short isturning those dreams into reality.

It is commonly assumed thatfinancial planners solvemoney problems.

In contrast, financial plan-ning is about so much morethan this.

A financial planner can helpbring your dreams to life, iden-tify your life goals and aspira-tions — and put in place afinancial plan to get you there.

A financial planner can alsoempower you with the finan-cial knowledge to truly takecontrol of your future.

This is just as important, nomatter who you are, or whatlife stage you’re at.

In many ways, a financialplanner plays a similar role toa personal trainer.

The accountability andstructure is what can make thedifference between a dream,and a dream that becomes a reality.

If your dreams currentlyfeel out of your grasp, talk to aprofessional financial plannerabout the steps you can take.

You might just be surprisedat what’s possible.

Visit fpa.com.au to find afinancial planner near you.

Dante De Gori is chief executive of the Financial PlanningAssociation of Australia

Build a betterfinancial future

How much super is enough?Is it really a million-dollar question?

Centrelink confusionMaking sense of the age pension

Tick the boxWhat type of retiree are you?

Unlocking wealthHow to make use of your house value

Doing it yourselfIs self-managed super rightfor you?

Risky businessWhen are your investments in peril?

SECURING YOURFUTURE

WESTBUSINESS

4

6

10

14

16

18

Dare to make your dreams areality, says Dante De Gori

WHERE WE FALL SHORT IS TURNING THOSEDREAMS INTO REALITY.

Pajoda Investments Pty Ltd ABN 33 127 407 238 trading as ipac Western Australia is a corporate authorised representative (CAR number 328419) of Charter Financial Planning Limited (AFSL 234665). All information and advice is for the private use of the person to whom it is provided. We provide you with services in accordance with our Financial Services Guide. Charter Financial Planning is responsible to you for all conduct.

2545

8 06

/15

Contact us on or email info@ipacwa.com.au. For more information visit ipacwa.com.au

At ipac Western Australia we start by understanding the story of our client’s lives.

We plan for the person you are, not just the money you have.

Because life is for living.

3Monday, August 22, 2016 SECURING YOUR FUTURE2 Monday, August 22, 2016SECURING YOUR FUTURE

If you do a Google search for“how much is enough inretirement?” you will get

almost 85 million results.So if you’ve been wondering

how much is enough for yourretirement, you’re not alone.

The answer will depend onyour circumstances andexpectations.

In attempting to answer thisquestion, we need to under-stand the five big questions forretirement.1. How much are you hopingto spend in retirement?2. How much can you save?3. How much investmentrisk do you want to take?4. When are you planning toretire?5. How much do you want toleave behind?

For many years, financeresearchers have suggesteddrawing down 4 per cent ofyour portfolio a year is a safewithdrawal rate.

If a retiree invested in a bal-anced portfolio of 50 per centshares and 50 per cent bonds,and drew down 4 per cent oftheir portfolio each year, theycould reasonably expect theirassets to last 30 years, or so theargument went. Using the 4

per cent rule, a retirementincome of $50,000 a year wouldrequire capital at retirementof $1.250 million and therewould be an expectation themoney would last your entirelifetime.

The Association of Superan-nuation Funds of Australiapublishes a standard bench-mark for singles and couples tolive modestly and comfortablyin retirement.

Currently ASFA suggests acouple would need $34,226 tolive modestly and $59,236 tolive comfortably, although ifyour retirement plans extendto things like regular interna-tional travel, helping childrenand regular vehicle upgrades,then clearly you will needmore.

In Australia we enjoy a gen-erous social security system inthe form of the age pension.

Just how long the systemwill remain generous, is an-other matter.

For those retiring in the nextfive to 10 years, there is a rea-sonable chance the retirementpension system will remainviable, but the state of ournational finances does raisequestions about the sustaina-bility of the system.

Under the current rules, aretired couple with over $1 mil-lion in assets can still receive apart-pension, although the eli-gibility rules become tougherfrom January 1, 2017 when theassets test for a homeownercouple will reduce to $823,000.

To illustrate how generousthe system is, let’s take theexample of John and Ruth,who own their family homeand have $350,000 in superan-

nuation and savings. Let’s saythey draw $14,000 from anaccount-based pension eachyear, their age pension pay-ment would see them achieve aretirement income of over$45,000 each year.

So let’s consider the howmuch question for 50-year-oldsplanning for their retirementsome time after 2030.

The much-maligned 2014Federal Budget papers out-lined the Government’s fund-ing problem in highlightingthe rapid increase in the pro-portion of the Australian pop-ulation aged over 65.

This growth in the over 65s

points to tougher eligibilityrequirements for age pensionbenefits, meaning today’s 50-year-olds are likely to be retir-ing at closer to 70, and may notenjoy the benefits retirees dotoday.

While it’s good to know thepension is there as a backup,many Australians are notplanning on using it, simplybecause they have an expecta-tion of a higher income inretirement, and are preparedto save enough to achieve thisresult. This group is broadlyreferred to as the self-fundedretirees.

For this group, how muchyou will need mainly dependson how much and for how longyou will be drawing on yourinvestment pool — the earlieryou retire, the larger your cap-ital base needs to be, while con-tinued work, even on apart-time basis, will stretchout your drawdown.

For self-funded retirees, theprospect of running out ofmoney is usually the biggest

concern. Managing your capi-tal to minimise the possibilityof errors, and ensuring yourwealth is not eroded by infla-tion, become the two mostimportant areas to consider.

Superannuation will proba-bly be the ideal structure foryou because the tax benefitsare considerable and willstretch your wealth further.

When we invest for retire-ment we are making decisionsthat need to pass the test oftime.

A retiree aged 65 is likely tolive for 20 years and perhaps aslong as 30, so they will need along-term investment plan.

The only problem is invest-ment markets can be uncer-tain. This is where the amountyou draw down from yourportfolio each year will helpyou deal with market uncer-tainty.

Let’s say you invest halfyour portfolio in a diversifiedportfolio of global and Austra-lian shares, and the balance incash and fixed interest invest-

ments. Significant marketevents like the 1987 stock mar-ket crash and the global finan-cial crisis can have a bigimpact on your retirement, sothe possibility of an event likethis needs to be factored in.

This is where the idea of adrawdown rate is important.

Let’s say you want a retire-ment income of $75,000 eachyear.

An annual drawdown. of 3.5per cent is considered safe,which means your portfoliowould need to be just over $2million, but you will be able towithstand most economicdownturns and market shocksduring your lifetime.

A safe drawdown means youwill sleep well at night, but youwill need a bigger portfolio toprovide the safety you need.

A moderate portfolio draw-down of 4.5 per cent each yearmeans you need less capital tofund your $75,000 annual lifes-tyle, but you may be more sus-ceptible to an economicdownturn or market shock.

CAPITAL NEEDEDRetirement Safe Moderate High income 3.50% 4.50% 5.50%$50,000 $1,428,571 $1,111,111 $909,091 $75,000 $2,142,857 $1,666,667 $1,363,636 $100,000 $2,857,143 $2,222,222 $1,818,182 $125,000 $3,571,429 $2,777,778 $2,272,727 $150,000 $4,285,714 $3,333,333 $2,727,273

AGE PENSION ASSETS-TEST FREE AREA Homeowner Non-homeowner

Until June 2016 Jan 2017 Until Jun 2016 Jan 2017

Single $205,500 $250,000 $354,500 $450,000

Couple $291,500 $375,000 $440,500 $575,000

ASFA RETIREMENT STANDARD Annual Weekly living costs living costsCouple - modest $34,226 $656

Couple - comfortable $59,236 $1136

Single - modest $23,797 $456

Single - comfortable $43,184 $828

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%

2010 2030 2050

AGEING AUSSIESPeople aged 55 and over as a proportion of Australians (2010-2050)

POCKET CHANGEWorking out how big a pot you needhinges on the answersto five queries, saysDavid Andrew

How much super will be enough?

UNDER THE CURRENT RULES, A RETIRED COUPLE WITHOVER $1 MILLION IN ASSETS CAN STILL RECEIVE APART-PENSION, ALTHOUGH THE ELIGIBILITY RULESBECOME TOUGHER FROM JANUARY 1, 2017.

David Andrew

4 Monday, August 22, 2016HOW MUCH IS ENOUGH? 5Monday, August 22, 2016 HOW MUCH IS ENOUGH?

concern. Managing your capi-tal to minimise the possibilityof errors, and ensuring yourwealth is not eroded by infla-tion, become the two mostimportant areas to consider.

Superannuation will proba-bly be the ideal structure foryou because the tax benefitsare considerable and willstretch your wealth further.

When we invest for retire-ment we are making decisionsthat need to pass the test oftime.

A retiree aged 65 is likely tolive for 20 years and perhaps aslong as 30, so they will need along-term investment plan.

The only problem is invest-ment markets can be uncer-tain. This is where the amountyou draw down from yourportfolio each year will helpyou deal with market uncer-tainty.

Let’s say you invest halfyour portfolio in a diversifiedportfolio of global and Austra-lian shares, and the balance incash and fixed interest invest-

ments. Significant marketevents like the 1987 stock mar-ket crash and the global finan-cial crisis can have a bigimpact on your retirement, sothe possibility of an event likethis needs to be factored in.

This is where the idea of adrawdown rate is important.

Let’s say you want a retire-ment income of $75,000 eachyear.

An annual drawdown. of 3.5per cent is considered safe,which means your portfoliowould need to be just over $2million, but you will be able towithstand most economicdownturns and market shocksduring your lifetime.

A safe drawdown means youwill sleep well at night, but youwill need a bigger portfolio toprovide the safety you need.

A moderate portfolio draw-down of 4.5 per cent each yearmeans you need less capital tofund your $75,000 annual lifes-tyle, but you may be more sus-ceptible to an economicdownturn or market shock.

A higher drawdown again of5.5 per cent each year wouldsuggest you may need evenless capital to fund your lifes-tyle, but your portfolio andyour lifestyle will be far moresusceptible to a market down-turn.

Finding the right level ofinvestment risk and the rightlevel of drawdown will dependon your risk tolerance and theconcern you may have aboutrunning short of funds duringyour lifetime.

The final factor we can’tignore is we do tend to needless money as we get older.Past the age of 80, we tend totravel less and spend less onlifestyle expenditure.

Spending more in the earlyyears while we’re healthierand physically active makessense so it’s a matter of findingthe balance between spendingfor today and ensuring there’senough for tomorrow.

David Andrew is managingdirector of Capital Partners

CAPITAL NEEDEDRetirement Safe Moderate High income 3.50% 4.50% 5.50%$50,000 $1,428,571 $1,111,111 $909,091 $75,000 $2,142,857 $1,666,667 $1,363,636 $100,000 $2,857,143 $2,222,222 $1,818,182 $125,000 $3,571,429 $2,777,778 $2,272,727 $150,000 $4,285,714 $3,333,333 $2,727,273

AGE PENSION ASSETS-TEST FREE AREA Homeowner Non-homeowner

Until June 2016 Jan 2017 Until Jun 2016 Jan 2017

Single $205,500 $250,000 $354,500 $450,000

Couple $291,500 $375,000 $440,500 $575,000

ASFA RETIREMENT STANDARD Annual Weekly living costs living costsCouple - modest $34,226 $656

Couple - comfortable $59,236 $1136

Single - modest $23,797 $456

Single - comfortable $43,184 $828

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%

2010 2030 2050

AGEING AUSSIESPeople aged 55 and over as a proportion of Australians (2010-2050)

POCKET CHANGE

How much super will be enough? THE RETIREMENTACCOUNT MULTIPLEFirst among the key princi-ples in the mathematics ofretirement portfolios is theretirement account multiple.

