Welcome to the Summer edition of the Intrinsic Financial Planning Report.
Our articles cover a range of topics which we hope you will find interesting.
We aim to keep you informed of any changes as they happen, but we also want to provide ideas to help you live the life you want, now and in the future.
In this issue we discuss:
- What is your concept of retirement?
- Super savings for women
- How the world celebrates Christmas
If you would like to discuss any of the issues raised in this report, please don’t hesitate to contact us.
In the meantime we hope you enjoy the read.
Regards, Justin and the team at Intrinsic Asset Management
What is your concept of Retirement?
The concept of retirement has changed dramatically over the generations but there remains one constant for most of us planning the end of our working life – to be able to do what we want, when we want. No more alarm clocks, no more commuting and no more demanding bosses!
But what do we want more of? Time on the golf course? Unrushed holidays exploring exotic locations?
Those are just the basics, however if retirement is looming have you thought about what actually will happen when you stop working? Will you have those choices?
Here are a few points to consider; and it’s not just about money.
Your wealth
When preparing to leave the workforce, some people focus so much on never having to face another stressful workday that they overlook many important issues.
The first and most obvious focus should be on the income needed to fund the retirement dream.
For many people, retirement will give them the first real block of time they have ever had completely to themselves to spend however they please. Some may want to travel and others may have hobbies they want to immerse themselves. Others may choose to move closer to family or make a ‘sea’ or ‘tree’ change. Some may do all of these things!
To make the most of your retirement years, your nest egg must be large enough to allow you to live the life you desire. It would be a shame to have a boring and unfulfilled retirement because you discover too late that you don’t have the means to afford activities that your friends are enjoying.
Your health
Secondly, many people plan for life beyond work assuming that they will remain healthy and vital. For the majority this will prove true, but sadly, others might not be as vigorous as they had hoped.
Illness in later years will mean facing additional pharmaceutical and medical expenses. You may incur extra costs from travelling with mobility issues, assuming travel is still manageable. Aged care can be costly, especially where high level care is required.
The key point to remember here is that while you are planning for your retirement in a financial sense, you also need to focus on your well-being now to ensure your mind, body and spirit are willing and able to fulfil your retirement hopes and dreams. Balancing both aspects is fundamental to achieving a rewarding lifestyle.
Your happiness
But what is there to do if you find yourself getting bored with so much free time? Well, one option could be to return to the workforce, maybe on a part-time or casual basis. If approaching your former employer or business partner/s is not an option, try something different. Depending on your skillset, you may be able to start a micro-business. All you have to do is get creative when looking at your skills and abilities!
If you are a retired teacher there are many opportunities, including working as a private tutor or providing after-school assistance, assisting sports teams, or even thesis proofreading for university students.
If accounting is your forte, use this skill to help small businesses manage their books.
Handy with tools and enjoy fixing things? You could find yourself in demand by those in your area who are working and have no time or skills to do odd jobs themselves. Place an advertisement on your local community board, online, or do a mailbox drop to get started.
Or, what about volunteer vacationing – “voluntouring”? If you’d like a travel experience with a difference, combine it with volunteer work. Sharing your interests with others or using your skills in a new way could certainly enhance your post-work years.
There is a plethora of websites that now focus on this latest interest. Just type “voluntourism” into your favourite search engine and be prepared to be amazed.
Your identity
Many people identify themselves according to their job title or profession. For this reason, retirement can leave you feeling like a piece of you is missing. But retirement can be a terrific opportunity to give up that old identity and re-invent a new you.
You can be a grandparent, sports enthusiast, volunteer, book club president—the sky’s the limit!
In many ways, re-inventing yourself as a retiree can be as challenging as being a success in your previous vocation. The key is to establish your priorities, set goals that work for you, and keep going until you reach them. Remember though to keep it fun.
Have you planned your first step?
If all this sounds exciting, don’t forget the first step is to get your retirement funding in order. Come and talk to us sooner rather than later. Once that is done, you can start looking forward to what should be the best years of your life.
Super savings for Women
Ask any woman juggling career, home and family and she’ll tell you it’s a hard slog. Yet as retirement looms, dreams of enjoying the rewards of all that work are shattered as the retirement savings don’t support the vision.
According to an inquiry into Women’s Economic Security in Retirement entitled “A husband is not a retirement plan: Achieving economic security for women in retirement”, on average, women retire with approximately half the retirement savings as men. The inquiry also found that the majority of Australians on the age pension are women. Of that number, the majority are single, meaning that these women are struggling alone on an income that the Organisation for Economic Co-operation and Development (OECD) defines as poverty.
