The retirement living sector is growing rapidly in Australia as the population ages and demand increases for a spot in a retirement village.

For many people, the idea of having someone on site to help with property and garden maintenance is enough for them to make what can be a major change later in life. For others it is about the ready-made community and the easy access to social activities and a network of friends.

And, as developers seek to entice younger and younger residents, they are dialling up the luxury and add-ons.

The type of accommodation varies widely between villages from apartments, villas and houses. Some retirement villages have a resort-style feel with a range of onsite amenities on offer including swimming pools, fitness centres, cinemas and cafes and there are often different dining and cleaning options available for residents.

Research released last year by the Property Council of Australia shows that retirement village residents are 41 per cent happier; 19 per cent less likely to require hospitalisation after only nine months; 15 per cent more physically active; five times more socially active; twice as likely to catch up with family or friends and have reduced levels of depression and loneliness.ⁱ

One important factor that sets retirement villages apart from residential aged care facilities is that retirement village living is considered independent living, generally without medical or personal care available through the village itself.

Different laws

Some residential retirement complexes include both independent living homes and aged care facilities. This set up can make the transition to aged care, if needed, less stressful especially if one member of a couple needs greater care.

However, the two operations are regulated quite separately under different laws and there are no guarantees that you can move smoothly from one to another when you want to.

Unlike assisted living or residential aged care, retirement villages are not regulated by the Federal Government but are governed under state and territory retirement villages acts.

As such, the rules can vary between jurisdictions and villages.

The rules under which retirement villages operate are not as restrictive or controlled as residential aged care.

Considering the costs

Buying into a retirement village can be a significant expense, making it important to understand the legal implications and ensure you carry out a thorough check to see if it is affordable.

In most cases you don’t own the village residence. A common arrangement is for a lease or loan type arrangement, where residents buy the right to occupy a home within the village for a specific period.

Knowing your rights and obligations, as well as the initial costs and ongoing fees and expenses are key considerations to a successful transition.

The costs could be roughly what would be incurred if you owned your home. However, you will have less discretion about incurring any expenses.

As well as an upfront price, there could be ongoing maintenance fees and deferred management fees, which reduce the amount you receive when you leave the village.

The level of fees and how they are set is a private commercial arrangement and not governed by any laws.

Financial and legal advice is highly recommended to ensure clear understanding of the purchase arrangements and contracts. Their level of complexity is not to be underestimated.

Extra services and support

It is most people’s aim to remain living independently in their own home for as long as possible.

For people living in retirement villages, this could mean accessing government subsidised home care services – for example, through the existing Home Care Packages Program.

Depending on a person’s health, these services could include cleaning and domestic assistance as well as personal care, such as assistance with showering or the delivery of pre-cooked meals.

Following the introduction of recent reforms, a new Aged Care Act aims to increase the subsidies for services and equipment to assist people staying at home.

A new Support at Home Program will replace the Home Care Packages Program from 1 July 2025. The Commonwealth Home Support Program will transition after 1 July 2027.

The reforms also include significant changes to the funding arrangements for residential aged care.

For both home care and residential aged care, the focus will be increasing the quality of services and the rights of individuals, while at the same time looking for greater contributions from people accessing the services.

Retirement villages are largely lifestyle considerations, but you also need to consider your current and future care needs to ensure that the village you choose will remain suitable for at least the medium term.

Contact us to discuss your plans for retirement, including any retirement living needs.

Tips for choosing a retirement village

• Visit several retirement villages to compare what is on offer.
• Ask the operator for a copy of the village’s disclosure statement, occupation rights agreement and any other relevant documents.
• Understand the entry and exit costs as well as the ongoing fees and what they cover.
• Check on resident rights – for example, can visitors stay overnight, are pets allowed etc.
• Know the expected sale price and whether you receive any of the capital growth.
• Are you expected to pay for refurbishment of the unit and how much is this likely to cost?
• Are deferred management fees applied?
• What happens if you need greater levels of care?

i Seniors’ housing focus required as population ages | Property Council Australia

Welcome to summer and, for many, an active season with last-minute tasks and celebrations with family and friends. We take this opportunity to wish you and your family a joy-filled and safe festive season!

