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Wednesday, August 17, 2011

Time to seek professional assistance is when...

Any change in financial goals/priorities, such as:
Awareness of new investment structure/opportunity
Birth of a child
Buying a car
Buying/selling investment assets
Career break or change planned
Change in Government assistance payments
Change in risk appetite
Decrease/increase in living expenses
Financial needs of family change (e.g. parent)
Home purchased or new home purchased
Increase in Income
Investment recommendation from a friend
Investments overweight in one asset class or type
Moving to part time work
Personal loan/credit card paid off
Receiving a bonus
Receiving an inheritance
Renovating the house
Second or subsequent marriage (essential to seek guidance re asset ownership)
Selling business assets
Starting a business
Super beneficiaries change/dependency status changes
Temporarily incapacitated
Travelling overseas
Undertaking study
Unhappy with current super fund

Monday, August 8, 2011

Time for women to bridge the super gap!

While the women's movement has delivered many successes over the last 50 years, the area of financial independence still lags behind. The retirement savings gap between men and women, in particular, is a key area that needs to be addressed.

Many women are exposed to a substantial risk of poor retirement living standards due to the massive underfunding of their superannuation. Statistics from the Association of Superannuation Funds in Australia (ASFA) in 2009 highlights the depth of the problem and are a real wake up call.

The average retirement payout for women going into retirement is only $73,000, whereas men are more than double this amount at an average of $155,000.

What are some possible reasons for such a disparity? Women are still the primary care-givers in most families, which means their career and income are more likely to be interrupted. They may also be over-represented in casual and part time workforce, which may result in lower incomes and limited ability to contribute to super. Those who take multiple part-time jobs where they may be earning less than $450 per month in each job, are particularly worse off, because current rules say that they are not eligible for compulsory super contributions to be made by their employers.

Divorce and the high proportion of single parent families that are headed by women have added to the problem and many women remain single and are solely responsible for their own retirement saving.

It also pays people to exercise caution on a reliance on the age pension to substitute for proper retirement saving. The age pension is already under significant pressure from an ageing population and it won’t even go close to providing what most would consider a comfortable retirement income. For example, if you are currently earning a $60,000pa income, the rule of thumb is that you would need a retirement income of around $40,000pa. The age pension is not going to deliver that sort of money, so it is up to the individual to plan ahead.

On the positive side, women are generally far better money managers and more able to set goals and stick to strategies. Often, they simply haven’t found out what they need to be doing, or putting away, to fund their retirement.

To help target such retirement savings goals it is important to take advantage of whatever government incentives are available. This is where seeking some professional advice can help. There are incentives such as the spouse super contribution that allows the main breadwinner to make super contributions on behalf of a spouse who is not working or is not earning a high income. This can provide a rebate of up to $540.

For women with a higher income earning spouse, there is the possibility of splitting super contributions. Not only would this boost the woman’s super balance, it may also provide the couple with Centrelink benefits or the opportunity to access their super earlier.

Salary Sacrifice is a critically important strategy in a lot of cases.

Opportunities such as these will depend on specific circumstances and this is where advice from a professional can be useful. At times of low or interrupted income, such advice can help map out future contribution strategies and even help with transition to retirement strategies that are also tax efficient.

For further information on how you and/or your partner can better plan out your super strategies contact *Hugh Kilpatrick from RI Reservoir on 03 9471 0080.

*Hugh Kilpatrick is an Authorised Representative of RI Advice Group Pty Limited ABN 23 001 774 125, AFSL 238429. This editorial does not consider your personal circumstances and is of a general nature only. You should not act on the information provided without first obtaining professional financial advice specific to your circumstances.

Super – who gets it?

Strict rules govern how your super is distributed when you die and if you don't get it right, your super savings could be given to someone other than your desired beneficiaries.

Most people will be surprised to hear that your super doesn't always form part of your estate when you die, so it often won’t be distributed as part of your Will.

One of the most important decisions you make when you join a super fund revolves around the question of who to nominate as the beneficiaries of your super when you die.

There are limitations on who you can nominate. Superannuation law stipulates that a superannuation fund can only pay a death benefit to your partner/spouse (including a de facto spouse, whether same sex or not), children, a person who was financially dependent on you or who you had an interdependency relationship with at the time of death or your legal personal representative (i.e. your estate).

Defining an interdependency relationship can be complex. Problems are much more likely to occur when there are blended families - step children, ex-partners - therefore potentially multiple beneficiaries. If someone comes forward saying they are entitled to claim some (or all) of your super balance, the trustee will generally take their claim into account.”

The trustees of your fund will have the ultimate discretion as to who will receive your super. They will take into consideration any nomination of beneficiaries that you have made, but are often not bound by your request.

The fight over super death benefits is now such a major issue that such cases comprise a third of all complaints made to the Superannuation Complaints Tribunal, the body established to oversee disputes relating to regulated super funds.
To avoid confusion and family disputes and to ensure your super balance goes to who you choose a person should consider making a binding death benefit nomination.

This is a nomination that the trustees are generally obliged to follow. You are still limited as to who you can nominate, which must be a spouse, child, someone who you held an interdependency relationship with, or a financial dependant.

If you want your superannuation to pass to someone else, such as a friend or charity, you would need to nominate your estate as the binding beneficiary of your superannuation entitlements. Your superannuation will then be paid into your estate and distributed according to the terms of your will - you would need to nominate such people or bodies as beneficiaries of your Will.

It is important to review death benefit nominations regularly (generally they are only valid for 3 years) and to include full details of your beneficiaries.

Keeping your super fund trustee informed of any changes to your beneficiaries - or changes to their personal details - will make the task of distributing your super much less complex for all involved.

If your fund does not have binding nominations, insist that they put it into their fund. If they are unwilling or unable, it is in your best interests to seek an alternative fund. You may think that where your money goes should be your choice!

A financial adviser can help you to review your death benefit nominations to increase the likelihood of your superannuation going to your intended beneficiaries and reduce the chance of hassles or disputes amongst the people you care about.

For further information contact *Hugh Kilpatrick from RIadvice-RetireInvest on 03 9471 0080 today.

*Hugh Kilpatrick is an Authorised Representative of RI Advice Group Pty Limited ABN 23 001 774 125, AFSL 238429. This information does not consider your personal circumstances and is of a general nature only. You should not act on the information provided without first obtaining professional financial advice specific to your circumstances.