How much do you need to retire?

Key takeaways

  • Start with a clear idea about the type of retirement lifestyle you’re after
  • Retirement calculators can tell you how much capital you need to support the lifestyle you want
  • A financial adviser can guide you in implementing strategies to save more and avoid running out of money.

You’ve spent decades working, so you don’t want to spend your retirement years scrimping for cash.

How can you make sure that doesn’t happen?

There’s a whole host of factors that will determine your lifestyle in retirement – savings, tax, investment strategy and more.

It can be complex – but it doesn’t have to be. There are tools and strategies that can help you enjoy your retirement if you start preparing for it now.

Start with a clear goal

The starting point is having a clear idea of the type of retirement lifestyle you’re after. This may be hard to know if you’ve still got a while to go before retiring, but the sooner you start thinking about it, the sooner you can implement a plan to turn your retirement dreams into a reality.

Some of the things you might consider are:

  • How often you would like to travel and the types of holidays
  • Whether a sea change or tree change is part of your plan
  • Downsizing – or upsizing. What are your accommodation plans in the future?
  • The types and frequency of any recreational activities
  • Do you intend on providing financial assistance to your family?
  • What options would you like to have in relation to help and support either at home, or perhaps in a retirement village or aged care facility?

Once you’ve decided on your retirement lifestyle, you can work through the likely cost of your expenses, where your retirement income will come from, and finally – “how much do I need to live the life I want in retirement?”

Seek help from a professional

If you value the experience of experts in other aspects of your life, don’t discount it when it comes to managing your life savings.

A financial adviser is not just someone who helps with investments. Their job is to help you with every aspect of your financial life—savings, insurance, tax, debt—while keeping you on track to achieve your goals.

More importantly, they can answer questions like:

  • What age can I stop working and retire?
  • What strategies can I use to build my wealth?
  • How can I ensure my wealth is transferred to my children?

If your to-do list is endless and you never quite have time to tackle your personal finances, a financial adviser may help to set you on the right track.

The Association of Superannuation Funds of Australia’s guide

The Association of Superannuation Funds of Australia (ASFA) gives us a general guide. According to their research1, updated quarterly, this is what you need to live at two different levels in retirement:

 

A modest retirement lifestyle would be one that’s slightly better than you’d enjoy on the Age Pension.

A comfortable retirement lifestyle includes a better standard of living (including better consumer goods) and more recreational activities such as some overseas travel.

Calculating how much you’ll need to support this lifestyle

ASFA’s figures give us a good starting point, a sense of what the average retirement might look like and what it would cost.

But what’s more important, is how much capital you need to support the lifestyle you want – and how you can go about accumulating that capital.

A retirement calculator can help you answer all these questions because it covers a whole range of factors.

  • Your current and potential super savings. It takes into account how much you’ve currently saved and your future saving based on income and your ability to save extra money into super.
  • Your investment choices. Increasing the return on your super savings can make a big difference to the amount of capital you retire with and your retirement lifestyle when you get there.
  • Your family situation. A retirement calculator allows you to build your spouse’s income, contributions and final super balance into the calculation.
  • Social Security and part-time work are two crucial ways in which many people at least partially fund  their retirement. The forecaster helps estimate the effect any Age Pension you are eligible for (and any work you do) has on your retirement income.

How to avoid running out

In short, using a retirement calculator gives you an in-depth view of how much you can save for retirement and what that turns into as a regular income.

Speaking with a financial adviser can also help you integrate other factors, such as changes that might make the most difference whether that’s your investment approach, contributions strategy, pension eligibility or contribution from your spouse.

From this knowledge comes the power to create a personalised super strategy. One that gets you to the retirement lifestyle you’ve dreamed of and helps to make sure you don’t run out of money.

If you would like competent advice in this area,  please email us at ds@bluerocke.com with your contacts, for an exploratory meeting, at our cost, not yours.

