vs X ASSOUTHERNADVISORY Newsletter - March 2023 Welcome tothe latest edition of our efent newsletter, Southern Advis ory Suite 108, 804-818 The Kingsway (Our articles cover a range of topics whicn we hope you wil find interesting. We am to Sarngbon NSW 7229 keep you informed of changes as they happen, but we aso want to provide ideas to 102 8524 6711 help you lve the fe you want — row ancl inthe future Einfo@southemackison:com.au ‘Wwe southernacvsory.corn. au In this ealtion we ciscuss 7 Age Ponsion traps to avoid, Insurance ahoad of retirement ‘and now te save for etvement in your 40's, Iryouwous lke to discuss any ofthe issues raised in this newsletter, please don't hesitate to contact us. In tho meantime we hope you enjoy the read, Allthe best ‘Southern Achisory7 age pension traps to avoid Make sure you don’t lose out on your age pension entitlements. Alter ifetme of hard work its mpertant you maximise your entlements in rtzernent. So you need to stucture your finances Carty to make sure you don ose your ‘age pension. Alter al, youve earned 1 ae some comman Waps t0 De aware ot Helping loved ones out... is ony nau! to want to help younger famiy members gst aleg Up fnancialy Butif youre nearng or aready in ratvement, you need t be careul how you go about this, a8 you coud Inacvertont affect your age oensin entlements you're tikng tang maney the res are you can ptt $10,000 per inane year, and no mere than $80,000 over ave year period. Ary excess lamoun!is counied as an asset, ana deemed to eam income, for afl fve-yearperion ‘rom the date of he i especially with buying property With nouse prices so high and nome ‘ownersho geting Lt of rach for younger Alstaians, sno saps tha many parents ‘wan’ to help ther kids get afoot on te property ladder. But vith property you noes to be extra caren Row you set things Up Lot's ook tan example. A cous aged 55 want te nel ther daughter buy er fest. rome. Wieat taking seve they Buy @ 150% share of house worth $500,000 as forward 12 years and the house Is no worth $1,009,000, of whieh ther mall {har e $900,000, Tol other tna assets ave worth $700,000 so they beloved they would be eligbie fora part lage pansion, To they dlemay thay dscover ‘her acuity nthe daughter's home has ‘cen them over tne asset test cut-off Bort, meaning they won'te geting ary age pension fom the Government So what can thay da? they tranaer tir cwraranip share to tai caught the capa gains would be as righ as $125,000 atte tne ‘SD per cant ax lsccunt on whch capita ‘gains tax could be as much as $50,000, ‘nl toy wo have 20 wat Tv yoars to ‘quality forthe pension because Centrelink ‘would teat he $500,000 98a deprived ass, ‘The total yaue of the capita gars !ax and the lost pension could be as rach as $180,0001 1 they’ been aware of te rap, taken advice, they cou have gare guarantor for ther daughir, possibly puting up thee own home as par security, and this would have had no eect on ther sure penson alg, ‘toratoly, hoy cola have ransomed their ‘ownership fo ther daughier at fast 5 years betore they became eligi fr the age pension, Thoy sll woud have had a capt ‘gains tx ati, but at least ho 5 yoar period for counting tne git woule have eased by ‘he ime they appied for the age pension. Borrowing against the family home to invest i yu aready, or about to 66, on the age pension, purcnasing an investment property wi the oan secured against your fars'y home (primary resisonca can bea trap. Normal, the debt against an investment aset—for exarpe, an nveeiant property is deductes from the asset value when workng out wether youre eighbie for an ‘ge porsion. But tho mortgage is socuroe ‘agains: another asset ik the ‘amly home, ‘then the gross amount fs counted, So this may afect your age pension as tefl valve Df the nvesimente counted 98 an asset ‘Away 0 avid this could be to secure the Asset against the nvestmentirstea. Downsizing the family home it you're thinkng ef sling your famiy home anc buying a stor pace, ters an ‘ded incentive a th Government is Alowing downsize controutionsirto super {or elgbe Ausraran of upto $300,000. But thre could be Cenirnk sting nthe ‘ai, as youre converting an exam asst the family home) into a counted asset money lat over that coud atect your igi forthe age pension. “Theres plenty to thnk about youte lootng at downsing, so you might want wb get some advice, Leaving a bequest in your will Many ved coupes lave al ther assets to each thorn thi wis they pass aay \Whio this is pefecty understandable it calid cause graf to the surviving pare It tner age pension i ecuced or los together. The asset cutot pains for singles fad cauoles aro ute derent~-$595,750 for 8 single person and $80,500 fora couple Starting a super income stream early Ifyou start a superincame stream ence you reach preservation age and before you reach age pension age—for exare, {8s part of a anstion to retrerent st Sr eould atc: your eniitemens to Centeink allowances ke Jabsoeker. So i's mportan to ge nancial advice. Actvice can make al the derance in how you se! up you" super and pension arrangements In genera you nave a younger parney, one Dplion could be moving