Is an Authorised Representative of RI Advice Group Pty Ltd Smart financial strategies for women.

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Smart financial strategies for women

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Disclaimer

Important Notice

RI Advice Group Pty Ltd, ABN 23 001 774 125, holds Australian Financial Services Licence Number 238429 and is licensed to provide financial product advice and deal in financial products such as: deposit and payment products, derivatives, life products, managed investment schemes including investor directed portfolio services, securities, superannuation, Retirement Savings Accounts.

The information presented in this seminar is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. RI Advice Group strongly suggests that no person should act specifically on the basis of the information contained herein but should obtain appropriate professional advice based on their own circumstances.

RI Advice Group Pty Ltd | ABN 23 001 774 125 AFSL 238429

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What we’ll cover today

• Women and Money

• Smart financial strategies to grow your wealth

• Taking real financial control of your own destiny with:- Superannuation - Investments- Retirement- Insurance- Estate Planning

• How we can help you at <insert practice name>

Ultimately, I want you to gain clarity on your next steps to take control of your own financial destiny!

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Women and money

• Women, on average, retire with around half as much super as men – a difference of over $90,000.1

• In 2010, 1 in 5 women yet to retire had no super at all!2

• Around 90% of women will retire with inadequate savings to fund a comfortable retirement.1

• On average, women retire before men and are in retirement longer than men.3

• Women earn on average $700,000 less than men during their lifetime.4

• On average, women earn almost 19% less than men for the same work.5

Sources: 1 The Association of Superannuation Funds of Australia (ASFA), 2015.2 Super system evolution: Achieving consensus through a shared vision, ASFA White Paper – Part 4 May 2013, ASFA.3 OECD 2014 Society at a glance 2014 – OECD Social Indicators, March 2014 page 2.4 Australian Bureau of Statistics, 2014. Average Weekly Earnings, Australia, 6302.0 (multiplied by a 45-year career).5 Workplace Gender Equality Agency, 2015. Gender pay gap statistics p2.

There is a startling financial divide between men and women in Australia today. Did you know?

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Women and money

• Women are more likely to have an interrupted working life through the caring responsibilities of family

• Some women may not work at all or work part time

• Women tend to be employed in occupations which are lower paid

• Ultimately, this has a negative impact on overall career earnings, and later retirement income preparedness.

These differences are largely due to systems which financially penalise women during their prime ‘income-earning’ years.

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Financial strategies for women

Start growing your wealth by considering simple but effective strategies that improve your:

•Superannuation

•Investments

•Retirement plans

•Insurance protection

•Estate Planning needs

It’s never too late to take control of your future by taking charge of your money and giving yourself more opportunities to succeed financially.

“The secret to change is to focus all your energy not on

fighting the old but on building the new”

- SOCRATES

Super Strategies“Am I on track to living my ideal retirement”

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How much super will be enough in retirement?

Strategies to help you boost your super savings

The amount of super you will need depends on your personal circumstances such as your current age and super balance, and planned retirement age and income.

Strategy How it works

Investing in super for a comfortable retirement

Can be a tax-effective vehicle to build wealth

Choose a fund that is right for you You have a choice of where to put your super

Consolidating your super (rolling over) into one account

Make your money work harder for you and avoid multiple fees. Be aware of exit fees and other charges that may apply. Check if any benefits, such as insurance, will be lost if you leave the fund

Salary sacrifice Contributing part of your pre-tax income into superannuation

Government superannuation Co-contribution scheme

The Government will contribute a maximum amount of up to $500 for people earning $35,454 or less and who meet the eligibility criteria.

Spouse contributionsA spouse can make contributions into a low income spouse’s account and receive a tax offset up to $540

Contributions splitting Eligible couples are able to split some of their super contributions

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Sacrifice a little to boost your super

• Lisa is 35 years of age and is a marketing executive earning $75,000 p.a.

• She is considering making a $10,000 p.a. salary sacrifice super contribution in the current 2015/16 financial year.

• The result: Lisa will increase her superannuation balance by $8,500 in year one alone and only reduce her take-home salary by $6,525.