RAM is simply the size ofthe superannuation accountbalance at retirement as amultiple of the retiree-to-be’sfinal year of salary.

Let’s look at Tony who hasa final year salary of $100,000and a superannuationaccount balance of $700,000.Tony has a RAM of 7.

This is a critical number toknow because once we knowthe RAM, calculating Tony’sincome replacement ratio isstraightforward: RAM xwithdrawal rate = incomereplacement ratio.

If Tony multiplies his RAMnumber by an initial with-drawal rate of 5 per cent perannum it produces the foll-owing equation: 7 x 5 = 35 percent income replacement.

In other words, if Tonywithdraws 5 per cent of the$700,000, which is $35,000;$35,000 is 35 per cent of hisfinal year’s salary of$100,000.

In the above example it isclear to see that Tony’sincome replacement inretirement (as a percentageof the final year’s salary) issimply a mathematical rela-tionship between his RAMand the chosen withdrawalrate percentage.

Next comes the reallytricky part: how best to invest

According to the last set offigures from the Austra-lian Government actu-

ary, a man turning 65 thisyear and wanting to retirehas a statistical life expectan-cy of about 18.5 years and awoman nearly 22.

For those people who arecurrently saving and invest-ing for their retirement,these statistics present a veryreal challenge because theyare directly linked to know-ing how much they will needto enjoy a financially secureretirement.

The problem in determin-ing how much is enoughbegins with the answer; itdepends.

It is with the above in mindmany people might find itvery helpful to have someprinciples and easy-to-understand mathematicalmeasures to use as a guide inaccumulating and later dis-persing funds for their retirement.

When considering a super-annuation fund retirementportfolio most people have noproblem understanding thatit is likely to last longer if therate of withdrawal is lower.

However, there are otheraspects of a retirement port-folio that may not be quite soeasy to understand.

High on the list of thoseconsiderations is the issue ofportfolio design: How havedifferent portfolios behavedin the past? So let’s thinkabout this a bit more.

Tony’s superannuation sothat he does not run out ofmoney. If financial securityin retirement for Tony isdefined as having his super-annuation fund survive (notrun out of money) for at least18.5 years, there can be nodoubt that in today’s low-interest rate environment hisportfolio will have to includegrowth-orientated invest-ments such as shares andproperty.

Let’s say that Tony hasselected an income replace-ment ratio of 50 per cent forhis retirement.

Because Tony has a RAMof 7, he will need to imple-ment an initial withdrawalrate of 7 per cent per annumto create a 49 per cent incomereplacement ratio (7 x 7 percent = 49 per cent incomereplacement ratio).

What is equally importantto understand is that if Tonyhad a RAM of 10, he wouldonly need a 5 per cent with-drawal rate to produce the 50per cent income replacementratio he desired.

This in turn means that hissuperannuation retirementportfolio can afford to have alower level of growth-orien-tated investments.

In the above example youcan see the luxury of using alower withdrawal rate is cre-ated by having a big RAM.

Brenton Jones is principal clientadviser at Future WealthPlanners

Acronym soup easier witha healthy serving of RAM

Brenton Jones

4 Monday, August 22, 2016HOW MUCH IS ENOUGH? 5Monday, August 22, 2016 HOW MUCH IS ENOUGH?

Like all things Centrelink, determining eligibilityfor the age pension is complex. From January 1,additional changes are going to add to this

complexity. It is important to remember that the agepension has been designed as a safety net for thosewithout sufficient resources to provide for an adequate retirement. To ensure the right people aresupported, it is means tested.

Retirees aged 65 (gradually increasing to age 67depending on your date of birth) and over may be eligible for a part or full age pension.

How does it work?The rate of age pension is different for couples andsingles, home owners and non-home owners. Differ-ent thresholds apply for each of these situations.

There are two tests — the assets test and incometest. Whichever test results in the lower pension payment to you, this is the test that determines yourentitlement.

The assets testThe value of your assets (not including your home)are tallied and counted against an asset threshold. Ifyour assets are over the relevant threshold, yourpension payment will be reduced by $1.50 for every$1000 of assets over that threshold limit.

This reduction is known as the taper rate, which ischanging from January 1, 2017. More on that later.

Assets include cash, term deposits, superannua-tion, account-based pensions, annuities, shares orother investments, household and personal effectssuch as household contents, cars, caravans and boats.

Note that it is the market value of these assets thatare counted, which for items like cars, are generallymuch lower than the insured value. Overstatingassets is a common trap which reduces the pensionyou receive. When valuing things like household con-tents, base the value as if you put the items on thestreet verge to be sold today — you wouldn’t get much.

Some assets are not counted, with the main assetbeing your home, provided you reside in it. If yourpartner is under age pension qualification age andtheir superannuation is not in pension phase, it also isnot counted.

The income testIn this test, any income from employment, pensions, annuities, trust distributions or moneydeemed to be earned from investments are included.

Exceeding the fortnightly income limit will seeyour age pension reduced by 50¢ for every $1 over thelimit, until you reach the disqualification limit for apart pension. If you have an old-style insurance policy known as an endowment policy, it may beexempt. Get advice before redeeming this kind ofasset as accumulated bonuses may be treated as

income. If you have reached pension age but continueto work, you may still qualify for a part or even full agepension under the work bonus scheme, depending onyour income. The first $250 of fortnightly incomederived from employment is excluded under theincome test. If your work is sporadic, you can “bank”any unused amount up to $6500, which can then beused to reduce your income.

What’s changing?Recently, the Government introduced changes to theasset test thresholds, which will take effect from

January 1. The lower asset limit for the full agepension has been lifted and the upper asset limit forpart pension has been lowered.

Importantly, the taper rate, which currently reduc-es the pension you receive under the assets test by$1.50 for every $1000 over the lower threshold, isincreasing to $3 for every $1000 over the threshold.

This is the reason why many will see a significantreduction in their entitlements.

About 120,000 Australians are anticipated to bebetter off under the Government’s changes.

Conversely, more than 300,000 will have at least partof their pension cut.

If you are unsure of your situation, we would adviseyou to see a financial planner to help you betterunderstand the impact on your eligibility so you canbetter plan and manage any impact to your cash flow.

Further implicationsAs announced with the Federal Budget changes, people who lose their pension entirely as a result ofthe changes, will automatically receive the Common-wealth Seniors Health Card, or a Health Care Card forthose under age pension age.

Importantly, they will be exempt from the usualincome test requirements for these cards indefinitely.

These cards provide access to Medicare bulk billingand less expensive pharmaceuticals.

Julia Schortinghuis is director of Lighthouse Capital.

Fortnightly AnnualSituation entitlement entitlement Couple $658.70 each $34,252Single $873.90 $22,721 *If you are a non-homeowner, you may be eligible for rent assistance.

The rules that dictatewhat you get backJulia Schortinghuisexplains who getsthe age pension

Centrelink asset test limits for FULL age pensionSituation Homeowners Non-homeownersSingle $209,000 $360,500Couple (combined) $296,500 $448,000*Assets below these limits qualify you for full age pension – subject to the income test

Centrelink cut-off limits for PART age pensionSituation Homeowners Non-homeownersSingle $791,750 $943,250Couple (combined) $1,175,000 $1,326,500Illness separated $1,462,000 $1,613,500(couple combined)*Assets above these limits will disqualify you from part age pension.

Centrelink income test limits for pensionsSituation For full pension/ For part allowance pension (per fortnight) (per fortnight)Single up to $164 less than $1911.80Couple (combined) up to $292 less than $2926.80Illness separated up to $292 less than $3787.60(couple combined)

CHANGESJanuary 1, 2017: Assets test thresholds� Assets Test thresholds above which age pension entitlements start to reduce will be increased Current thresholds NewHomeowners indexed thresholds ChangeSingle $210,500 $250,000 $39,500Couple $298,500 $375,000 $76,500Non-homeownersSingle $363,000 $450,000 $87,000Couple $451,000 $575,000 $124,000

IMPACTJanuary 1, 2017: Assets test taper rate� Assets test taper rate will be increased from $1.50 per fortnight per $1000 to $3 per $1000 above the assets test thresholds� Assets test upper thresholds (above which age pension reduced to zero) reduced Current upper New thresholds upperHomeowners (indexed) thresholds ChangeSingle $804,500 $547,000 ($257,500)Couple $1,194,000 $823,000 ($371,000)Non-homeowner Single $957,000 $747,000 ($210,000)Couple $1,346,500 $1,023,000 ($323,500)

OVERSTATING ASSETS ISA COMMON TRAP WHICHREDUCES THE PENSION.

Julia Schortinghuis

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6 Monday, August 22, 2016HOW MUCH PENSION? 7Monday, August 22, 2016 HOW MUCH PENSION?

January 1. The lower asset limit for the full agepension has been lifted and the upper asset limit forpart pension has been lowered.

Importantly, the taper rate, which currently reduc-es the pension you receive under the assets test by$1.50 for every $1000 over the lower threshold, isincreasing to $3 for every $1000 over the threshold.

This is the reason why many will see a significantreduction in their entitlements.

About 120,000 Australians are anticipated to bebetter off under the Government’s changes.

Conversely, more than 300,000 will have at least partof their pension cut.

If you are unsure of your situation, we would adviseyou to see a financial planner to help you betterunderstand the impact on your eligibility so you canbetter plan and manage any impact to your cash flow.

Further implicationsAs announced with the Federal Budget changes, people who lose their pension entirely as a result ofthe changes, will automatically receive the Common-wealth Seniors Health Card, or a Health Care Card forthose under age pension age.

Importantly, they will be exempt from the usualincome test requirements for these cards indefinitely.

These cards provide access to Medicare bulk billingand less expensive pharmaceuticals.

Julia Schortinghuis is director of Lighthouse Capital.

The rules that dictatewhat you get back

CHANGESJanuary 1, 2017: Assets test thresholds� Assets Test thresholds above which age pension entitlements start to reduce will be increased Current thresholds NewHomeowners indexed thresholds ChangeSingle $210,500 $250,000 $39,500Couple $298,500 $375,000 $76,500Non-homeownersSingle $363,000 $450,000 $87,000Couple $451,000 $575,000 $124,000

IMPACTJanuary 1, 2017: Assets test taper rate� Assets test taper rate will be increased from $1.50 per fortnight per $1000 to $3 per $1000 above the assets test thresholds� Assets test upper thresholds (above which age pension reduced to zero) reduced Current upper New thresholds upperHomeowners (indexed) thresholds ChangeSingle $804,500 $547,000 ($257,500)Couple $1,194,000 $823,000 ($371,000)Non-homeowner Single $957,000 $747,000 ($210,000)Couple $1,346,500 $1,023,000 ($323,500)

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Does your retirement planneed a second opinion?

Independently owned and non-aligned for over 15 years, allowing us to focus on you

6 Monday, August 22, 2016HOW MUCH PENSION? 7Monday, August 22, 2016 HOW MUCH PENSION?

There’s less than sixmonths to go before thenew year, which means

only six months before chang-es to the assets test go intoeffect. This could mean a not-so-happy new year for age pen-sion recipients whose rate ofpayment is determined by theassets test.

While the changes that takeeffect on January 1 will resultin some age pension recipientsreceiving an increase in theirfortnightly payment, themajority will start the yearwith a reduced or removed agepension, crimping their dis-posable income.