While headline inflation eased to 2.8% in the September quarter, the Reserve Bank remains unmoved on interest rates. RBA Governor Michelle Bullock says the drop in the cost of living may be welcome relief for most of us, but the Board’s measure to watch is trimmed mean inflation and that’s still not “sustainably” in the desired target range of 2-3%. It’s not likely to get there until late in 2026, the RBA predicts.

The sharemarket reacted sharply to the Governor’s comments in the last days of a month that had seen several all-time highs. US President-elect Donald Trump’s promise for 25% tariffs on Canadian and Mexican goods also contributed to the billion dollar shares sell-off. Nonetheless, the S&P ASX200 finished November 3.4% higher.

The Australian dollar is also taking a beating from the possibility of both the US tariffs and the RBA’s rates forecast. It hit a seven-month low below 65 US cents near the end of the month.

And, in good news the ANZ-Roy Morgan Consumer Confidence Index, while down slightly has stayed above a mark of 85 points for the sixth week in a row for the first time in two years. Commonwealth Bank projections expect a boost in sales for small businesses thanks to the Black Friday and Cyber Monday sales and the coming festive period.

Dollar cost averaging: can it work for you?

Australian share prices have seen record highs in 2024 after a sluggish couple of years.

The S&P ASX200 index added just under 7 per cent in the 10 months to October 31 closing at 8160.ⁱ It reached its previous all-time high of 8355 just two weeks before.

So, if you were invested in an index fund or a basket of shares mirroring the ASX200 for the entire period, it’s likely you would have added some value to your portfolio.

Over the course of the year, the index has ebbed and flowed, recording several all-time highs and some jarring notes in response to global events.

Geopolitical tensions have also played a part in market skittishness as the wars in the Middle East and Ukraine continue and economists argue about the future impact on Australia of a Trump presidency.

US share prices surged the day after Donald Trump’s election in what many saw as a positive reaction to the returning President’s policies. Since then, prices have declined in a not-unexpected correction. Various analysts are predicting future volatility as markets respond to the proposed policies including tariffs and mass deportations promised by the President-elect.

These ups and downs in prices can have investors scurrying to hit the ‘buy’ or ‘sell’ buttons. They may be desperate to save further losses when share prices are falling rapidly or wanting to cash in on a rising market. Meanwhile, those with lump sums to invest may delay, trying to pick the time when prices are lowest.

Timing the market

It’s a strategy – known as timing the market – that may work for some, particularly if you need access to your investment in the short term. But, for mid- to long-term investors, it’s generally accepted to be problematic.

To begin with, predicting the next market movement is extremely difficult – even for experienced investors – because of the endless factors that can influence the markets.

Reacting to major market movements by selling or keeping a lump sum in cash until ‘the time is right’ means you run the risk of missing the market’s best days and reducing your overall return.

Countless studies show that better long-term results are achieved by consistent investing over time.

In Australia, $10,000 invested in the ASX/S&P 200 during the 20 years to October 2024 would have increased to $60,777. ⁱⁱ But, if you had missed the 10 best days during that time, your total investment would be just $36,014.

Dollar cost averaging

One way of removing the emotion and guesswork is to consider investing at regular intervals over time, ignoring any market signals, in a strategy known as ‘dollar cost averaging’.

The strategy works best if you are investing over the medium to long term because it helps to smooth out the price peaks and troughs.

In fact, compulsory superannuation paid by employers is a form of dollar cost averaging. Smaller, regular amounts are invested automatically, regardless of market movements and, over time, the investment grows.

However, the jury is out on whether dollar cost averaging is a useful strategy when you have a lump sum in cash to invest.

Some advocates of dollar cost averaging argue that there’s a better return because you reduce the risk of making a large investment just before markets plunge.

Those opposed to the strategy for lump sum investing say that, with a lump sum sitting in a bank account as you chip away at regular stock purchases, there is a risk that you will miss the best of the market.

A 2023 study found that investing a lump sum in the markets at once over the long term delivers a better return than a dollar cost averaging strategy.ⁱⁱⁱ

So, avoid the risks of timing the market and consider whether dollar cost averaging might be an appropriate strategy for you.