Article source: https://www.mlc.com.au/personal/blog/2020/09/how_much_do_you_need

 

How to help your parents and still save for retirement

How to help your parents and still save for retirement

The financial impact of COVID may have cut into your parents’ retirement savings, or perhaps they just simply didn’t save enough to last the distance.

Whatever the reason, if you’ve now found yourself with parents you need to help, you may be wondering how this will affect your own retirement plans.

So, here’s a few things you can do to help both you and your parents improve your chances of retiring comfortably.

Analyse your parents’ assets and savings

It can be tough to start a conversation about money with your parents, but it’s one of the most important conversations you can have to understand their retirement savings.

Having access to their financial information will give you a better understanding about their situation. More importantly, you’ll know if you’re going to be required to help them financially.

Ideally you want a clear picture about their current assets, savings and debt status plus an understanding of their income and expenses. There are budget planners and phone apps you can use to help get control and visibility around spending habits. You may also want to use a retirement calculator to give an idea of how long their money will could last.

If you find they don’t have enough income to support their retirement, there may be things they can implement to change it. This could include cutting down expenses, moving to a more affordable home or renegotiating their debt. It’s very important to make sure they are maximising any social security entitlements they may have too.

Review their health insurance

Healthcare costs are becoming increasingly onerous so it may be advisable to review your parents’ health insurance. It’s important they have enough cover for medical expenses, long-term care and other retirement costs.

Seek professional help

Enlisting the help of an expert, such as a financial adviser, may alleviate some of your pressure.
Better yet, financial advisers can assist in developing appropriate strategies to ensure you’re meeting your own retirement goals as well as your parents. They can also investigate what tax concessions, or other government benefits, your parents may be entitled to.

Perhaps most importantly, a financial adviser can help you take a holistic view. They can look at your parents’ situation and your own and work out strategies that optimise both outcomes over the long-term.

For example, you may need to reduce your current spending to help your parents retire more comfortably. That’s a short-term cost to you – but if it means your parents can keep important assets like the family home, you may benefit from that in the long-term. A financial planner –trained, impartial and able to see the big picture – can be a big help.

Set clear boundaries

It’s an admirable thing to help your parents but be clear about what that help consists of – for example it’s one thing to help out with their bills occasionally, but it’s another to have your name placed on loan documents!

If that isn’t the type of help you had in mind, it’s important to communicate that – and stick to it.

Invest in your own retirement

There are retirement calculators you can use to see if you’ll have enough saved to maintain the standard of living you’d like in retirement.

If you find you need to make financial adjustments to increase your retirement savings, one option could be to contribute more to your super on a regular basis using your before-tax or after-tax income. There are tax benefits that come with this too.

For example, if you contribute some of your after-tax income or savings into super, you may be eligible to claim a tax deduction. This means you’ll reduce your taxable income for the financial year and potentially pay less tax, while adding to your super balance. It’s a win-win.

These types of contributions are capped at $25,000 per financial year however. If you choose to contribute over this amount, you may be required to pay more tax.

Bottom line: We all want to help our parents if they’re struggling financially, but it’s important to think of your own situation too. And don’t forget, money isn’t everything—one of the best things you can do for your parents is to spend quality time with them while you’ve got it!

If you would like competent advice in this area,  please email us at ds@bluerocke.com with your contacts, for an exploratory meeting, at our cost, not yours.

Article source: https://www.mlc.com.au/personal/blog/2021/03/how-to-help-your-parents-and-still-save-for-retirement

Pros and cons of self-managed super funds

Having control over how your retirement savings are invested is one of the many benefits of self-managed super funds (SMSF).

On the flip side, the responsibilities and management skills required to run an SMSF are significant. This is because you’re accountable for your SMSF’s regulatory compliance—not your accountant, financial adviser or solicitor.

In this article, we’ll explore what might make an SMSF more attractive than investing through a super fund, and some of the downsides to consider.