Case study – meet Lisa

Taking $10,000 as salarySalary sacrificing $10,000 into

superannuation

Salary before income tax $75,000 $65,000

Income tax payable (Marginal tax rate and Medicare levy 34.5%)

$17,422 $13,947

Lisa’s take home salary (after income tax is taken out)

$57,578 $51,053

Total employer contributions (including salary sacrifice)

$7,125 (subject to 15% super contributions tax)

$17,125* (subject to 15% super contributions tax)

*Assumes Lisa’s employer doesn’t reduce SG contributions in line with her reduced salary.

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Let the Government boost your super

• Total income of $35,454 or less, the Government will contribute $0.50c for each after-tax dollar you contribute up to a maximum co-contribution amount of $500.

• The Government co-contribution amount reduces if you earn more than $35,454 and cuts off for those earning a total income of $50,454 or more.

Government superannuation co-contribution scheme

Total income Minimum personal after-tax contribution required

Maximum Government co-contribution received

$35,454 or less $1,000 $500

$38,454 $800 $400

$41,454 $600 $300

$44,454 $400 $200

$47,454 $200 $100

$50,454 or more $0 $0

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Let the Government boost your super

Case study - meet Tracey

•Tracey is 40 years of age and is a part-time administration assistant earning $35,000 p.a.

• She makes a personal after-tax super contribution of $1,000 to receive her maximum Government co-contribution of $500 – a real superannuation boost!

Government super co-contribution scheme cont…

Smart super tip: if you have a particular year where you are earning less or no income e.g. during

maternity leave, you should consider a Government co-contribution strategy.

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Let your spouse boost your super

What is it?

•This strategy allows a higher-income earning spouse to make after-tax contributions into a lower-income earning spouse’s super fund to boost their retirement savings.

How?

•If your assessable income (plus reportable fringe benefits and reportable employer super contributions) is $10,800 or less, your spouse receives an 18% tax offset (up to a maximum of $540) on the first $3,000 of their after-tax spouse contribution.

•The tax offset reduces if your income is greater than $10,800 and cuts off once your income reaches $13,800.

•You must both be Australian residents for tax purposes.

Spouse contributions

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How can you/your spouse benefit?

•The spouse making the super contribution receives a maximum $540 tax offset (18% on the first $3,000 contributed).

•Grow your retirement savings together as a couple.

•Build wealth even if one spouse isn’t working since earnings within super are generally taxed at a lower rate than investments outside super..

Who does the strategy work for?

Generally, your spouse can make contributions into your super if:

•you are under 65 years of age or

•You are at least 65 and less than 70 and have been gainfully employed for at least 40 hours over 30 consecutive days during the year.

Spouse contributions cont…

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Case study – meet Craig and Angela

•Craig, aged 35, earns $120,000 p.a. and has reached his concessional contributions cap.

•Angela, aged 35, homemaker earning $8,000 p.a.

•Craig invests a further $3,000 after tax money into Angela’s super.

•Result – Craig receives a $540 tax offset.

Craig and Angela are tax-effectively saving for their retirement

Spouse contributions cont…

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So, why save for your retirement via super?

• Accumulate and grow your savings in a tax-effective way as you approach retirement

• Invest tax-effectively and benefit from compounding returns within super, while working to build retirement savings

• Access choice and flexibility as most super funds offer a range of managed funds and other investment options

• Gain more convenience, control and potential savings on multiple fees by consolidating existing super accounts into one account

You can…

Are you effectively investing?“Investing early means I can give my child the best possible start”

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Choosing the right investments

Before investing it’s important to:

•Define your financial goals

•Draw up a budget

•Choose the right investment to suit your budget and lifestyle

•Recognise the level of risk you feel comfortable with for different investment types

Invest to grow your wealth and/or provide an additional income stream.