We’d be happy to discuss how best to ensure your regular investing strategy or investment of a lump sum, takes account of future market movements and volatility.

i Australia Stock Market Index | Trading Economics

ii Timing the market | Fidelity Australia

iii Lump-sum investing versus cost averaging: Which is better? | Vanguard

Gifting for future generations

At this time of year, when giving is particularly on our minds, some might turn their attention to how best share their wealth or an unexpected windfall with their loved ones­.

You might be thinking about handing over a lump sum to help them with a major purchase or business opportunity, or be keen to help reduce or extinguish their student loans. Alternatively, it might be about helping to solve a housing problem.

Whatever the reason there are some rules that it is worth being aware of to ensure both you and they are protected.

Giving a cash gift

You can give anyone, family or not, a gift of cash for any amount and, as long as you don’t materially benefit from the gift or expect anything in return, no tax is paid on the amount by either you or the receiver.ⁱ

The same applies if you’re planning to pay out your child’s student loans.

However, be aware that if the beneficiary of your cash gift is receiving a government benefit, such as an unemployment benefit or a student allowance, there is a limit on the size of the gift they can receive without it affecting their payments.

They may receive up to $10,000 in one financial year or $30,000 over five financial years (which can not include more than $10,000 in one financial year).ⁱⁱ

Helping out with housing

Many parents also like to help their children get into the property market, where possible.

It’s been a difficult time for many in the past few years in dealing with the COVID-19 pandemic, the rising cost of living and interest rates, and a housing crisis.

A Productivity Commission report released this year found that while most people born between 1976 and 1982 earn more than their parents did at a similar age, income growth is slower for those born after 1990.ⁱⁱⁱ

With money tight and house prices climbing, three in five renters don’t believe they will ever own a home even though most (78 per cent) want to be homeowners, according data collected by the Australian Housing and Urban Research Institute (AHURI).^iv

Just over half of those surveyed (52 per cent) were renting because they didn’t have enough for a home deposit and 42 per cent said they couldn’t afford to buy anything appropriate, the AHURI survey found.

So, in this climate, help from parents to buy a home isn’t just a nice-to-have, it’s becoming a necessity for many.

Moving home

Allowing your adult child, perhaps with a partner and family, to share the family home rent-free is common option, giving them the chance to save up for a deposit.

One Australian survey found that one-in-10 people had moved back in with their parents either to save money or because they could no longer afford to rent.^v

If it gets too much living under the same roof, building a granny flat in your backyard may be an option.  Of course there are council regulations to consider, permits to be obtained and the cost of building or buying a kit but on the upside, it may add value to your home.

Becoming a guarantor

Another way to help might be to become a guarantor on your child’s mortgage. This might be the best way into a mortgage for many but before you sign, think it through carefully, understand the loan contract and know the risks.^vi

Don’t forget that, as guarantor, you’re responsible for the debt. You will have to step in and repay if the borrower can’t afford to repay, and the loan will be listed as a default on your own credit report.

Any sign that you are being pressured to be a guarantor on a loan may be a sign of financial abuse. There are a number of avenues for advice and support if you’re concerned.

It’s vital that you obtain independent legal advice before signing any loan documents.

If you would like more information about how to provide meaningful financial support to your children, we’d be happy to help.

i Tax on gifts and inheritances | ATO Community

ii How much you can gift – Age Pension – Services Australia

iii Fairly equal? Economic mobility in Australia – Commission Research Paper – Productivity Commission

iv Rising proportion of ‘forever renters’ requires tax and policy re-think | AHURI

v Coming home: 662,000 Australian households reunite with adult children – finder.com.au

vi Going guarantor on a loan – Moneysmart.gov.au

Surviving the silly season

Ah, Christmas! – the time of year when your bank account shrinks, your social calendar explodes, and your family dynamics resemble a poorly scripted soap opera. As we navigate this festive minefield of shopping, social gatherings, and feasting, it’s common to feel a little frazzled.

In fact, research has found that the holiday season is one of the six most stressful life events we go through, in the same category as moving house and divorce.ⁱ

But it does not have to be – before you let the silly season get the better of you, here are some ways to not just survive, but thrive, to make it through the festive chaos and bring in 2025 feeling energised and on track to reaching your goals. 