If you’re going to be affectedby the changes, is there any-thing you can do between nowand January to minimise theimpact? Yes, there is.

Get your Centrelink in order Make sure Centrelink isassessing the correct valuesfor assets that tend to depre-ciate in value. Centrelinkassesses at their net marketvalue, which it regards as theamount a person would expectto receive if they sold the asseton the open market, less anyvalid debts or encumbrances.For such assets as householdcontents, motor vehicles,boats and caravans, Centre-

link will usually accept yourreasonable estimate. Sourcessuch as redbook.com.au canbe great reference tools towork out the current marketvalues of assets like your carand caravan. When estimatingthe market value of your hou-sehold contents, be realistic.Keep in mind how much youwould pay for second-handgoods being sold at a garagesale on a bitterly cold Sundaymorning in winter.

Get your house in orderFixtures and fittings withinyour home are not assessableassets. If there’s anythingaround the home that needs tobe repaired or replaced, thinkabout getting that work donenow.

Get your personal affairs inorderRelieve financial stress fromyour loved ones at a time whenthey will least be able to copewith it by pre-paying for yourfuneral, investing in funeralbonds or purchasing yourburial plot. Any amount usedto purchase a pre-paid funeralor burial plot may be exemptunder the assets test as longsas certain conditions are met.Funds invested in a funeralbond of a value up to $12,250for a single person or $12,250each for a couple in individualfuneral bonds may be exemptunder the assets test. Asalways, caveat emptor applieswhen making a decision topurchase a service in advance.There are a number of funeral

bond providers in the marketso it’s best to consult a finan-cial adviser before making adecision to go down this path.

Consider the use oflong-term annuitiesThis point relates to annuitieswith payment terms greaterthan five years. Centrelinkwill initially base its assess-ment of the income stream’sasset value on its purchaseprice and will reduce it everysix or 12 months by the amountof the purchase price that hasbeen returned to you. If theincome stream provides for areturn of capital at the end ofits payment term (called a re-sidual capital value), Centre-link will not assess an assetvalue lower than this amount.This could be an attractiveoption to take in our currentenvironment of low interestrates. It can be difficult to workout what type of annuity isright for you, so make sure youdiscuss your requirementswith a financial adviser beforedoing so.

Use your spouse If you are lucky enough tohave a partner under pensionqualifying age (born after July1, 1952), then holding funds inthe accumulation phase with-in their super may be worth-while. However, there are anumber of factors to considerbefore using this strategy,such as your overall cash flow,the tax rate on investmentearnings within their superaccount and potential restric-tions on access. So make sureyou discuss your position witha financial adviser to work outwhether this is a good decisionfor you.

Lastly, consider yourcharitable donation andgifting programYou are able to gift up to $10,000per financial year withoutCentrelink penalising you.Beware though — an overalllimit of $30,000 in gifts over arolling five-year periodapplies.

Mike Dowling is an adviser withShadforth Financial Group

Pump up your pensionMikeDowlinghas 6 tipsto boostincome

FIXTURES AND FITTINGS WITHIN YOUR HOME ARE NOTASSESSABLE ASSETS. IF THERE’S ANYTHING AROUNDTHE HOME THAT NEEDS TO BE REPAIRED GET THATWORK DONE NOW.

Boosting your pension could mean you can afford Moet instead of cleanskin sparkling.

MikeDowling

8 Monday, August 22, 2016MAXIMISE YOUR PENSION

With the coalition win-ning 30 Senate seats toLabor’s 26, getting any

legislation passed will likelyrely on the support of theGreens and/or Nick, Jacqui,Derryn and Pauline.

This makes it difficult tospeculate on the likelihood ofthe new superannuation measures proposed in themost recent Federal Budgetactually becoming law.

Since the election, the coali-tion has acknowledged thatthe unpopularity of some ofthese proposals may have beenreflected at the polls.

Expect some watering down,but let’s analyse what wasproposed in the Budget andhow it could impact on yoursuperannuation and retire-ment plans.

Lifetime cap onnon-concessional (after-tax)contributionsPrior to Budget night, therewas an annual cap of $180,000,with some provision for com-bining up to three years of thiscap into a single transactionfor those under age 65. The capis now $500,000 in total.

All NCC made from July 1,2007 included in the$500,000 capThis means many people willhave already utilised orexceeded this new cap. Thosewho have done so are to beallowed to retain these fundsin super.

Reduction of concessionalcontribution capIt was proposed in the Budgetthat, effective from July 1,2017, the present annual cap onthese contributions of $35,000for those aged 50 and above,and $30,000 for those under 50,will drop to $25,000.

Cap on allowable balance inpension phaseWhile previously the only caps

on entitlement were on contri-butions, it has been proposedthat a maximum of $1.6 million be allowed to beretained in a pension account.Any excess must be eitherwithdrawn or rolled back tothe accumulation (super)account.

Change to the work testUnder present rules, those 65and over have to pass a worktest to be eligible to contributeto super. As of July 1, 2017, this work test will no longerapply for those aged between65 and 74.

Concessional contributionsnot restricted to employersor self-employedAs of July 1, 2017, all contribu-tions to super, up to the $25,000annual cap, can be treated asconcessional, even if made as apersonal contribution by themember.

Catch-up provisions forthose who have not reachedtheir annual CC capEffective from July 1, 2017,members eligible to contribute

with account balances of lessthan $500,000 will be allowed tomake catch-up contributionson any unused component ofthe annual $25,000 cap on arolling five-year basis.

Reduction of the (Division293) income thresholdtriggering double taxation ofconcessional contributionsAs of July 1, 2017, the thresh-old for income plus conces-sional super contributions, atwhich the rate of contribu-tions tax increases from thestandard 15 per cent to 30 percent, will reduce from the pre-sent $300,000 to$250,000.

WayneLeggett isdirector atParamountFinancialServicesGroup.

The election and your superCanberra hasplans for yournest egg, warnsWayne Leggett

Malcolm Turnbull wants change.

9Monday, August 22, 2016 SECURING YOUR FUTURE

Depending on how muchyou have saved for yourretirement, it is likely you

fall into one of three types ofretirees. The financial plan-ning strategies that suit youwill differ based on whichgroup you are in.

Understanding the type ofretiree you are can help whenyou sit down to review yourfinancial situation.

An easy way to estimate thisis to think about how muchyou will need to spend eachyear in retirement.

Let’s assume you’ll have$50,000 per year and that yourretirement savings earns fourper cent per year. In this scena-rio, if you accumulated$350,000 in retirement savingsyou will earn $14,000 per year,meaning your retirement sav-ings are reduced by $36,000 peryear.

Depending on interest ratesand investment conditions,

your retirement savings willonly last around 10 years.

However, based on currentlife expectancy, a 65-year-oldman will live to 84 and awoman to 87, leaving you withat least 10 years to survive withno retirement savings.

Let’s look at financial plan-ning strategies you could useto help you through retire-ment.

Retiree type 1: under$350,000 in investmentsIssues: You might become des-perate to earn a higher returnso your money doesn’t dwindleas quickly, but the danger isthe potentially devastatingconsequences of taking exces-sive risk.

Strategy: Instead of takingmore investment risk, youcould think about downsizingthe family home, managingyour cashflow and working outhow the age pension can help.

Retiree type 2: $350,000 to$850,000 in investmentsIssues: You should ensure youare taking enough risk, usingthe right assets and correctlystructuring your investments.

Be forward thinking interms of tax and age pensionplanning.

In this low interest rate andhigh tax-offset environment,personal tax may not be anissue.

However, if tax offsets arereduced and interest ratesincrease you may find yourselfpaying tax and regretting ear-lier decisions not to use strate-gies such as account-basedpensions.

Strategies: Balance the useof your super pension with pri-vate investments to optimiseyour tax outcomes.

Then ensure a measuredapproach to taking investmentmarket exposure versus earn-ing interest on cash at thebank.

You should rebalance on aregular basis, bearing in mindyour propensity for marketexposure as this is a morereliable approach than tryingto pick sharemarket winners.

Retiree type 3: $850,000and over in investmentsIssues: If you are in this group,then review your investmentsand ensure you are getting thebest out of them. A sense of“we have plenty to last us” canbring about apathy. In thisrapidly changing world of tax,government concessions,technology and investmentstrategies, you may be missingsome important opportu-nities.

Strategies: Review your su-per and non-super invest-ments to ensure you aregetting the outcomes you seek.This could include simplypressuring your bank for abetter deposit rate, makingsure your managed invest-ments are cost-effective andensuring you have adequatediversification in your invest-ments.

Don’t set and forgetFinancial planning is impor-tant for everyone across alltypes of retirees. In the cur-rent complex environmentwhere the rules surroundingthe age pension, investment,tax and estate planning areconstantly evolving, it is vitalthat you review what strate-gies you are using to manageyour financial health in retire-ment. If you haven’t reviewedyour finances for some time,there will no doubt beimprovements that can befound.

Ben Devenish is ShadforthFinancial Group principal

What type of retiree are you?People fall into three maingroups when they finally stopworking, says Ben Devenish

YOU COULD THINK ABOUTDOWNSIZING THE FAMILYHOME.

10 Monday, August 22, 2016SECURING YOUR FUTURE

One of the most enjoyableparts of my job is talkingto clients about what they

would like to do when theyretire.

However, over the years ithas become apparent thatmany people do not spend a lotof time thinking about whatthey will do in retirement, beyond not having to go towork any more.

While you need to consideryour finances in retirement,there is more to retirementplanning than the question“do I have enough money toretire?”

As a starting point, here areseven assumptions aboutretirement that are importantto consider.

I will play golf /tennis/netballevery day.How will you spend your timewhen you are not working?

What activities are you looking forward to? Can you dothem every day or do you needother options?

Start finding new activitiesto incorporate into your lifebefore you retire to help avoidthe sudden onset of long hoursto fill without knowing what todo with yourself.

I will travel every year and goto all the places I havealways wanted to see.Have you sat down with thesignificant others in your lifeand discussed what their ideaof the perfect holiday is?

Are you in agreement or dothey have other ideas?

If they do have other ideas,how can you compromise toachieve what you both want?

Sit down now and start

the conversation to avoid surprises later.

I will spend more time withmy partner.Does your partner want tospend more time with you ordo they have other activities intheir lives?

If the latter is the case,what’s the plan to make thiswork?

Have the conversation nowand work out what you will dotogether and individually andplan what other activitiesyou’ll do with friends and ac-quaintances.

I will do all the things I havealways dreamed of doing.What are the things youalways dreamed of doing?

How will you make themactually happen? Work out thefirst thing you want to do andwhat the first step will be —start the plan now.

Having goals and dreamscan make life more exciting,but only if you have a plan toachieve them. Otherwise, theycan become hollow dreams.

I will no longer have to workand I will not miss it.Are you sure? What was the area of your job you found themost enjoyable, and how willyou replicate getting the samemental fulfilment in retire-ment?

Start networking with your business acquaintancesand friends to explore your options — volunteering orbeing on a board can provide a sense of purpose in retire-ment.

I will be fit and healthy andlive happily ever after.Money cannot buy health andthere is no point in workinghard to achieve your financialgoals if you are not able toenjoy retirement because youare ill.

Obviously some healthissues are beyond your controlbut what about the ones youcan control? Can you startleading a healthier lifestyle?What can you do now toimprove your health or makeany health issues more manageable?

I will be remembered when Iam gone.How will you be remembered?What is the legacy you want toleave and how will you achievethis? Can you start your owncharity or make a bequest toone? Do you want to make adifference in other ways? Workout what steps you need to taketo make a difference.