asses into super fs anon-concessna conrbulion for the spouse who is underage persion age. Te amount placed in super fo the younger spouse is preserved unt! they meet a conciton of rlease. Ths may work Wott ther condition of release ony & fow yoarsavay, but could bea concern it ‘here's mors of an age gap Changing account- based pensions it yauve been receting an account based ponsion (ABP) fora wile, you shoul be Svare ofa change made on 1 January 2018 wich impacted how rch nome irom the ABP fs courted towards the age pension income test Ityou were m an exsting ABP you were exempt rom the now usb ony fr 3s long as you continued with te same provider Soi you change providers you coula inadverinty reduce your age pension envtomers We can help work out the best oaton for you parlour ceumstances—tne Bontts Dt anew ABP or te hgher age pension. Setting up a family trust I tne a famiy trust or private company invehed i your affairs, the rules are ven more complex, £0 youl need expert advice Before arplng for he age persion Looking al he best way 1 sel up your oy Jon ents Head Tapa Teenie Saag AMPRei. . Why it’s important to think about insurance ahead of retirement If retirement's on your horizon, you'll be keen to make sure your plans stay on track. it makes sense to concentrate on things you can control, such as insurance. Paying for more insurance than you raed ‘can eat away a yourrelement savings a & {me whon they're more rmportan than er Under-nsuro an’ one day you may tnd you ned and have fo use eavings or bore money 10 nelp you gt trough hard simes. Cover for a changing life if youie considering wint nsurance you ray nee inthe les up retreat, 8 ‘oad way to gt started isto thnk about ‘what you really need. and wat you don't. ‘Another approach o make sure you're hedng therigh insurance forthe style sou want reireren ier's a simple checklist that may hla 1. Ask yourself how much meney your {ary would hav if you were fo pass anny or become csabies Compare that wtn how much money your fai might need inthe same Situation, incuding how they'd manage paying for dy to-day costs xe mortgages or 3. The aiference between the two can hep you work outhow much instrance you may need Consider your existing cover 1g out your existing insurance agreements taking special noe of when theyre due to ‘voi and your continued eighty tr the policies ney hol. An important area ‘or many Auras is insurance holdin superannuation. Those polles can coms as pa of eur super [account and often have an exit dae. Insurance in super Insurance in super can hp us out vine we ay nee Uke ary po traurance, works beet when you have the right vel of preiacton fr your sliston As you hea tras rlremant ana your ite changes, so might your Pres. wel as Uensurance wich paye'alonp eum benef you paseo Ye might have Totland Permanon., Disablement TPO) n your sper TPD cover may prove you wih lamp sum paymont tou sulle a saat tat provers you rom aver working aga "PO could help you pay for ongoing medica expenses teratons 9 yourhome to make Aaysonday io easier and hop pie re ancl staby, Toa salary continuance, also known as income aotoction Sesign to pay arnt bereft of yp 0 175% 0 your are: deabty regular ncome yale unaie ta work eo rs oss Tplcaly, wii super, come Protection proves you wih cover eer for ao" oor oF fue year pai or Unt ou ts 8, ponding onto torso your pan What to look out for Thor are px ae cons of insurance wn Soper Thangs tthe about youre Sopreacing rvonens noe: = Cower hough super may and when you reach a certan age sus 65 or 7), That's goneray afro cover tra’ cutie a super accoun Taxes may be appli to TPD benefits Clpending on your age Chim payments may ake longer. the rmanoysnoraly pai byte insurer to the tee of be super fun before i's Bad to yeu or yeur dependants Ira g000 idea to make su your super balance it being reouced mor than needs to be, by your insurance parents Ths i ald insrance een Don't double up and stay flexible ‘As part ct your review, t's also a gcad dea to check insurance you hold n super aganst other policies ‘you might have outs.de super Thon compare your cover, check whether you nave any meurance dub ups if you nave more than one super account ith the same ype of surance, you ay be paying fo more surance than you need n parca, ‘or Temporary Salary Contrance ITSC o” income Protection, youll most ko ony be aale to calm up to 75% ‘of your pro-csablity income ftsts may anal, rogartess of how much Youre insured for or whetner you need tin to accounis, ‘As well 8s comparing the level of ‘ovr you ge, consider any ‘exclusions, such as he treatment of any pre-oxsting medica candilons anc! waling periods. Remember tat if you do cancel our insurance, you might ose access to features ara Benefits and may no: be abl o sion back up atthe same rate or ata {you are appying fr or reinstating your insurance, of ao ooking fo make 2 claim, salsa Important to dsciose ‘your situation to your insurer honesty ‘Otherwiee, the insurer may be enites to refuse you claim. Any changos i te cas for Nexo» trinking, whatever age you are Tho lead upto retroront i 9 groat lime to reviow your insurance