Get organised

Let’s face it, the silly season is a whirlwind. Between work parties, family catch-ups, and obligatory gatherings with distant relatives you only see once a year, it’s enough to make anyone want to retreat to a deserted island.

However, rather than running off to Bora Bora, if you want to survive the silly season relatively unscathed, planning ahead is a must. With the social calendar filling up quicker than you can say cheers, it becomes easy to overcommit and leave yourself feeling a little stretched. Rather than maintaining a constant schedule of parties and social engagements, why not learn the power of saying ‘no’. Choose the events you really want to attend and think about each invitation before you send that RSVP. Remember to allow for some guilt-free ‘down time’ amongst all the festivities.  

Shopping shenanigans

Shopping during the silly season can be akin to a scene from an action movie—chaotic, frenzied, and with a distinct chance of an all-in brawl.

Channel your inner Santa Claus and make a list. And yes, check it twice! A good list keeps you focused and reduces the chances of impulse buys—like that life-sized inflatable Santa that seemed like a good idea at the time. (Spoiler alert: it wasn’t.)

Consider shopping online, too. You can sip your coffee in your pyjamas while avoiding the chaos of the shops. Just remember: the delivery cut-off dates are real! Don’t be the person frantically searching for gifts at 9 PM on Christmas Eve.

The present predicament

Let’s talk presents. It’s lovely to give and receive gifts, but when did we all agree that every adult needs a new mug or another pair of socks?

To combat the gift-giving madness, consider doing a Secret Santa among adults. Set a reasonable budget and unleash your creativity. Who doesn’t want a mysterious gift that could range from a novelty toilet brush to a box of chocolates? 

Navigating the family dynamics

Family gatherings can be a delightful mix of love, laughter, and the occasional argument that would make for great reality TV. You know the drill—everyone has an opinion, and even the Christmas ham can become a hot topic of debate.

Before the big day, set some ground rules. No politics, no discussing that relative’s questionable life choices, and absolutely no karaoke unless everyone is fully prepared to participate. If tensions start to rise, a little humour can go a long way. Embrace the absurdity of it all. If Uncle Bob starts arguing about the best way to cook prawns, counter with a story about how Auntie Sheila once tried to deep-fry a turkey—because that’s a Christmas classic in its own right.

Don’t try to do it all

If you’re hosting this year, congratulations! You’re officially in charge of managing the chaos. But you don’t have to shoulder the entire load.

Encourage those who are coming to bring their ‘special’ dish. Not only does it lighten your load, but it also allows everyone to show off their culinary skills (or lack thereof). Plus, you might discover that Aunt Margaret’s “special” potato salad is actually a hidden gem—just don’t ask what’s in it. 

Survive and thrive

At the end of the day embrace the chaos, lean into the hilarity of when things don’t go to plan, don’t take it all too seriously and be prepared to step back a little when you need a break from all the festivities.

Here’s to a joyful festive season filled with laughter and the wonderful chaos that is Christmas. We’ll catch you on the other side. Cheers!

i Christmas stress | Relationships Australia

It’s the last month of Spring and with summer on the way and many already planning for Christmas and holidays, it might be a busy month.

Interest rates are expected to remain on hold when the Reserve Bank board meets next week despite welcome news on the inflation front. The Consumer Price Index rose just 0.2% in the September quarter and 2.8% for the year, the lowest rate in just over three years. Prices fell slightly for alcohol and tobacco, clothing, housing, health, and financial services. Transport costs also fell for the first time since 2020.

Share prices softened during the past two weeks of October, recorded the worst monthly performance in six months. The S&P/ASX 200 closed slightly down by 0.3% over the month, after again reaching record highs mid-month.

The Australian dollar ended the month at 65.7 US cents after almost hitting 70 US cents just a few weeks ago. Investors were reacting to the weaker than expected Australian retail sales and stronger US unemployment and retail sales figures.

Iron ore has hit a one-month low at USD104.08 after the heady highs in January of almost USD 145 in January. All eyes are on meetings in China next week about expanding its stimulus measures.

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Market movements and review video – November 2024

Stay up to date with what’s happened in the Australian economy and markets over the past month.