Belinda von Knoll is an adviserwith Shadforth Financial Group

Don’t try topredict yourgolden years Belinda von Knollsays you shouldnot assume thingsabout life afteryou quit work

DOES YOUR PARTNERWANT TO SPEND MORETIME WITH YOU OR DOTHEY HAVE OTHERACTIVITIES IN THEIRLIVES?

Belinda vonKnoll

11Monday, August 22, 2016 SECURING YOUR FUTURE

Account-based pensionWhen a super fund memberretires they typically converttheir super account into anaccount-based pension. Thismeans that they begin to drawan income stream that paysthem regularly to supporttheir lifestyle expenses but thevalue of their account can stillfluctuate with changes in theunderlying value of theirassets. Under current rules,income earned by assets sup-porting an account-based pen-sion is tax free but proposedgovernment changes will seethe tax-free component limit-ed to an account value of $1.6million if legislated.

Concessional contributions These are typically the “taxdeductible” contributions you

make to your super fund,usually either in the form ofsalary-sacrifice contributionsor superannuation guaranteeobligations for employees orpersonal contributions forself-employed individuals whoclaim a tax deduction for thosecontributions. Under the pro-posed changes to superannua-tion, the limit on concessionalcontributions would reduce to$25,000 per year but the agelimit on contributions wouldincrease to 75 without the needto meet a “work test”.

Condition of releaseA situation or event that hasoccurred can allow you toaccess your preserved benefitsinside your superannuationaccount, and variouslyinclude reaching age 65, leav-

ing employment after age 60,suffering a terminal medicalcondition, being totally dis-abled or reaching your preser-vation age and commencing atransition-to-retirement inc-ome stream. There are severalother possibilities but theabove mentioned are the morecommon ones.

Death benefit nominationA nomination made by theowner of a superannuationfund informs the trustee of thefund where the proceeds of thefund are to be distributed inthe event of the death of thesuperannuant. A “binding”death benefit nomination isthe most effective as it compelsthe trustee to direct paymentto the specified eligible benefi-ciary or beneficiaries. How-ever, binding death benefitnominations can lapse afterthree years. The advantage ofhaving a death benefit nomi-nation in place is that the pro-ceeds can be paid out quicklyto the beneficiary without hav-

ing to go into the estate andwaiting for probate to occur.

Income protection insuranceUnlike death or disability in-surance which pay a lumpsum, income protection paysyou a proportion of your sala-ry if you are unable to work tohelp you meet your ongoingliving expenses. For many peo-ple, their most important“asset” is their ability to earnan income, so income protec-tion insurance is a key compo-nent of their risk protectionstrategy.

Non-concessionalcontributionA type of personal contribu-tion against which a tax deduc-tion cannot be claimed and is

therefore often referred to asan “after tax” contribution.Proposed legislation by thegovernment will limit the life-time contributions of theseamounts to $500,000, whichsome argue will limit thedegree to which individualswill now be able to use super-annuation as an effectiveretirement savings vehicle.Under current legislation, aneligible individual may con-tribute up to $180,000 per year.

Personal contributionFor employed individualsthese amounts are usuallythose that are contributedfrom your “after-tax” income(i.e. non-concessional contri-butions) and are therefore nei-ther salary sacrifice nor

Back to school for the Don’t know your work test fromyour concessional contribution?Greg Major explains the basics.

THE PRESERVATION AGE WAS TRADITIONALLY AGE 55,BUT LEGISLATION HAS BEEN PASSED WHICH IS MOVINGTHAT AGE GRADUALLY HIGHER OVER TIME.

Explore the possibilitiesAre you heading in the right direction?

Let us be your GuideKLI Accountants & Wealth Managers Pty Ltd | ABN: 36 167 537 546 | AFSL: 452054

Level 11 Brookfield Place125 St Georges Terrace, Perth WA 6000P: 08 9466 3337 | www.kligroup.com.au

12 Monday, August 22, 2016DEFINITIONS 13Monday, August 22, 2016 DEFINITIONS

therefore often referred to asan “after tax” contribution.Proposed legislation by thegovernment will limit the life-time contributions of theseamounts to $500,000, whichsome argue will limit thedegree to which individualswill now be able to use super-annuation as an effectiveretirement savings vehicle.Under current legislation, aneligible individual may con-tribute up to $180,000 per year.

Personal contributionFor employed individualsthese amounts are usuallythose that are contributedfrom your “after-tax” income(i.e. non-concessional contri-butions) and are therefore nei-ther salary sacrifice nor

superannuation guaranteecontributions. Previously itwasn’t possible for mostemployed individuals tomake a tax-deductible perso-nal contribution; althoughunder the proposed superan-nuation changes by thegovernment, an individualwould be able to make a per-sonal deductible contribu-tion from July 1, 2017.

Preservation ageThis is the minimum age atwhich you can possiblyaccess your super withoutrestriction, i.e. gain access toyour “preserved” benefits.The preservation

age was traditionally 55 butlegislation has been passedwhich is moving that agegradually higher over time,such that for people bornafter June 1964 the preserva-tion age is now 60.

Salary sacrificeSalary sacrifice is a generalterm under which anemployee forgoes the pay-ment of salary for paymentin kind. One common exam-ple is novated leases formotor vehicles, which is atype of salary sacrifice. Inthe superannuation world,salary sacrifice means fore-

going salary for which the

employer makes a contribu-tion on your behalf to yoursuper fund. By foregoing thesalary, you are effectivelymaking a “tax deductible”contribution to your superaccount.

Superannuation guarantee Superannuation guaranteeis a requirement uponemployers to provide a mini-mum level of superannua-tion support for employeesby contributing a percentageof their ordinary-time earn-ings into their superannua-tion account every quarter.The current contributionrate increased to 9.5 per cent

as of July 1, 2014, and willremain at that level until June30, 2021, and then increase by0.5 per cent each year until itreaches 12 per cent.

Transition to retirement This is a form of incomestream that can be structuredfrom your superannuationaccount once you have reach-ed your preservation agewhich allows you to receive apension while still working.Proposed changes to the work-ings of TTR will make thisonce quite tax-effective mech-anism for working people aged60-65 less attractive if passed.Where the assets supporting a

TTR are currently not taxedon earnings, the Govern-ment’s proposed legislationwould see those taxed at 15 percent.

Work testPeople who are aged over 65(and under age 74) and want tocontribute to super must meeta “work test”. The work testrequires that the individualmust have worked for at least40 hours over 30 consecutivedays in the financial year thatthey wish to make the supercontribution. If the individualmeets the work test, then theyare eligible to make any type ofcontribution.

Blueprint Planning Pty Ltd (ABN 78 097 264 554), trading as Blueprint Wealth, is an AuthorisedRepresentative and Credit Representative of AMP Financial Planning Pty Ltd, Australian FinancialServices Licensee and Australian Credit Licensee.This article contains information that is general in nature and does not take into account yourobjectives, financial situation or needs. Therefore, before making any decision, you should consider theappropriateness of the advice in regards to those matters.

Back to school for the THE PRESERVATION AGE WAS TRADITIONALLY AGE 55,BUT LEGISLATION HAS BEEN PASSED WHICH IS MOVINGTHAT AGE GRADUALLY HIGHER OVER TIME.

Explore the possibilitiesAre you heading in the right direction?

Let us be your GuideKLI Accountants & Wealth Managers Pty Ltd | ABN: 36 167 537 546 | AFSL: 452054

Level 11 Brookfield Place125 St Georges Terrace, Perth WA 6000P: 08 9466 3337 | www.kligroup.com.au

basics of retirement

Greg Major is an adviser with Blueprint Wealth

12 Monday, August 22, 2016DEFINITIONS 13Monday, August 22, 2016 DEFINITIONS

The Australian dream hasalways been about owningproperty. But as more Aus-

tralians reach retirement, thequestion is being asked, howcan we utilise our most val-uable assets, the family home?

What kind of lifestyle youwant, where you want to liveand how your mobility mayreduce in the future all need tobe taken into account.

These then need to be bal-anced against the cost of

having the lifestyle you wantand how this affects yourincome and expenses. Any res-tructure will usually affectboth your age pension entitle-ments and personal estateplan. You need to consider howmuch you wish to leave foryour children/grandchildrenand how much you want to useduring your lifetime.

DownsizingIn your early retirement years,the burden of maintaining alarge principal residencebecomes apparent. The kidshave left home and you want totravel but a large property ishard to maintain.

Downsizing is costly andsomething you really want toonly do once. Real estate agentfees are usually between 2-2.5per cent and stamp duty on anew premise will be upwardsof $20,000.

That being said, releasingcapital that can be investedwill increase the amount ofincome you have available forlifestyle. The downside is that

the additional capital releasedwill generally result in areduction in the age pension.

RenovationsAs your mobility needs

change with age, your currenthome may no longer be suita-ble for you. However, many ofus have an emotional attach-ment to our homes and wouldrather stay, or you may be liv-ing in an area you love, and arereluctant to leave.

In this case, renovations canbe undertaken to ensure safetyin bathrooms and kitchensand ease of access for futuremobility. Simple amendmentsto your home can be madefrom $10,000 to $25,000. Main-taining equity in the familyhome with little other assetswill often maximise your agepension entitlement, as thefamily home is not counted inthe age pension asset test.

Retirement villageOn average, a property in aretirement village costs about90 per cent of the medianhouse price in the area it is

located, and in some cases youare not required to pay stampduty. This makes the entrycost smaller than purchasing asimilar home outside a village.

However, you usually pay a“deferred management fee”when you leave.

This fee is calculated on theamount of your initial pur-chase price and your length ofresidency, and is usuallycapped.

In addition, residents arerequired to pay a managementfee towards the running of thevillage. Average monthly feesare $280-$500 and are used tofund shared resources and theupkeep of common areas within the village.

In considering this option,you must compare the totalcost of the deferred manage-ment fee and maintenancefees over your lifetime againstthe social aspects and carebenefits a retirement village provides.

Kelly Pillay is director of KLIAccountants & Wealth Managers

Housing options openMake the family homework, says Kelly Pillay

AS YOUR MOBILITY NEEDSCHANGE WITH AGE, YOURCURRENT HOME MAY NOLONGER BE SUITABLE.

Knowledge is Power.

Take charge of your super.

Our Trustee Knowledge Centre gives you the confidence to self manage your super fund to gain the best possible outcome for your retirement.

As an independent organisation, the SMSF Association knows the right information is essential for your fund and your future.

Our goal is to educate and empower people to better understand the issues, demands and regulations needed to make the most of their self managed super fund.

On our new website you’ll find essential information, education modules, timely checklists, videos, latest news and changes to regulation and laws.

Things can change rapidly, but as a member of the Trustee Knowledge Centre you’ll remain up to date.

Take charge, start your free 30-day membership trial today.

Visit trustees.smsfassociation.com

Book your free no obligation meetingwith Your Money columnist

WWWWWWWWWaaayyynnneee LLLLLLLLLeeeggggggeeetttttttttttttt

Helping you build a brightertomorrow by making the most

from what you have today!Authorised representative ofFortnum Financial Advisers

email@paramount.net.au(08) 9474 3522

www.paramount.net.au

ABN 54 139 889 535AFSL 357306 3269380METTT08032016

Blueprint Planning Pty Ltd ABN 78 097 264 554 trading as Blueprint Wealth is an authorised representative and creditrepresentative of AMP Financial Planning Pty Limited, AFSL and Australian Credit Licensee.This advertisement contains general information only. It does not take into account your objectives, financial situationor needs. Please consider the appropriateness of the information in light of your personal circumstances.