Timeframe Investment goals

Short term(1 to 3 years)

CarHolidayStarting a family

Medium term(3 to 5 years)

House depositBoatRegular incomeExtended work leave

Long term(7 years or more)

Children’s education fundRetirement

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The main asset classes

There are four main asset classes

•cash

•fixed interest

•property

•Shares

Diversification - build a balanced

portfolio by investing in a

combination of asset classes

Cash

Property

Shares

Fixed interest

Exp

ecte

d r

etu

rn

Expected risk

High

HighLow

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Asset classes defined

Cash and fixed interest are considered ‘defensive’ assets as they are designed to defend your investment from losses.Property and shares are considered ‘growth or aggressive assets’ because they tend to provide overall higher returns but the annual returns can vary more than cash and fixed interest.

Asset Description

Cash Bank deposits and investments in securities such as treasury notes

Fixed interest investment (or ‘bond’)

Is a debt security issued by a corporation or Government in return for cash from an investor

Property Investment in direct property, listed property trusts (LPTs) and other property securities

Shares (or stocks) Are securities representing ownership of a company. When you buy a share in a company, you become a joint owner of the business

Managed funds Made up of a pool of money - people with similar investment goals can individually invest an amount of money into the fund

Gearing Allows you to borrow and invest more in order to achieve greater investment returns

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The long-term trend is up

Please note these are sample profiles only of a typical diversified fund. The fund performance has been based on the returns of the individual indexes, as outlined below. Timeframe: 31/01/1983 – 31/12/2014 . Data: Australian shares – S&P/ASX 300 Accum Index; Global shares – MSCI World (ex Aust) in $A – unhedged; Global listed property – Returns are based on the FTSE EPRA NAREIT ex Aus Total Return Index hedged to AUD since 2009. Prior returns between 2004-2008 are based on the UBS Global Investors ex Aus Total Return Index. Earlier returns have been proxied using hedged global share returns; Australian fixed income – Bloomberg Composite Bond All Maturities Index (Post Sept 89) / Commonwealth Bank Bond Index (Pre Sept 89); Global fixed income – Barclays Global Aggregate hedged in AUD (post Dec 94) / Citigroup WGBI Ex-AUD hedged (Pre Dec 94); Cash – 11am Cash Rate (Pre Apr 87), Bloomberg Bank Bill Index (Post Apr 87); Alternative Defensive – Cash+2%; Alternative Growth - Cash+4%. Source: Thomson Reuters DataStream & ANZ Global Wealth.

* Past performance is not indicative of future performance.

1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2010 2012 2014

Growth of $10,000 over time*

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Shares vs Cash

What would have happened if I invested in cash over the last 10 years?

Term Deposit Total Return Index: Custom built index utilising RBA data. Australian shares Total Return Index: ASX 300 Total Return Index Source: RBA, Bloomberg, ANZ Global Wealth

(income growth) (income and capital growth)

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Investment strategies

• The longer you invest for, the greater the difference in the compound interest - invest now and don’t wait for later

• For example - Invest now versus investing in 3 years time

– Invest $1,000 today and contribute $100 each month in a managed fund that earns 8%

– In 10 years’ time = $20,071

– If you invest 3 years later = $12,708

– Difference is $20,071 versus $12,708 = $7,363

• Therefore, the longer you invest, the greater the difference in compound interest!

1. The magic of compound interest

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Investment strategies

• School fees can be very costly, plus there are extra costs involved

• Start saving for your children’s education as soon as possible

• Consider starting a Cash Management Trust (CMT) or a managed fund – watch your money grow with compound interest

2. Setting up investment accounts for your children’s education and future

• Investing overseas, gives you access to growing economies, geographic and sector diversification - better spread of risk and potential for higher returns over the longer term

• Alternative: invest through your superannuation fund or a managed fund in international shares and manage the currency risks

3. Investing internationally

Retire on your terms“I will retire on my own terms”

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Retirement

• To live comfortably in retirement today, the required amount is around $430,000 for a single and around $500,000 for a couple (this may vary depending on your own needs and objectives)1

• When you reach retirement age you can access your retirement income via an income stream, a lump sum or a combination of both

• Account-based pension: a tax-effective investment that invests super savings to pay you a regular income stream

• Age Pension: Centrelink determines eligibility by applying income and assets test

As at 30 June 2015, a homeowner will not be entitled to a part Age Pension if their total Centrelink assessable assets are at least:

Category As at 1 July 2015*

Single homeowner $779,000

Couple homeowner $1,156,500

1Association of Superannuation Funds of Australia (ASFA), March 2015. ASFA Retirement Standard * Transitional rules may apply to some existing Age Pension recipients.