What about super?
It’s a double-whammy for women whose careers were interrupted to raise children, but unfortunately, time off work means there’s less money being contributed to the super pie.
Unpaid parental leave translates into no employer super guarantee (SG) contributions. To make matters worse, when they do return to the workforce, managing the school run often means women are working part-time. Employers are not required to pay the SG if the employee is earning $450 or less, before tax, in any calendar month.
So, even once she returns to her job, chances are she’s still not contributing to super.
In fairness though, this is a stage of their lives when young families often have other things on their minds besides superannuation, and parents are happy to have this little extra in their pockets.
For some women, starting up a home-based business presents a viable option. Given that sole traders are not required by law to pay superannuation to themselves, most manage to find something better to do with 9.5% of their income.
So what can be done?
The answer lies in planning and budgeting.
Over recent times the federal government has implemented measures designed to help low income earners – particularly women – by supporting and encouraging even the smallest contribution to retirement savings. They include:
- Spouse tax offset
If your spouse is earning $37,000 per annum or less, making contributions to her eligible super fund can attract a tax offset of $540 per annum. This amount gradually reduces for income above $37,000 and phases out when income reaches $40,000 per annum. This means that a contribution to your wife’s super fund can benefit you both.
- Low income super tax offset contribution (LISTO)
This replaces the former Low Income Super Contribution (LISC). Eligible individuals with an adjusted taxable income of $37,000 or less will receive a contribution equal to 15% of their total pre-tax super contributions for an income year.
Although capped at $500 per annum, this scheme encourages even the smallest super contribution, meaning that it’s possible to continue contributing to super while on parental leave, or if you’re a sole trader. Every dollar will make a difference as compounding applies over the years.
There will be many reading this who believe it’s too late – yes, blokes too! Fact is it’s never too late to develop a financial strategy that can help you achieve your goals.
Governments are beginning to acknowledge women’s financial needs, however independence means taking control and building your own plan too.
Professional financial advice will help you get on track and through a combination of government policy and personal financial strategy, retirement dreams can come true.
Sources:
www.ato.gov.au Super for employers; Introducing the Low Income Superannuation Tax Offset
www.aph.gov.au A husband is not a retirement plan: Achieving economic security for women in retirement. Report pages 9 & 63 (29 April 2016) http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Economic_security_for_women_in_retirement/Report
How the world celebrates Christmas
Beyond the rush of shopping, parties and the anticipation of holidays, Christmas still has the power to bring people together in the spirit of goodwill.
The practice of exchanging gifts has become traditional around the world and an essential ingredient of Christmas for millions of people around the world. Gift-giving may have originated with the story of the Three Wise Men who brought gold, frankincense and myrrh to Jesus, but it was also linked to St Nicholas, who evolved in many European countries into Santa Claus.
In different cultures around the world, the Christmas season is celebrated in a variety of ways.
> In Britain, groups of serenaders called “waits” travelled from house to house, singing carols. These 19th century “songs of joy” are still among today’s most beloved Christmas music.
> Ethiopians still follow the old Julian calendar and celebrate Christmas on the original date of 7th January usually by going to church.
> In Japan Christmas is a time to spread happiness rather than a religious celebration. It is actually more like our Valentine’s Day for the young Japanese. As so few Japanese are Christian, Christmas Day is not a national holiday in Japan.
> Christmas is known as Yule in Iceland and was first celebrated in ancient times as the winter solstice. The first recorded Christmas or Yule tree in Iceland was in 1862. As there were no evergreen trees growing in Iceland at that time, Icelanders made Yule trees using a central pole with branches attached to it and painted green.
> In Venezuela Christmas is an extremely colourful event with fireworks being a popular way to celebrate. It is customary for Venezuelans to exchange presents at midnight on Christmas Eve. Christmas fare includes ‘Hallacas’ which is a mixture of beef, pork, chicken, capers, raisins, and olives is wrapped in leaves creating a parcel for boiling or steaming.
All of these different traditions have one thing in common… they bring families and friends together in a time of love and good memories.
Joyeux Noel. Feliz Navidad. Froehliche Weihnachten. Sung Tan Chuk Ha. Een Plesiergiege Kerfees… or in other words, “Merry Christmas”!
Intrinsic Private Wealth specialise in providing financial advice to Australian investors. With over 20 years of experience in the finance & investment industry.
General Advice Disclaimer: Information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, you should consider whether the information is appropriate in light of your particular objectives, financial situation and needs. Intrinsic Private Wealth has financial advisers that are authorised to provide personal financial advice. Call 02 9615 4500 for more information on our available services.