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Contact us today to book afree initial consultation with aBlueprint Wealth Financial Advisor.1/23 Richardson StreetSouth PerthWA 6151Tel (08) 9423 0300Email help@bpwealth.com.auWeb bpwealth.com.au

Better is thepurposeofeveryplan.It’s thesparkbehindevery idea,andthesubjectofeverydaydream.

Better iswhatwewantforourselves,forour familyandforour future.Better isuniquetoeachandeveryoneofus.Butnomatterwhatyourbetter is,BlueprintWealthcanhelpyouachieve it.

14 Monday, August 22, 2016RETIREMENT LIVING 15Monday, August 22, 2016 RETIREMENT LIVING

located, and in some cases youare not required to pay stampduty. This makes the entrycost smaller than purchasing asimilar home outside a village.

However, you usually pay a“deferred management fee”when you leave.

This fee is calculated on theamount of your initial pur-chase price and your length ofresidency, and is usuallycapped.

In addition, residents arerequired to pay a managementfee towards the running of thevillage. Average monthly feesare $280-$500 and are used tofund shared resources and theupkeep of common areas within the village.

In considering this option,you must compare the totalcost of the deferred manage-ment fee and maintenancefees over your lifetime againstthe social aspects and carebenefits a retirement village provides.

Kelly Pillay is director of KLIAccountants & Wealth Managers

Housing options open

Book your free no obligation meetingwith Your Money columnist

WWWWWWWWWaaayyynnneee LLLLLLLLLeeeggggggeeetttttttttttttt

Helping you build a brightertomorrow by making the most

from what you have today!Authorised representative ofFortnum Financial Advisers

email@paramount.net.au(08) 9474 3522

www.paramount.net.au

ABN 54 139 889 535AFSL 357306 3269380METTT08032016

Pension loan schemeThe PLS is open to people of pension age whohave equity in Australian real estate thatthey can use as security for a loan to the Com-monwealth Government. The PLS allowsthose on a part-pension to top it up to the fullrate. If you are not eligible for any pension,the PLS allows you to receive fortnightly pay-ments equivalent to the full rate. To be eligi-ble, the person must receive no pension or areduced rate of pension because of theincome or assets test. It is not available tothose receiving the full rate of age pension.Compound interest is charged on the loanand it is normally repaid if the home is soldor from the person’s estate after their death.This is a little-known option, which is used incircumstances where an individual ownsproperty that they either do not want to sellor if the property is unable to be sold.

Reverse mortgageA reverse mortgage allows you to borrow upto 25 per cent of the value of your property,with interest on the borrowed amount cap-italised into the loan. Current reverse mort-gage interest rates are around 6.5 per cent.Upon your death, the bank will sell the home,clear the debt and return the remainingamount to your estate. If the reverse mort-gage is drawn down over time and used tofund your living expenses, it will have noeffect on your entitlement to an age pension.You need to understand the effect that com-pound interest has on your lending, as it ispossible for the full value of the house to beabsorbed by the reverse mortgage, with littleto no money remaining for children andgrandchildren through your estate.

If you are trying to work out what to do with your principal residence, deciding on which option touse can be both confusing and stressful. It’s important to get a clear picture of what options are

available to you, so that you can make the most out of one of your most valuable assets.

Blueprint Planning Pty Ltd ABN 78 097 264 554 trading as Blueprint Wealth is an authorised representative and creditrepresentative of AMP Financial Planning Pty Limited, AFSL and Australian Credit Licensee.This advertisement contains general information only. It does not take into account your objectives, financial situationor needs. Please consider the appropriateness of the information in light of your personal circumstances.

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Contact us today to book afree initial consultation with aBlueprint Wealth Financial Advisor.1/23 Richardson StreetSouth PerthWA 6151Tel (08) 9423 0300Email help@bpwealth.com.auWeb bpwealth.com.au

Better is thepurposeofeveryplan.It’s thesparkbehindevery idea,andthesubjectofeverydaydream.

Better iswhatwewantforourselves,forour familyandforour future.Better isuniquetoeachandeveryoneofus.Butnomatterwhatyourbetter is,BlueprintWealthcanhelpyouachieve it.

Two ways to unlock the wealth in your property

14 Monday, August 22, 2016RETIREMENT LIVING 15Monday, August 22, 2016 RETIREMENT LIVING

value, meaning a low fundbalance costs you less in fees.An SMSF is generally notconsidered economical untilyour fund balance exceedsaround $250,000. Anythingless than that and you aremissing one of the mainbenefits.

Can you become a trustee? If you create an SMSF, youwill be classified as a trusteeof the fund and responsible

shares is considered fullydiversified). With a smallerinvestment pot, andpotentially a less diverseportfolio, managing thatportfolio well becomes moreimportant — and potentiallymore time-consuming.

Will an SMSF save money? Many costs associated withan SMSF are fixed, whilemany managed funds chargea percentage of the fund

Have you ever thought,‘Wow! Tradespeoplecharge an arm and a leg.

I’m going to renovate thebathroom myself !’ only tofind the process a lot morecomplicated, time-consumingand (potentially) costly thanyou actually thought it wouldbe? If you haven’t, unless youhave some skill andexperience in the required

trades, this will almostcertainly be the case ifyou ever decide to DIY.A similar philosophycould be taken to

managing your ownsuperannuation savings bycreating a self-managed superfund (SMSF).

With that in mind, here aresix questions to ask yourselfbefore creating an SMSF:

Do you have any investmentexperience?As already mentioned,experience in the requiredskills makes any DIY projectquicker and easier tocomplete and is more likely tosave you money. You may notbe a financial planner, but ifyou have managed otherinvestments, such as sharesand property over anextended period, SMSFmanagement may well besomething you are confidentyou can do. Also keep in mindthat you can use aprofessional to advise on

managing the fund. Justbecause it is self-managed,doesn’t mean you have to doeverything yourself.

Will you put in the time tomanage your fund?Like any DIY project, theprospect of saving moneygenerally comes at a cost ofyour time. The moreexperience you have ininvesting and fundmanagement the less time itwill take. But to get the bestresults you should take thetime to regularly monitor themarkets you are investing inas well as spending time onadministrative tasks. In amanaged fund your money isput into a large pot andspread over a wide number ofinvestments, reducing therisk significantly (generally aportfolio of 30 different

Are you ready toDIY with SMSF?Renovating a house yourself ishard, so think hard about DIYsuper, warns Troy MacMillan

non-concessional contribu-tions from July 1, 2017.

Insurance transfer and coverLife insurance bought via aSMSF (superannuation lawsrequire trustees to consider in-surance for fund memberswhen drafting the investmentstrategy) requires the ownerto be the trustee of the superfund. If the policy owner is anindividual this can be a breachof the legislation. Caution isalso required when transfer-ring existing insurance poli-cies into a new SMSF. Theinsurer must be notified sothey can adjust the policydetails.

Choose the right partnerDon’t set up an SMSF withsomeone unless you’re in along-term relationship. It mayseem a little bizarre to thinkpeople would set up a fundwith someone who isn’t a life-time partner but they some-times do. If the assets are justcash and shares, unwinding itis not such a problem. Butwhen the assets are illiquid,such as property, then it canbecome time-consuming andexpensive to wind up the fund.

Get the paperwork right:sloppy paperwork will comeback to haunt trustees, espe-

cially if the ATO decides totake an “interest” in yourfund. It’s imperative trusteeshave the time and knowledgeto ensure all their paperworkis complete and up to date. Ifnot, they need to get profes-sional help to ensure theirfund is compliant at all times.

The property trapAn SMSF can’t buy a residen-tial property for fund mem-bers to live in, or even use as aholiday home. Business prop-erty is the exception to thisrule, provided the transactionis done at market value and isdocumented. SMSFs can bor-row using limited recourseborrowing arrangements(LRBAs) but they must complywith very specific legalrequirements. Getting profes-sional advice from an SMSFspecialist is strongly recom-mended before entering intoan LRBA. While trustees areallowed to maintain a proper-ty, it can’t be improved.

Arm’s length investing: theATO takes a dim view ofSMSFs that acquire assets at“mate’s rates”. As a rule allassets must be bought at themarket price.

Andrea Slattery is chief executive ofthe SMSF Association

In the last Mercer index,which rates global superan-nuation schemes, Australia

came third. In the last sevenyears that this authoritativeindex has published its find-ings, it has always placed Aus-tralian in the top four. The factis we have a highly regulated,secure and well-performingsuperannuation system.

But with regulation comescomplexity, and with that theincreased likelihood of fallingfoul of the law. This is partic-ularly germane for SMSF trus-tees who directly manage their

funds. There is agrowing army

of specialiststo advisetrustees onhow to avoidthese pitfalls

but the ulti-mate re-

sponsibility still rests withtrustees.

The reality is that the vastmajority of trustee mistakesresult from ignorance or a lackof up-to-date knowledge, notmalfeasance, and as suchcould be greatly minimisedwith good advice and bettertrustee education.

So what are some of themore common mistakes?

Sole purpose testThis test lies at the core ofSMSF compliance. As the titlesuggests it simply says a fundneeds to be maintained for the“sole purpose” of providingretirement and/or death bene-fits to fund members (ordependants if a member diesbefore retirement). However,some trustees still believeSMSF assets can have otheruses. They can’t and the ATOwill penalise you for doing so.Some of the following mis-takes flow from failing tounderstand the importance ofthe Sole Purpose Test.

Member loans: A goodexample of how fund mem-bers can transgress the

Sole Purpose Test. Many smallbusiness people have SMSFsand wrongly believe they cantap their superannuation toprop up their business intough times. The rationale isthat it’s their money so what’sthe harm with giving them-selves a short-term loan. Well,there are no occasions wherean SMSF can loan money tofund members and funds thatdo so can face penalties or bedeemed non-compliant by theATO and lose all concessionaltax benefits.

Exceeding contribution capsTrustees must not exceedtheir concessional and non-concessional contributioncaps. The ATO takes a morebenign view than previously,with any excess concessionalcontributions being taxed atthe marginal tax rate. Cur-rently concessional caps are$30,000 a year or $35,000 forfund members aged 49 or over.Non-concessional contribu-tions have a yearly cap of$180,000 for members 65 orover but under 75, or $540,000over a three-year period formembers under 65. However,the Government proposed inthe last budget to limit the con-cessional cap to $25,000 and alife-time limit of $500,000 for

Common mistakes for trusteesAndrea Slattery on the pitfalls of managing your own nest egg

If you would like a copy of our uniqueR.A.M. Retirement Ready Report that ispersonalised to your current superannuationsituation please contact us on 9207 3844,visit our website fwplanners.com.au ordownload our free App.

To download our FREE AppSearch Future Wealth Plannerson your Apple or Androiddevice.

TUNE IN TO 6PR EVERY THIRD TUESDAY OF THE MONTH FROM 10AM - 10.30AM TO SPEAK TOBRENTON JONES, FOUNDER OF FUTUREWEALTH PLANNERS AND AUTHOROF THE R.A.M REPORTTUBR

WANTTOKNOWWHATTHEKEYTO A SECURE RETIREMENT IS?Were you born between 1946 and 1964?Do you know what your R.A.M is?

Having a large R.A.M is a key component tofinancial security in retirement.