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Helping the kids without derailing your retirement plans

As parents, the instinct to support our children never truly fades, even when they become adults but when you are looking at giving them a financial helping hand there is a bit to consider.

It’s important to ensure any support you provide is not at the expense of your financial future. It can also be tricky knowing what form your support should take, in order to maximise the benefits for your kids.

Support in a challenging environment

In today’s financial landscape, many young people are struggling to get ahead in the face of skyrocketing housing prices and rising living costs and it’s increasingly common for parents to provide some form of financial assistance. In fact, more than half of parents with a child older than 18 provide financial support.ⁱ

So, if you are giving your adult kids a monetary helping hand, or considering it, you are in good company.

Achieving balance

The challenge for most people is the balance between helping your kids get a head start in life and making sure you have enough for a secure financial future.

It’s important to have clear visibility of your own financial situation, of how much you’ll need to fund the retirement you aspire to, and how much you can comfortably spare. If your financial future is secure, you’ll be in a better position to help your children when they need it most, so ensure that any contribution you make to your kids’ financial wellbeing is not at the expense of your superannuation and other retirement savings. 

Ways of providing support

When we think of support we often think of the ‘bank of mum and dad’ helping with a home purchase and that is quite common, with 40 per cent of new home buyers getting a hand from their parents. ⁱⁱ

If you’re considering this route, you have several options:

Gift funds: If you have the means, you can gift your child a portion of the deposit, however, be mindful of any tax implications.

Going guarantor: Another popular option is to act as a guarantor on your child’s home loan. This means that you’ll use the equity in your own home to guarantee the loan, which can help your child secure better borrowing terms. It’s a significant commitment, so be sure to discuss the potential risks and implications thoroughly.

Co-ownership: In some cases, parents and children can purchase a property together, sharing the financial responsibilities. This arrangement can be beneficial, but it’s crucial to have a clear agreement in place outlining each party’s responsibilities and financial contributions.

Other ways of providing financial support

There are lot of other ways you can help your kids with a range of expenses. Nearly 40 per cent of parents pay for their adult children’s groceries and around the same proportion allow their adult children to live at home rent-free, while around a third pay their adult children’s bills. One in five fork out for their kid’s car-related costs like registration fees and petrol and 20 per cent pay for their kids to take off on holidays.ⁱⁱⁱ

Non-financial support

Financial assistance isn’t the only way to support your children. Often, your time and knowledge can be just as valuable. Encourage them to develop good financial habits, such as budgeting, saving, and investing. You might even consider involving them in family discussions about money management, which can empower them to make informed financial decisions.

Communication is critical

Regular, honest conversations about finances can strengthen your relationship with your children. Discuss their financial goals and challenges openly and encourage them to share their aspirations. These dialogues will allow you to gauge how best to support them and sometimes, just being there to listen can make a world of difference.

Setting clear boundaries is also crucial when offering financial support. Discuss how much you can provide, whether it’s a one-off gift, a monthly allowance, or a loan. By being transparent about your limits, you can prevent misunderstandings and help your children set realistic expectations and become financially independent.

Navigating the complexities of financial support can be challenging, especially when balancing your own needs with those of your children. We can provide assistance and advice tailored to your unique situation and help you create a sustainable plan that allows you to assist your children without compromising your retirement goals.

i Finder Bank of Mum and Dad Report | Finder

ii https://www.apimagazine.com.au/news/tag/depositiii Bank of Mum and Dad slightly less generous than before COVID-19 crisis, survey shows | Domain

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Super vs property: what works for retirement income?

There is no debate that Australians love investing in property. The value of Australian residential real estate at the end of August 2024 was an estimated $10.95 trillion.ⁱ

Some love it so much that they believe property is a better option for providing a retirement income. They see a bricks and mortar investment as a more tangible and solid approach than say, superannuation, preferring to take their super as a lump sum on retirement to buy property. They may also choose to invest a windfall, such as an inheritance, or the proceeds from downsizing the family home, in property instead of their super.  

So, given that a retired couple above age 65 needs an estimated yearly income $73,337 to lead a comfortable lifestyle, could a property investment do the job?ⁱⁱ

While it’s true that a sizeable property portfolio could deliver rental income to equal a super pension, it might mean missing out on some useful benefits.