Benefits of SMSFs

Access to more investment options

Having an SMSF provides more choice and freedom to access investment options that would otherwise be unavailable through a super fund. This includes assets like art and collectibles—such as stamps and coins—as well as physical gold.

Unlike investing with an industry, bank or retail super fund, your SMSF can borrow to invest in property, typically using a structure called a Limited Recourse Borrowing Arrangement (LRBAs).

This strategy is a good option to help expand your investment portfolio. However, there are restrictions and compliance requirements. The Australian Taxation Office (ATO) has recently warned investors of the dangers of over-investing (and over borrowing) into property within SMSFs.

Tax benefits

If you’re an SMSF trustee, you’re entitled to the same reduced tax rates that are available through super. Your investment return is therefore taxed at a maximum of 15% rather than the marginal tax rate which could be as high as 45% for super funds.

More scale to access opportunities

Generally speaking, an SMSF fund can have up to four members. Bringing four investors’ money together, offers greater scale to access investment opportunities that may not be available to you as an individual investor. Having scale may also help to keep fees down.

Considerations to be aware of

Responsibility

Managing an SMSF is not easy. As the trustee, you need to ensure the fund complies with all relevant regulations otherwise you could face severe consequences for getting it wrong.
If the fund is deemed to have breached its compliance responsibilities, penalties can include fines and civil or criminal proceedings. Depending on the transgression, tax penalties could be levied, including fund returns being taxed the top personal marginal tax rate as opposed to the concessional super rate of 15%.

Expertise

What investors often overlook is the financial and investment expertise required to run, or be involved in running, an SMSF.

As a trustee, you’ll be responsible for creating and implementing your own investment strategy—one that will need to deliver enough returns to adequately fund your retirement.

This means you need to:

  • understand how investment markets work, including sharemarkets
  • record your investments and transactions
  • ensure your fund is adequately diversified to help manage risk.

You’ll also need to remain up to date on any changes to legislation that affect SMSFs as these may have compliance requirements.

An understanding of how to manage legal documents, such as a trust deed, is also beneficial. However, a legal professional could help you with this.

Time

The administration and management of an SMSF is time intensive so if time is something you’re short of, an SMSF may not be a good option. On the other hand, many SMSF investors enjoy the sense of involvement and purpose that running their own fund brings.

Outsourcing to professionals

If you find you don’t have the time or investment knowledge to manage your SMSF, you can outsource this to investment managers, financial advisers or other experts. This will come at an additional cost though.

Minimum amount required

There is a lot of controversy around what should be a reasonable amount to set up an SMSF.

Depending on the fund’s complexity and structure, set up costs, administration, reporting and legal fees can become expensive so a general rule of thumb is to have around $500,000 as a minimum.

Bottom line: While SMSFs are not for everyone, they do offer significant benefits. Running an SMSF successfully requires investment, legal, super and admin skills—or the ability to get help from people who have those skills. A conversation with a financial adviser or accountant could help you decide whether going it on your own is a good option.

If you would like to receive competent advice on how to manage your SMSF, please email us on ds@bluerocke.com with your contacts, for an exploratory meeting, at our cost, not yours.

Source: https://www.mlc.com.au/personal/blog/2021/03/pros-cons-self-managed-super-funds

Bad Blood by John Carreyrou

Just read this superb book- one of those you can’t put down. Will be of interest to those into private equity funding for bio-medics.

 

This true story is about developing a device, to have a blood test without using a syringe.

 

What is astounding, is that a young 20 something, could get leading lights like Joe Biden (when he was VP), Shultz, Kissinger, Murdoch, Matthis and other senior figures to support her for years – until she was exposed.

 

Enjoy!

What’s ahead for China’s markets in the Year of the Ox

Investors keen to see whether China’s bull market can keep charging ahead in the lunar Year of the Ox will be focused on the sustainability of economic recovery and the pace of possible monetary tightening.

China’s modern stock markets are only three decades young, but the Year of the Ox (or Bull) has so far managed to live up to its name for investors.