UESDAY OF THE MO

P: 9207 3844 W: fwplanners.com.auFuture Wealth Planners Pty Ltd ATF B & G Business Trust is a Corporate Authorised Representative of Sentry Financial Planning Pty Ltd AFSL 247105

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value, meaning a low fundbalance costs you less in fees.An SMSF is generally notconsidered economical untilyour fund balance exceedsaround $250,000. Anythingless than that and you aremissing one of the mainbenefits.

Can you become a trustee? If you create an SMSF, youwill be classified as a trusteeof the fund and responsible

shares is considered fullydiversified). With a smallerinvestment pot, andpotentially a less diverseportfolio, managing thatportfolio well becomes moreimportant — and potentiallymore time-consuming.

Will an SMSF save money? Many costs associated withan SMSF are fixed, whilemany managed funds chargea percentage of the fund

for its management; however,you will not be able to be atrustee if you are under 18years of age, an undisclosedbankrupt, are mentallyincapacitated or have beenconvicted of certain crimes.

Are you aware of the legalramifications if youmismanage the fund?So you have determined thatyou can become a trustee, butdo you want to? Mismanaging

your SMSF can result inpenalties to both yourself andyour fund— anywhere from afew hundred dollars up todisqualification as a trusteeand many thousands ofdollars which the trusteeneeds to pay themselves, notout of the SMSF’s funds. So itis worth becoming extremelyfamiliar with theresponsibilities and reportingobligations of a trustee beforedeciding to become one. Visit

ato.gov.au for moreinformation about penalties.

Are you aware of the taximplications if your fund isnon-compliant? Superannuation is designedto encourage people to putmoney aside for retirement.The main incentive is the lowtax rate of 15 per cent onmost superannuationcontributions. The same taxrates apply to SMSF andmanaged funds; however, ifyour fund is non-compliant, itcould be penalised at themaximum tax rate (currently49 per cent) every year that itremains so. In the first year, itwill also be assessed on themarket value of all its assetsand any contributions notalready part of the taxableincome of the fund (basicallyyou will lose almost half ofyour whole fund’s value).

Will you put in the time tomanage your fund?No this isn’t a typo, therereally are only six questions,it’s just that this one is worthasking yourself twice. Nowthat you are aware ofeverything that’s involved increating and managing anSMSF, take the time to weighthe amount of money you are

likely to save against theamount of time it will take tosave it. If your hourly rate islikely to be less than theminimum wage, maybe it isworth using an expert.

Now, this article gives theimpression that you wouldneed to be crazy to create anSMSF (in which case youwouldn’t be able to, accordingto point four above), but thereality is that SMSFs are thefastest-growingsuperannuation sector inAustralia, with close to600,000 funds controllingapproximately $600 billion.

That being the case, theremust be some prettycompelling reasons to createand manage your own fund.

The main benefits are thesubstantial savings you canmake once your fund getsover that $250,000 mark, andthe flexibility and additionalcontrol over your financialfuture that comes withmanaging your funds, yourway. This piece is simplydesigned to encourage you totake the time to fully considerall the aspects involved withmanaging an SMSF lest youbecome a DIY disaster.

Troy MacMillan is an adviser withand founder of TWD

cially if the ATO decides totake an “interest” in yourfund. It’s imperative trusteeshave the time and knowledgeto ensure all their paperworkis complete and up to date. Ifnot, they need to get profes-sional help to ensure theirfund is compliant at all times.

The property trapAn SMSF can’t buy a residen-tial property for fund mem-bers to live in, or even use as aholiday home. Business prop-erty is the exception to thisrule, provided the transactionis done at market value and isdocumented. SMSFs can bor-row using limited recourseborrowing arrangements(LRBAs) but they must complywith very specific legalrequirements. Getting profes-sional advice from an SMSFspecialist is strongly recom-mended before entering intoan LRBA. While trustees areallowed to maintain a proper-ty, it can’t be improved.

Arm’s length investing: theATO takes a dim view ofSMSFs that acquire assets at“mate’s rates”. As a rule allassets must be bought at themarket price.

Andrea Slattery is chief executive ofthe SMSF Association

Common mistakes for trustees

If you would like a copy of our uniqueR.A.M. Retirement Ready Report that ispersonalised to your current superannuationsituation please contact us on 9207 3844,visit our website fwplanners.com.au ordownload our free App.

To download our FREE AppSearch Future Wealth Plannerson your Apple or Androiddevice.

TUNE IN TO 6PR EVERY THIRD TUESDAY OF THE MONTH FROM 10AM - 10.30AM TO SPEAK TOBRENTON JONES, FOUNDER OF FUTUREWEALTH PLANNERS AND AUTHOROF THE R.A.M REPORTTUBR

WANTTOKNOWWHATTHEKEYTO A SECURE RETIREMENT IS?Were you born between 1946 and 1964?Do you know what your R.A.M is?

Having a large R.A.M is a key component tofinancial security in retirement.

UESDAY OF THE MO

P: 9207 3844 W: fwplanners.com.auFuture Wealth Planners Pty Ltd ATF B & G Business Trust is a Corporate Authorised Representative of Sentry Financial Planning Pty Ltd AFSL 247105

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For many people, whenthey think aboutinvestment strategy their

main consideration is howthey can make the mostamount from their money. Inreality, one of the mostimportant decisions to makewhen it comes to investing ishow much risk you’re willingto take to get a return.

Considering the amount ofrisk you are willing to takewill then influence thepotential return (or loss) that

you can set yourself up for.Everyone wants to maximisetheir return but what risksare you willing to take to getthere?

Traditionally, when itcomes to investing forretirement or insuperannuation, youngpeople are willing to takemore risks and as they getcloser to retirement age theybecome more conservative.

This basic principle isbased on time. How muchtime do you have before youneed or are able to accessyour money? Do you havetime for your portfolio torecover after a marketdownturn?

Another question toconsider is what returns doyou need to achieve yourlifestyle goals in retirement?

If your portfolio is able togenerate stable returns,without taking a lot of risk,then it may make sense tolook at lower-risk options.Taking less risky options maybring the benefit of reducingyour financial stress.

Risk varies from person to

person but it is generallyaccepted that a riskierportfolio tends to contain agreater number of shares andproperty investments. A lot ofpeople consider blue-chipshares and property as safeinvestments.

However, both have theability to go up and downsignificantly in value over a12-month period. Defensiveassets include investmentssuch as cash and bonds —both government andcorporate bonds.

People who choose anaggressive risk profile willhave a growth portfolio ofAustralian and internationalshares with some property. Abalanced portfolio can bemisinterpreted as a 50-50 splitbetween growth anddefensive assets, although itis more likely a 70 per centsplit to growth assets.

Conservative portfolios willhave a 70 per cent tilt todefensive assets with somehaving a smaller amount ofgrowth assets. According to aLonsec Investment OutlookReport published in June,

over the past 20 years, atypical balanced portfolio hasmade an average return of8.44 per cent a year, whereasthe conservative portfolio hasmade 7.06 per cent. Thosedifferences may not soundthat great but, compoundedover 20 years on a $100,000investment, they create adifference of about $114,000.

In the currentenvironment, becauseinterest rates have fallen,some conservative investorshave lowered their sights ontheir return objectives.Interestingly, it is the growthpart of their portfolios whichis really struggling toperform with total returnsfrom equity markets in thepast year at only around 2 percent, whereas bond marketreturns have been quitestrong at around 7 per cent.

Those who have been braveenough to invest in theAustralian REIT market haveseen their money grow by 24per cent in the past year.These figures demonstratethat even in “ sideways”equities markets, assetclasses with different riskprofiles may perform quitedifferently, henceunderstanding risk and howto combine it in your portfoliois paramount to long-termsuccess.

Many superannuationfunds will automaticallyreduce your risk level as you

get closer to retirement age ifyou have not advised themotherwise. You need to beaware of this and consider ifthis is right for you.

When considering the typeof Investment strategy that isapplicable for you, it isimportant to think about theamount of risk you arewilling to take, the returnsthat you are looking for andalso the timeframe you havefor your investment.

This will help you consideran investment strategy that isright for your personal profileas well as your stage in life.Getting personal advice tohelp you consider theinvestments you should betaking is one way to help youmanage risk and get thereturns that you are after.

Brad Martin is an adviser atBlueprint Wealth

Blueprint Planning Pty Ltd (ABN 78097 264 554), trading as BlueprintWealth, is an AuthorisedRepresentative and CreditRepresentative of AMP FinancialPlanning Pty Ltd, AustralianFinancial Services Licensee andAustralian Credit Licensee. Thisarticle contains information that isgeneral in nature and does nottake into account your objectives,financial situation or needs.Therefore, before making anydecision, you should consider theappropriateness of the advice inregards to those matters.

Facing a risky business

Tom Cruise in the 1983 hitfilm Risky Business.

Investing is allabout weighingrisk and return,says Brad Martin

OVER THE PAST 20 YEARS, A TYPICAL BALANCEDPORTFOLIO MADE AN AVERAGE RETURN OF 8.44 PERCENT A YEAR, WHEREAS THE CONSERVATIVEPORTFOLIO HAS MADE 7.06 PER CENT.

Lighthouse Capital Pty Ltd, Level 3, 190 St George’s Terrace Perth WA 6000 is anAuthorised Representative of Godfrey Pembroke Limited ABN 23 002 336 254,an Australian Financial Services Licensee, Registered office 105 – 153 Miller Street,North Sydney NSW 2060 and a member of the National Australia group of companies.

Godfrey PembrokePremie r Prac t i ce 2012

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TAKE CONTROL OF YOUR WEALTHHelping generations of West Australians since 1993

Lighthouse Capital Perth 9481 2366 | Bunbury 9791 3426 | www.lighthousecapital.com.au

Premier Practice 2016

BradMartin

18 Monday, August 22, 2016INVESTMENT RISK 19Monday, August 22, 2016 INVESTMENT RISK

get closer to retirement age ifyou have not advised themotherwise. You need to beaware of this and consider ifthis is right for you.

When considering the typeof Investment strategy that isapplicable for you, it isimportant to think about theamount of risk you arewilling to take, the returnsthat you are looking for andalso the timeframe you havefor your investment.

This will help you consideran investment strategy that isright for your personal profileas well as your stage in life.Getting personal advice tohelp you consider theinvestments you should betaking is one way to help youmanage risk and get thereturns that you are after.

Brad Martin is an adviser atBlueprint Wealth

Blueprint Planning Pty Ltd (ABN 78097 264 554), trading as BlueprintWealth, is an AuthorisedRepresentative and CreditRepresentative of AMP FinancialPlanning Pty Ltd, AustralianFinancial Services Licensee andAustralian Credit Licensee. Thisarticle contains information that isgeneral in nature and does nottake into account your objectives,financial situation or needs.Therefore, before making anydecision, you should consider theappropriateness of the advice inregards to those matters.

Facing a risky business

Tom Cruise in the 1983 hitfilm Risky Business.

When quoting returns fordifferent asset classes, theinvestment industry mostlyuses long-term averages.

However, this approachmasks some unfortunatetruths which can have bigimpacts on investors,particularly retirees. Theextent to which annualreturns differ, and the“sequence” in which returnsare achieved, can have a bigimpact.

Somebody retiring in 1969or 1970, and taking anindexed income of 5 per centper annum of the accountbalance, would have done bestby investing in cash. Then,after 25 years they would stillhave most of their capital left,even after allowing forinflation.

Fast-forward to ourpost-GFC world and it isalmost the mirror opposite ofthe situation in the 1970s.

In the 1970s and 1980s,inflation and interest rateswere high and thesharemarket suffered a majorfall of about 50 per cent.