After all, super is a retirement savings structure with significant tax advantages. It also has the flexibility to provide investments in a range of different asset classes, including property.

Meanwhile, super fund performance has, generally speaking, outstripped house price movements over the past decade. Super funds (invested in an all-growth category) returned an annual average of 9.1 per cent during that time while average house prices in Australian capital cities grew 6.5 per cent per year over the same period.^{iii, iv}

Not that past performance can give you any guarantees about what will happen in the future. Indeed, the average numbers smooth out the years of high returns and the years of negative returns. More important considerations in making an informed decision are your financial goals, your investment timeframe and how much risk you’re comfortable with.

Liquidity

One of the most significant differences between super and property investments is liquidity, or how quickly you can convert your investment to cash.

With super, assuming you’re eligible, funds can be accessed relatively easily and quickly. On the other hand, if your wealth is tied up in property it may take some time to sell or it may sell at a lower price.

Nonetheless, market cycles affect both property and super investments. They can be affected by volatile conditions and deliver negative returns just at the time you need access to a lump sum.

Long-term investing

Superannuation is designed for long-term growth, often spanning decades as you accumulate wealth over your working life. The magic of compounding interest can lead to substantial growth over time, depending on your investment options and the state of the market.

Property investments, on the other hand, can be invested for short, medium, and long-term growth depending on the suburb, the street, and the type of house you invest in. Of course, there are additional costs in buying a property (such as stamp duty) plus costs in selling (including capital gains tax). If there’s a mortgage over the property, you’ll need to factor in the additional costs of repayments and interest (bearing in mind that interest on investment properties is tax deductible).

Risk appetite

Investors’ attitudes towards risk also play a role in choosing between super and property.

Superannuation funds can be diversified across various asset classes, which helps to reduce risk. But property investments expose investors to a single market meaning that while there might be a big benefit from an upswing, any downturn may be a blow to a portfolio.

Making an informed choice

Ultimately, any decision between superannuation and property should align with individual financial goals, risk tolerance, and investment strategies. And, of course, it doesn’t need to be one or the other – many choose to rely on their super while also holding investment property so it’s best to understand how super and property can complement each other in a well-rounded retirement plan.

We’d be happy to help you analyse your retirement income strategy to develop a plan that works for you.

i Monthly Housing Chart Pack – September 2024 | CoreLogic Australia

ii ASFA Retirement Standard – June quarter 2024 | The Association of Superannuation Funds of Australia Limited (ASFA)

iii Super funds deliver strong result in FY24 | Chant West

iv SQM Research Weekly Asking Property Prices , 1 October 2024 | SQM Research

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Is a retirement village right for you?

The retirement living sector is growing rapidly in Australia as the population ages and demand increases for a spot in a retirement village.

For many people, the idea of having someone on site to help with property and garden maintenance is enough for them to make what can be a major change later in life. For others it is about the ready-made community and the easy access to social activities and a network of friends. And, as developers seek to entice younger and younger residents, they are dialling up the luxury and add-ons.

The type of accommodation varies widely between villages from apartments, villas and houses. Some retirement villages have a resort-style feel with a range of onsite amenities on offer including swimming pools, fitness centres, cinemas and cafes and there are often different dining and cleaning options available for residents.

Research released last year by the Property Council of Australia shows that retirement village residents are 41 per cent happier; 19 per cent less likely to require hospitalisation after only nine months; 15 per cent more physically active; five times more socially active; twice as likely to catch up with family or friends and have reduced levels of depression and loneliness.ⁱ

One important factor that sets retirement villages apart from residential aged care facilities is that retirement village living is considered independent living, generally without medical or personal care available through the village itself.

Different laws

Some residential retirement complexes include both independent living homes and aged care facilities. This set up can make the transition to aged care, if needed, less stressful especially if one member of a couple needs greater care.

However, the two operations are regulated quite separately under different laws and there are no guarantees that you can move smoothly from one to another when you want to.

Unlike assisted living or residential aged care, retirement villages are not regulated by the Federal Government but are governed under state and territory retirement villages acts. As such, the rules can vary between jurisdictions and villages.