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Retirement case study

• Mary is 65 years of age, single and owns her own home

• Due to asset test changes, Mary’s assessable assets have to exceed $779,000* before losing entitlement to the Age Pension

• Mary’s total assessable assets are $460,000. Her Age Pension is calculated under both the income and assets test and her entitlement is determined by the test which produces the lowest result.

• Mary is entitled to a part Age Pension of $478.45 per fortnight ($12,439.70 p.a.)

Case study – meet Mary

Superannuation pension (asset tested) $400,000

Personal effects $20,000

Car $10,000

Cash at Bank $30,000

TOTAL $460,000

* Refer to www.humanservices.gov.au for current figures.

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Transition to Retirement (TTR)

If you have reached your preservation age (currently 55), you can access your superannuation without having to retire permanently from the workforce.

•You can reduce your work hours, and supplement your reduced income with tax-effective income from your super

•However, there is no requirement to actually reduce your working hours to start a TTR pension!

You can benefit from three TTR strategies:

•Lifestyle booster – Reduce your hours at work but maintain your current lifestyle income

•Super booster – Continue to work the same hours and boost your retirement savings

•Income booster – Top-up your income with your super

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TTR case study – Super Booster

• Anne is 55 years of age and is an advertising manager earning $90,000 p.a.

• Anne has a super balance of $300,000

• Anne currently receives $66,953 in after-tax income

• If she salary sacrifices $26,450 p.a.*, she will still receive $50,125 p.a. in net income from her employer

The strategy: supplement her reduced income with pension payments of $21,230 p.a. from a Transition to Retirement pension using her existing superannuation savings after tax, Anne will still receive $66,953

How will this benefit Anne’s retirement savings? Anne’s net* salary sacrifice super contributions of $22,482.50 will exceed her TTR pension payments of $21,230. In addition, the investment returns within the pension are tax free

The result: Anne’s income is maintained while her super savings are boosted by an additional $3,572^ in the first year alone

Case study - meet Anne

* Salary sacrifice $26,450 plus Superannuation Guarantee $8,550 = $35,000 Concessional contributions cap.

^ assuming 7% return on investment.

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TTR case study – Super Booster

Anne’s income overview

Cash flow impact

Current position ($) With strategy ($)

Original salary 90,000 90,000

Salary sacrifice contributions (0) (26,450)

Transition to retirement pension 0 21,230

Total income 90,000 84,780

Gross PAYG Tax (21,247) (19,316)

15% pension tax offset 0 3,185

less Medicare levy (1,800) (1,694)

Net cash flow 66,953 66,953

The result:

Anne’s income is maintained while her super savings are boosted by an additional $3,572^ in the first year alone!

^ assuming 7% return on investment.

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Access significant tax concessions

• Access your superannuation benefits via a lump sum payment or commence a retirement income stream

• At age 60 – you will not pay any tax on lump sum superannuation withdrawals or superannuation pension payments

• Before age 60 – you may have to pay tax

Insurance“I want to be sure my family is protected”

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Insurance

Whether you are a working professional or a full-time homemaker, your insurance cover needs to reflect the cost of replacing everything you do – including the things you don’t get paid for.

Do you have sufficient insurance to protect yourself and your income against sickness and injury?

• Life insurance: if you die or are diagnosed with a terminal illness

• TPD insurance: if you become permanently disabled

• Trauma insurance: if you are diagnosed with a specific illness or injury

• Income protection: if you are unable to work due to illness or injury

• Child insurance: if your child is diagnosed with a specific illness or dies

• Living expense insurance: if you become significantly disabled and need care

Types of insurance

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Insurance through super

Taking out and topping up your insurance inside super can be a cost-effective way to protect yourself and your family.