People relying on shares fortheir income needed to drawbigger amounts to keep upwith inflation. This entailedselling more shares at lowerprices. They were broke after15 years.

By contrast, cash and fixedinterest provided goodincome. The 10-yearAustralian Government bond

topped out at 16.5 per cent inAugust, 1982.

Now we have the opposite— record-low interest rates,low inflation verging ondeflation, and low growth.

So, where to look? Firstly, itis helpful to break the returnsources down into its

separate components ofgrowth and income.

When we do this, wefind that dividends stillprovide a good level ofincome and have donebetter than term depositssince the late 1990s.

Finally, whatever

strategy you adopt, beready to change if thereare fundamental changesto the global economicand financial scene.

John Cameron is principal ofBlack Swan Event FinancialPlanning

Sequencing and retirement incomeJohn Cameron

Feb 2003 Dec 2006 Jan 1970 Nov 1974

$000 value $000 value

Infl ation-adjusted balanceInfl ation-adjusted balance

Income 5% of initial balance increasing by infl ation Income 5% of initial balance increasing by infl ation

250

200

150

100

50

0

1200

1000

800

600

400

200

0

RETIRED FEBRUARY 2003Money into Australian shares, account balance after

RETIRED JANUARY 1970Money into Australian shares, account balance after income

Lighthouse Capital Pty Ltd, Level 3, 190 St George’s Terrace Perth WA 6000 is anAuthorised Representative of Godfrey Pembroke Limited ABN 23 002 336 254,an Australian Financial Services Licensee, Registered office 105 – 153 Miller Street,North Sydney NSW 2060 and a member of the National Australia group of companies.

Godfrey PembrokePremie r Prac t i ce 2012

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Lighthouse Capital Perth 9481 2366 | Bunbury 9791 3426 | www.lighthousecapital.com.au

Premier Practice 2016

18 Monday, August 22, 2016INVESTMENT RISK 19Monday, August 22, 2016 INVESTMENT RISK

21WORKING ON20 WORKING ON

The lead-up to retire-ment is supposed tobe something to look

forward to, and an oppor-tunity to plan for life afterwork. But if you’re uncer-tain about whether or notyour retirement assetsare going to last, it can feellike a looming deadline.

There are a number ofoptions to help extend thelife of your super, withoutmissing out on the holi-days and other experienc-es you’ve been dreamingabout.

Take the example of

Jane, who is a 61-year-oldearning $60,000 a year.She would like to retirenow but only has $300,000in superannuation. If shewas to retire tomorrow,Jane would requireincome of $42,000 perannum to ensure a com-fortable retirement.

Assuming an averagerate of return, we can esti-mate that Jane’s moneywill last until she reachesage 71. This puts her wellshort of the averagefemale life expectancy of83 and will see her rely on

the age pension. People inthis position feel pres-sured to stay at work.

If Jane was to continueworking for another threeyears, she would build alarger superannuationbalance and reduce theperiod over which shewould rely on her super.

As you can see in thetable above, this wouldresult in a significantlylonger period of incomethrough retirement.

Jane’s situation is notuncommon — 40 per centof men and 35 per cent ofwomen are now delayingretirement because offears around financialsecurity. Research cur-rently being conducted byBoston University indi-cates that continuing to

work for three years pastyour planned retirementage can boost your retire-ment savings by morethan 30 per cent.

Alternatively, we areseeing more people con-sider gradual retirement,allowing them to take thebig holidays and followtheir passion while stillkeeping their hand in thegame and ensuring theircapital lasts a lifetime.

In this situation, Janecould extend the life of hersuperannuation by con-tinuing to work part-timefor a longer period. Thiswould give her an imme-diate lifestyle benefitwithout having to pushthrough working full-time for another fewyears.

Extra graftcan pay offafter workWorking for three extra yearscould boost your nest egg bya third, writes Kelly Pillay

60 8460 84EmploymentAccount-based

pensionAccount-based pension

Employment Age pension

Age pension

Super balance

Super balance

70

60

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$000$000 $000$000400

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WORK FOR THREE YEARSWORK PART-TIME

Mickey Danker is among thegrowing number of WestAustralians who choose towork past retirement age. At84, Mr Danker is the conciergeat Joondalup’s Sisters SupaIGA.

“I make sure the shoppersfeel at home and make surethey get a decent trolley,” hesaid. “I also do a bit ofmaintenance on the trolleys.”

Mr Danker started work atIGA in 2008. He works twodays a week for three hourseach day, down from five daysa week and four hours a daywhen he first started.

In his younger days, he was afitter and turner. Mr Dankerdoes not have plans to retirefrom his supermarket gig.

“I really enjoy it. I enjoymeeting people andsocialising,” he said.

He works on Tuesdays andFridays, when pensioners areeligible for a discount.

Claire Tyrrell

Sisters Supa IGA concierge MickeyDanker is one of a growing numberof older workers.

Mickey still on job

The FPAWestern Australian Chapterrecognize and thank the followingsponsors for their valuable support.

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T: 08 9358 5599 l E: admin@dky.com.auPO Box 8337, PERTH WA 6849 l W: dky.com.auSuite 2, 1334 Albany Hwy, CANNINGTON WA 6107

Auditax AccountantsChartered Accountant & SMSF Auditor

21WORKING ON20 WORKING ON

the age pension. People inthis position feel pres-sured to stay at work.

If Jane was to continueworking for another threeyears, she would build alarger superannuationbalance and reduce theperiod over which shewould rely on her super.

As you can see in thetable above, this wouldresult in a significantlylonger period of incomethrough retirement.

Jane’s situation is notuncommon — 40 per centof men and 35 per cent ofwomen are now delayingretirement because offears around financialsecurity. Research cur-rently being conducted byBoston University indi-cates that continuing to

work for three years pastyour planned retirementage can boost your retire-ment savings by morethan 30 per cent.

Alternatively, we areseeing more people con-sider gradual retirement,allowing them to take thebig holidays and followtheir passion while stillkeeping their hand in thegame and ensuring theircapital lasts a lifetime.

In this situation, Janecould extend the life of hersuperannuation by con-tinuing to work part-timefor a longer period. Thiswould give her an imme-diate lifestyle benefitwithout having to pushthrough working full-time for another fewyears.

By reducing her work-ing hours, Jane will expe-rience a shortfall inincome. To make up thisshortfall, she will com-mence a transition-to-retirement (TTR) incomestream from her super.

A TTR is a type of pen-sion that allows an indi-vidual over a certain ageto draw an income fromtheir super fund of up to10 per cent of theiraccount balance annual-ly. The TTR will be used tosupplement Jane’sincome each year untilshe retires fully at age 70.

The benefit of the com-bination of TTR pensionand part-time work is thather superannuation bal-ance continues to growbecause of the lower

drawn-down amount inthose first years.

Furthermore, Jane’scapital is not exhausted,providing some protec-tion from adverse mar-kets or giving her a littleextra to spend.

If Jane retires now, hercapital will likely beexhausted by age 71.

If she works full-timefor three more years, hercapital could last until sheis 84.

A small amount of part-time work in combinationwith a TTR pensionmakes a significant differ-ence to the quality ofJane’s retirement.

Kelly Pillay is director of KLIAccountants & WealthManagers

Extra graftcan pay offafter work 60 8460 84

EmploymentAccount-based pension

Account-based pension

Employment Age pension

Age pension

Super balance

Super balance

70

60

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10

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$000$000 $000$000400

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WORK FOR THREE YEARSWORK PART-TIME

Mickey still on job

Corporate Authorised RepresentativeSecuritor Financial Group LtdAustralian Financial ServicesLicence 240687

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SPECIALCONSUMER-DIRECTED CARE

The six-month countdown has begun for a new world for Western Australia’s aged care industry.

The West Australian will publish a comprehensive guide to how the new system works.

Look out for the upcoming

To guarantee your message contact Terence Tay T: 08 9482 9706 E: terence.tay@wanews.com.au

your behalf. Two situa-tions in which an exe-cuted EPA are handy are :

� When you are physical-ly unable to attend to yourfinancial or property-relatedaffairs. For example, you maybe out of the country andrequire someone to pay yourbills and expenses and manageyour investments.

� If for any reason you loselegal capacity (i.e. the abilityto understand and enter intoformal agreements) and canno longer make financial or

Enduring power of attorney (EPA)

An EPA is a legal documentby which you appoint a trustedperson or persons (an endur-ing attorney) to make finan-cial and property decisions on

property-related decisionsyourself. Unlike a “regular”power of attorney, an EPA willcontinue even after you loselegal capacity.

Enduring power of guard-ianship (EPG)

An EPG is a legal documentby which you appoint someone(an enduring guardian) tomake personal, lifestyle ortreatment decisions on yourbehalf in the event you becomeunable to make such decisionsyourself. An EPG comes intoeffect if you are unable tomake reasonable judgementswith respect to yourself. Forexample, if you enter into acoma because of an accident,the EPG would provide au-

thority to your enduringguardian to make decisionsabout where you live, the sup-port services you have accessto and medical treatment.

Advanced health direc-tives (AHD)

This provides some degreeof control in the decisionsregarding your medical andhealth care treatment, includ-ing medical, surgical, dental,palliative care and life-sus-taining measures. An AHDcomes into effect if you areunable to make reasonablejudgments about your medicalcare treatment at the time thetreatment is required.

Estate planning tips� If you are over 18 and have

full legal capacity considerexecuting an EPA, EPG and/or an AHD.

� When appointing an attor-ney or guardian, make surethat it is someone you trustand who will have your bestinterests in mind.

� You can limit the scope ofthe decision-making authorityin an EPA or EPG.

� Review your EPA, EPGand AHD regularly. As yourcircumstances change, and asmedical practice and technol-ogy changes (in the case ofAHDs), your EPA, EPG andAHD should also be updated.

� Consult a financial advis-er when considering yourestate planning.

� Seek legal advice whenpreparing wills, EPAs, EPGsand AHDs.

Raymond Pecotic is managingdirector of Empire Financial Group

MAKE SURE IT ISSOMEONE WHO WILLHAVE YOUR BESTINTERESTS IN MIND.

Estate planning toolkitRaymond Pecotic explainsthe three keys to preparingfor the inevitable

THIS SEMINARWILL SHOWYOU:• How Mike (65) and Kathy (60), with $800,000 in superannuationand savings, receive a total annual income of $89,000 (including$20,000 from part-time work and part Centrelink age pension) with nopersonal tax.

• How Phil (60) and Helen (58) with 5 years to retirement with totalsuperannuation investments of $950,000 build their superannuationand pocket an additional $7,900 per year in tax savings and otherbenefits under the new PROPOSED LEGISLATION.

• How Tony (62) and Cheryl (60) retired and sold their business andbusiness premises for $3M without Capital Gains Tax and were able tocontribute $3M to their super and enjoy tax-free income in retirement.

• How Christine (61) with investments of $920,000 outside ofsuperannuation and $135,000 in superannuation structured her assetsto receive a tax-free income of $60,000 per annum.

• How Paul (50) and Vicki (52) with 10 years to retirement, grow theirnet investment assets of $115,000 to over $1,500,000 by following adiversified wealth building strategy.

• Including Q&ASession. Put your questions to our panel of experts.