and cap! to changing creumstances,How to save for retirement in your 40s Retirement can start to feel closer when you're in your 40s. Fortunately, there's siill plenty of time to make decisions that could have a positive impact on your future financial wellbeing, ey pots On average, coupes nees nary $65,000 ayer to ive comfortably in cetirerent “Thanks to the pandemic, many of us spend sometime working ftom home. Chanel your war commute savings into your investments There are numerous statis to reduce your els. Some ae easier han you mght Bink. ~ Star eay when it comes to ging your keds a healthy understanding of mney. Di you know that many superannuation funds have Ife insurance included? By th te yout in your 40s youl potentially be earing more maney than you may have previously bul you may also have unexpected of unwelcome expenses, ke divorce. At ths age you righ! also put retrement planning onthe backburner mn favour of more prossing financial Ccorsmiments, suc as your home loan anc Ke" eohoal foes Use these patent ie ‘changes asthe impetus to re-evaluate our ‘sols ans income an look at haw yeu can maxinige savings for your rem. in your 40s, etrement age i stlatleast 20 years away anc, whe tat seems ike plenty ‘ot time, your decsions now can han socure {your financial future, Read onto fired smart Ways 0 ave for atrement whist i your 4s, Calculate how much you'll need for retirement Keep tabs on now much youre likely to need in alvement by checking tne retrement standards pubished ausriery by the Association of Superannuation Funds of ‘Ausvala /ASFAY. Calcuate ths agains your ‘own supor balance to gve you an idea of how soon youl be able to say goodbye to he 8105 cording to ASPs March 2022 figure, jas and couples aroun age 65 who {x long ta rate tay would need an snnval budget of around $46,094 o $65,445 spect to funda ‘eomferable’ ese Tove a modest esta, which Considered sighty beter than living onthe fae persion alone, ndviduais ane counes ‘would negd an annual budgot of around $28,582 or $2,621 respectively Set realistic financial goals Wie your fmarcial goals in your 20s and {305 may have been ideaistc. as you get ‘osor to rtrement. they should Become reabste. F's time to develop acer plan for your savings, wth achievable ser, mid ard long term targets working toward your ‘vera roioment goa Live within your means Your 40s 28 typaly peak earring yeas. t's impor you consider unraling ome of hie cash nts actively saving or you eirement Become more mind around spending on big-ticket toms as wo ~ befor a spree, ny taking aday ora week’ to give yous ‘ime to think about haw men you really need heim. You'll be urprged at how fen you decide i's not essential to your Ite, ans he money you save can be aed yr retirement saves instead Review your investments “our super mignt be teking lon, but what aout other missions? no fo0 ato for sang and vesting. Wor ot what restr you are 0 youhave a better stoning! Pow comtatabe you are wah ike Ton tka a nancial asor Shout creaing a portoio tat sus you which mgt incus property, sare an ‘Aim to be debt free Entering ratrement with debt means jugging reaaymente witha high nrest rate, which wall eat into your reeement come. To enter retirement cab fag, look at paying aff your nome loan ore you rte Preparing fr rlrrment in your 40s might ‘moan gating 8 Detter deal on inves ates {Sr oreating a budget tat alows you to make extra conirautons to your home loan above you minimum monthy repayments. Moke sure you pay of your erect card 'ance ina each month, 20 you dont ‘accumulate interest. Be cautious abut borrowing money thar you wort bo able to payoff ina shor period of te, TIP 1: Not all ds are the sama. K's a.g200 ea to understand which ae 'g008' ar lwhien are ‘bac. and wish you should be paying of fst ‘HP 2: Do you have an ermergency fund in place? I's a good idea to consider an ‘emergency fund i you havent areany, Update your insurance Whether tnee’s an unaxnactec emergency ‘or you suter an ongoing ines, naving ‘ne right kind of nsurance can hep create 28 of ind when you need i most Reuiow your private heath insurance to make Sure its stil ight for your needs, patculry ‘your creumstances have changed or you rave a growing family. Income protection and ie insurance ep to protect you and Your family you can't work due nr or Ins, eo yau ean continue to pay the ble ‘witout cipping ino your savings. Plan for your kids’ futures "Your kc mean the wer o you ~ we gt BU her education doesn't have to come at ‘ne expense of your retirement. As part ct your retrement planning, consider setting Uo | separate savings account to fund things ko your kis ecueaton fees, so you dont rave to dp ino your retirement ‘und. As an aerate, aggressively paying down your rom loan may give you access toa re-craw {acity which could assist with education Show your enisren how and why you're cating back on ciscrtonary sponding {meals out, tps tothe mevies 0 make ‘hal long-term goals ie goting a ob) nity. They're never tao young veloo a healthy understanding of finances and eudgetng, ‘Speak tous foday ifyou would ike o invest ‘more for your retirement.