• Tax concessions

• Potential increased cash flow

• Potential cheaper premiums (due to lower Group premium rates)

• Possible ‘Medical test’ exemptions

Benefits of using your super to pay your insurance premiums include:

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Insurance through super for employees

• Sarah is 44 years of age and is a manager earning $100,000 p.a.

• With help from her adviser, Sarah will require $1.2 million in combined Death and TPD cover

• Premium for this cover will be $2,000 p.a.

• Sarah names her daughter as her sole beneficiary, who will receive a tax-free lump-sum insurance payment if Sarah died.*

Case study – meet Sarah

*The outcomes would be different if all or part of the super death benefit proceeds are paid to a recipient that is not a death benefit dependant under tax law.

~ Based on marginal tax rate plus Medicare Levy of 39% and assumes Sarah does not breach her annual contributions caps.

Taking insurance outside super

Taking insurance inside super

Premium cost $2,000 $2,000

Amount of pre-tax income required

$3,279 $2,000

Income tax paid $1,279 $0

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Insurance through super for self employed

• Bettina is 44 years of age and runs her own retail business, earning $200,000 p.a.

• With help from her adviser, Bettina will require $2 million in combined Death and TPD cover to eliminate her personal and business debts and provide for her family.

• Premium for this cover will be $2,500 p.a.

• Bettina names her husband as her sole beneficiary, who will receive a tax-free lump-sum insurance payment if Bettina died.*

Case study – meet Bettina

*The outcomes would be different if all or part of the super death benefit proceeds are paid to a recipient that is not a death benefit dependant under tax law.

~ Based on marginal tax rate plus Medicare Levy plus Budget Repair Levy of 49% and assumes Bettina does not breach her annual contributions caps.

Taking insurance outside super

Taking insurance inside super

Premium cost $2,500 $2,500

Amount of pre-tax income required

$4,902 $2,500

Income tax paid $2,402 $0

Estate Planning“It’s nice to have more time with my grandchildren”

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Estate Planning

• Without adequate planning and a legal Will, you can expose your family and dependants to serious, unnecessary risks and burdens

• Take care of your loved ones after you die and know that your assets are distributed according to your wishes

• A Will – determine the distribution of your estate assets to your beneficiaries

• Power of Attorney (POA) – ensures someone you trust will manage your affairs

• Enduring POA – appoint a person to make decisions about your property or financial affairs if you lose mental capacity

• Distributing assets via a trust – used to hold assets that can be owned by an individual, family or business

Key components of an estate plan include:

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Estate Planning

When saving for retirement, you may utilise different investment structures, which may have different estate planning implications

• Superannuation – non-lapsing death benefit nominations and also binding and non-binding nominations

• Insurance policies – death beneficiaries and insurance proceeds

• Investment trusts – jointly owned trusts or individually owned trusts

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Questions?

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How we can help at <practice name>

Financial adviser principal Financial adviser

Para-planner Client support manager

NameemailPhone

NameemailPhone

NameemailPhone

NameemailPhone

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What next?

• Make an appointment today.

• Complete the feedback form if you’d like someone from our office to follow you up.

• Go to our website <website.com.au>.

• Grab a guide/flyer before you leave.

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Disclaimer

Material contained in this presentation is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such.

This presentation contains general information only and does not take into account your personal objectives, financial situation or needs. You should therefore consider whether information or advice contained in this presentation is appropriate to you having regard to these factors before acting on it. As the rules associated with the superannuation and taxation regime are complex and subject to change, you should seek personalised advice from a financial adviser and tax adviser before making any financial decision in relation to the superannuation, taxation and investment matters discussed in this presentation.

The case studies used are hypothetical and are not meant to illustrate the circumstances of any particular individual. Whilst every effort has been made to ensure that the assumptions on which the case studies are based are reasonable, the outcomes may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. The results ultimately achieved may differ materially from the case studies.

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Is an Authorised Representative of RI Advice Group Pty Ltd Smart financial strategies for women.

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