The last lunar Year of the Ox, in 2009-2010, brought a 51 per cent surge in the benchmark Shanghai Composite Index. The cycle before that, in 1997-1998, witnessed a 27 per cent rally.

Of course, past performance is not a reliable indicator of future results. But as the new ox year kicks off on Feb. 12, several factors will be front of mind for investors eyeing China’s markets. First and foremost is that ample liquidity and China’s “first in, first out” recovery from the economic fallout of the global Covid-19 pandemic look set to help sustain bullish market sentiment into the spring, in both the onshore market and Hong Kong. But any flare up in inflationary pressures or sharp turn to monetary tightening could threaten to put a yoke on hard-charging markets.

The recovery continues

Like in 2009, investors today have been emboldened by cheap credit and a strong post-crisis economic rebound. The macro backdrop helps: China’s was the only major economy with positive growth in 2020, and consensus forecasts for this year project GDP rising about 8 per cent. Analysts also expect robust earnings growth for Chinese companies at least in the first two quarters.

In March, China’s legislature, the National People’s Congress, is expected to unveil details of the country’s 14th five-year plan, which will set the high-level growth and development agenda through 2025. This year is also notable as July will mark the 100th anniversary of the establishment of China’s ruling Communist Party, and maintaining social stability and economic strength are paramount goals. Chinese policymakers’ stated aim of achieving a “moderately prosperous society in all respects” means sparing no effort to support growth while minimising systemic risks.

Diverging performance

But investors should also be watchful for high volatility and sharp divergence in performance between sectors. In our view, some valuations already look stretched in sectors like technology, consumer and healthcare, where more crowded trades may result in wider price swings. On the other hand, many large financial stocks remain laggards, trading at single-digit earnings multiples or discounts to book value.

Unlike the broad-based bull run in 2009, structural growth themes will likely reign this year, with certain hot sectors and industry leaders dominating the show. Domestic consumption should continue to shine, as Chinese policymakers seek to boost internal demand in the face of ongoing trade tensions with Washington.

Consumers may take the baton from exporters who played a key role in China’s recovery last year. The job market has stabilized with unemployment falling back to pre-pandemic levels, while large savings pots allow the release of more spending power – China has one of the highest savings rates among major economies. Last year, facing the uncertainties of the virus threat, China’s consumers saved even more by cutting back on travel and other discretionary spending, but the rollout of vaccines and continued recovery may allow them to loosen their purse strings once again.

Looking ahead

Inflows to Chinese equities have been on a steady rise in recent months, as foreign investors seek exposure to the renminbi’s appreciation as well as China’s economic growth. Investors may also be rotating out of the domestic property market, where the government has imposed tough measures to curb speculation. Recent IPOs of Chinese companies, especially in Hong Kong, have been strong.

Still, there is no way to know how far the 2021 bull can run. We see more cause for caution in sectors where valuation multiples have rapidly ballooned. One key risk is faster-than-expected policy tightening. As the recovery continues and inflationary pressure builds up, China may become the first country to need to mop up liquidity.

So far this year, the People’s Bank of China has been sending out mixed signals, draining funds at times to test market reaction. Concerns over tightening caused market jitters in late January. There may yet be more small tightening steps to cool inflation or limit asset bubbles. Nevertheless, we expect any further normalization of monetary policy to be slow and gradual, as the central bank takes care to maintain market stability in what China hopes will be an otherwise auspicious year.

If you would like to receive competent advice on how to manage and grow your wealth, please email us on ds@bluerocke.com with your contacts, for an exploratory meeting, at our cost, not yours.

 

Source – https://www.fidelity.com.au/insights/investment-articles/whats-ahead-for-chinas-markets-in-the-year-of-the-ox/

恭喜发财 Gōng xǐ fā cái

To our clients celebrating Lunar New Year,

A very Happy New and Prosperous New Year to all of you and your loved ones in this Year of the Ox!

From, the BlueRocke team.