SEATS ARE LIMITED. BOOK NOW: Call Shannon on P: 9445 2247 or visit online at www.fortyseven.com.auForty Seven is the brand name under which Forty Seven Financial ACN 166 576 450, John Holland ABN 24 239 532 771 & Lindsay Holland ABN 15 327 316 880 Trading as Forty Seven Financial Planning, Forty Seven Legal Pty Ltd ACN 161 537 613 and Forty Seven Accounting Pty Ltd ACN 162 783 548operate, each being separate and distinct legal entities, which cannot obligate each other. Each entity is only responsible for the services it provides, not those of another entity. Forty Seven Financial ACN 166 576 450, John Holland ABN 24 239 532 771 & Lindsay Holland ABN 15 327 316 880 Trading asForty Seven Financial Planning, are authorised representatives of GWMAdviser Services Limited ACN 002 071 749 an Australian Financial Services Licensee with its registered office at 105-153 Miller Street, North Sydney NSW2060.Amember of the National group of companies.

A COMPREHENSIVE

FREERETIREMENTSEMINAR

Tuesday September 6thorOctober 4th

TheHyatt, Perth, 7pmLimited seating -

booknow!

3271

643-

1JLV

EP

0805

2016

Lindsay Holland, Financial PlannerCFP®, B.Sc Adv Dip. FS (FP)

Specialising in wealth creation andretirement strategies

John Holland, Financial PlannerCFP®, B.Com, Dip FP

Specialising in wealth creationand retirement strategies

Vincent Holland, Lawyer & Financial PlannerLLB (Hons) B Com (Finance) Dip FP

Specialising in estate planning, aged care,wealth creation and retirement strategies

Leanne Bogoev, Chartered AccountantBcom (Accounting & Taxation), CA, Dip FPSpecialising in Tax for Investments, SMSFs

and Businesses.

How to RETIRE comfortablywith $600,000 or more

This is a key opportunity to find out how to plan for a comfortable and secure future. You will see how others arrived at their decisions.

How to invest a lump sum(Superannuation, Account Based Pension, Investments)

Phone: 9322 7818 Email: perth@blackswanevent.com.au

Website: blackswanevent.com.au Offi ce: 28 The Esplanade Perth

Black Swan Event Financial Planning is a Corporate Authorised Representative of Paragem Pty. Ltd. (AFSL 297276)

John Cameron B.Econ, B.Comm, MBA, CFP

John Cameron is one of the most senior, experienced and

academically qualifi ed people in fi nancial planning. His articles, original research, seminars and insights have earned him high respect. You might think he

would be available only to very high net worth clients, but he is just as willing to help small

and part-pension accounts. For real people-fi rst service, do the old fashioned thing, pick up the

phone and talk to a human being.

Are you ready for the next fi nancial shock?Financial shocks dominate the airwaves. Some of them are real, and many are imaginary. They provide risks and opportunities. Having the right advisor will help you navigate these stormy waters.

❏ Do you really trust your advisor?

❏ Does your advisor keep in regular contact?

❏ Do you meet with the same senior advisor each time?

❏ Does your advisor proactively contact you if changes are needed?

❏ Is your advisor academically qualifi ed in fi nance or economics?

❏ Do you truly understand why the strategy developed for you is the best one for you?

❏ Are you confi dent your best interests are being looked after?

If you answered NO to any of these questions, let one of us buy you a coffee and give you an educated second opinion.

Richard Gordon Masters of Business (Fin and

Econ), DFPP, CFP

Richard Gordon has a wealth of experience in international fi nance. He

becamse a fi nancial adviser so he could work more with people and apply his skills in

a more meaningful way.

22 Monday, August 22, 2016CAN’T TAKE IT WITH YOU 23Monday, August 22, 2016 CAN’T TAKE IT WITH YOU

� When appointing an attor-ney or guardian, make surethat it is someone you trustand who will have your bestinterests in mind.

� You can limit the scope ofthe decision-making authorityin an EPA or EPG.

� Review your EPA, EPGand AHD regularly. As yourcircumstances change, and asmedical practice and technol-ogy changes (in the case ofAHDs), your EPA, EPG andAHD should also be updated.

� Consult a financial advis-er when considering yourestate planning.

� Seek legal advice whenpreparing wills, EPAs, EPGsand AHDs.

Raymond Pecotic is managingdirector of Empire Financial Group

The 5 mistakes made with willsEstate planning toolkitIt’s human nature to procrastinate when making

your will. Who wants to think about their owndemise? But getting a will professionally pre-

pared (not one of those cheap will kits) is critical toensure the right assets get to the right people, at theright time, paying as little tax as possible.

1. What is actually in my estate?You’d be surprised what may or may not be in yourestate. If your home is in joint names with yourspouse, it won’t be part of your estate. If your insur-

ance policy is owned by someone else(including in your super), that won’t be

part of your estate either. Unless youspecifically say so, your super won’t beeither. This could be a good or badthing but the starting point is under-standing what exactly you canbequeath and planning accordingly.

2. Choosing the wrongexecutorYou can choose any adult to beyour executor, even one of yourbeneficiaries —but do you real-ly want dear Aunt Wendy tohave the burden of imple-menting an important legal

document? Your estate represents the financialvalue of your life’s work, so your loved ones willthank you for appointing a lawyer or trustee to dothis. After all, that’s probably what they will decideis best after you are gone anyway —executors candecline to act.

3. Making specific giftsGiving away specific family heirlooms is fine but,beyond that, it is much better to give portions orshares of your overall estate. While you are alive,valuations change, and assets are bought and sold.If you specifically list these (e.g. the holiday housedown south goes to your daughter, the life insur-ance policy goes to your son) and things havechanged at the time of your passing, your benefici-aries may receive a far different cut than youplanned. Proportions fix this and the executor canalways still hand over a specific asset in lieu ofcash.

4. Not updating a will after marriage or divorceBoth of these events revoke a will, and if you dieintestate (with no valid will) your assets aresplit up according to a government formula.But if you are getting divorced, don’t wait tillit gets through the courts, as separationdoesn’t affect your will. Why do you want theperson you just left to inherit all your assets?

5. Thinking of the worst caseThe main reason why people put off making a willis that it requires you to think of terrible scenarios.What if you outlive your kids — does their share ofyour estate go to their spouse or to your children?What if you and your spouse/beneficiary die with-in a short period of eachother? While you can’t rulefrom the grave, a properlydrafted will can takeaccount of these sce-narios.

Patrick Canion is chiefexecutive of ipac WA

Patrick Canion

THIS SEMINARWILL SHOWYOU:• How Mike (65) and Kathy (60), with $800,000 in superannuationand savings, receive a total annual income of $89,000 (including$20,000 from part-time work and part Centrelink age pension) with nopersonal tax.

• How Phil (60) and Helen (58) with 5 years to retirement with totalsuperannuation investments of $950,000 build their superannuationand pocket an additional $7,900 per year in tax savings and otherbenefits under the new PROPOSED LEGISLATION.

• How Tony (62) and Cheryl (60) retired and sold their business andbusiness premises for $3M without Capital Gains Tax and were able tocontribute $3M to their super and enjoy tax-free income in retirement.

• How Christine (61) with investments of $920,000 outside ofsuperannuation and $135,000 in superannuation structured her assetsto receive a tax-free income of $60,000 per annum.

• How Paul (50) and Vicki (52) with 10 years to retirement, grow theirnet investment assets of $115,000 to over $1,500,000 by following adiversified wealth building strategy.

• Including Q&ASession. Put your questions to our panel of experts.

SEATS ARE LIMITED. BOOK NOW: Call Shannon on P: 9445 2247 or visit online at www.fortyseven.com.auForty Seven is the brand name under which Forty Seven Financial ACN 166 576 450, John Holland ABN 24 239 532 771 & Lindsay Holland ABN 15 327 316 880 Trading as Forty Seven Financial Planning, Forty Seven Legal Pty Ltd ACN 161 537 613 and Forty Seven Accounting Pty Ltd ACN 162 783 548operate, each being separate and distinct legal entities, which cannot obligate each other. Each entity is only responsible for the services it provides, not those of another entity. Forty Seven Financial ACN 166 576 450, John Holland ABN 24 239 532 771 & Lindsay Holland ABN 15 327 316 880 Trading asForty Seven Financial Planning, are authorised representatives of GWMAdviser Services Limited ACN 002 071 749 an Australian Financial Services Licensee with its registered office at 105-153 Miller Street, North Sydney NSW2060.Amember of the National group of companies.

A COMPREHENSIVE

FREERETIREMENTSEMINAR

Tuesday September 6thorOctober 4th

TheHyatt, Perth, 7pmLimited seating -

booknow!32

7164

3-1J

LVE

P08

0520

16

Lindsay Holland, Financial PlannerCFP®, B.Sc Adv Dip. FS (FP)

Specialising in wealth creation andretirement strategies

John Holland, Financial PlannerCFP®, B.Com, Dip FP

Specialising in wealth creationand retirement strategies

Vincent Holland, Lawyer & Financial PlannerLLB (Hons) B Com (Finance) Dip FP

Specialising in estate planning, aged care,wealth creation and retirement strategies

Leanne Bogoev, Chartered AccountantBcom (Accounting & Taxation), CA, Dip FPSpecialising in Tax for Investments, SMSFs

and Businesses.

How to RETIRE comfortablywith $600,000 or more

This is a key opportunity to find out how to plan for a comfortable and secure future. You will see how others arrived at their decisions.

How to invest a lump sum(Superannuation, Account Based Pension, Investments)

Phone: 9322 7818 Email: perth@blackswanevent.com.au

Website: blackswanevent.com.au Offi ce: 28 The Esplanade Perth

Black Swan Event Financial Planning is a Corporate Authorised Representative of Paragem Pty. Ltd. (AFSL 297276)

John Cameron B.Econ, B.Comm, MBA, CFP

John Cameron is one of the most senior, experienced and

academically qualifi ed people in fi nancial planning. His articles, original research, seminars and insights have earned him high respect. You might think he

would be available only to very high net worth clients, but he is just as willing to help small

and part-pension accounts. For real people-fi rst service, do the old fashioned thing, pick up the

phone and talk to a human being.

Are you ready for the next fi nancial shock?Financial shocks dominate the airwaves. Some of them are real, and many are imaginary. They provide risks and opportunities. Having the right advisor will help you navigate these stormy waters.

❏ Do you really trust your advisor?

❏ Does your advisor keep in regular contact?

❏ Do you meet with the same senior advisor each time?

❏ Does your advisor proactively contact you if changes are needed?

❏ Is your advisor academically qualifi ed in fi nance or economics?

❏ Do you truly understand why the strategy developed for you is the best one for you?

❏ Are you confi dent your best interests are being looked after?

If you answered NO to any of these questions, let one of us buy you a coffee and give you an educated second opinion.

Richard Gordon Masters of Business (Fin and

Econ), DFPP, CFP

Richard Gordon has a wealth of experience in international fi nance. He

becamse a fi nancial adviser so he could work more with people and apply his skills in

a more meaningful way.

22 Monday, August 22, 2016CAN’T TAKE IT WITH YOU 23Monday, August 22, 2016 CAN’T TAKE IT WITH YOU

A CERTIFIED FINANCIAL PLANNER® professional is internationally recognised for

the highest education and ethical standards. So if you want fi nancial advice, just look

for a CFP® professional. You can fi nd one today in your local area at fpa.com.au

CFP,® CERTIFIED FINANCIAL PLANNER® and CFP Logo® are certifi cation marks owned outside the U.S. by Financial Planning Standards Board Ltd (FPSB). Financial Planning Association of Australia Limited is the marks licensing authority for the CFP marks in Australia, through agreement with FPSB.

I T ’ S A L L Y O U N E E D T O K N O W