Considering the costs

Buying into a retirement village can be a significant expense, making it important to understand the legal implications and ensure you carry out a thorough check to see if it is affordable.

In most cases you don’t own the village residence. A common arrangement is for a lease or loan type arrangement, where residents buy the right to occupy a home within the village for a specific period.

The level of fees and how they are set is a private commercial arrangement and not governed by any laws. The costs could be roughly what would be incurred if you owned your home. As well as an upfront price, there could be ongoing maintenance fees and deferred management fees, which reduce the amount you receive when you leave the village.

Knowing your rights and obligations, as well as the initial costs and ongoing fees and expenses are key considerations to a successful transition.

Financial and legal advice is highly recommended to ensure clear understanding of the purchase arrangements and contracts. Their level of complexity is not to be underestimated.

Extra services and support

It is most people’s aim to remain living independently in their own home for as long as possible.

For people living in retirement villages, this could mean accessing government subsidised home care services – for example, through the existing Home Care Packages Program. Depending on a person’s health, these services could include cleaning and domestic assistance as well as personal care, such as assistance with showering or the delivery of pre-cooked meals.

Following the introduction of recent reforms, a new Aged Care Act aims to increase the subsidies for services and equipment to assist people staying at home.

A new Support at Home Program will replace the Home Care Packages Program from 1 July 2025. The Commonwealth Home Support Program will transition after 1 July 2027.

The reforms also include significant changes to the funding arrangements for residential aged care.

For both home care and residential aged care, the focus will be increasing the quality of services and the rights of individuals, while at the same time looking for greater contributions from people accessing the services.

Retirement villages are largely lifestyle considerations, but you also need to consider your current and future care needs to ensure that the village you choose will remain suitable for at least the medium term.

Contact us to discuss your plans for retirement.

i Seniors’ housing focus required as population ages | Property Council Australia

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The Age Pension and your retirement plans

Most people intend to retire between ages 65 and 66, according to the latest data and, surprisingly, despite growing superannuation balances, the Age Pension is the main source of income for many retirees.ⁱ

The intended retirement age has increased significantly in the last two decades, from just over 62 years on average in 2004.

Australian Bureau of Statistics (ABS) figures show that, in 2022-23, a government pension or allowance was still the main source of personal retirement income. This was followed by super, an annuity or private pension.

More than 60 per cent of those aged over 65 years were receiving the Pension in 2021ⁱⁱ

Am I eligible?

It is important to remember that, while you may not meet the eligibility requirements today, you may qualify later in life.

In 2021, only 44 per cent of people aged 65-69 received either full or part Age Pensions but this increased to 81 per cent for those aged 80 to 84 years.ⁱⁱⁱ

Veterans who have served in the Australian Defence Force may be eligible for pensions or benefits from the Department of Veterans Affairs.^iv

You are generally eligible for the Age Pension if you:

• are over 67 years (depending on when you were born)
• are an Australian resident and have lived in Australia for at least 10 years
• can meet an income and assets test

What are the income and assets tests?

The Age Pension means tests considers your income and the value of any assets you own. If the value of your income and assets exceed certain limits, your payment will be reduced.

Income includes money from a job (including salary packaging), other pensions or annuities, earnings from investments and any earnings outside of Australia.^v

Assets are items of value you or your partner own or have an interest in such as investment properties and artworks; caravans, cars, and boats; shares; and business assets. While your family home isn’t included in the assets test, your pension may be affected if you sell it.^vi

Can I still work?

Singles can earn up to $212 per fortnight without their pension being affected. For every dollar over that amount, their pension will be reduced by 50 cents. Couples can earn up to $372 per fortnight and for every dollar over that amount, 25 cents in the dollar will be deducted from their pension payment.^vii

If your income in a fortnight goes over a certain amount, you will not receive a pension payment. This cut-off amount is $2500.80 for a single person and a combined $3,833.40 for a couple. There are other higher cut-off allowances for those affected by ill-health.

The Work Bonus may help you earn more from working without reducing your pension. You don’t need to apply for it, the Bonus will be automatically applied to your eligible income – you just need to declare your income.^viii

What does the Age Pension pay?

There are different rates of pension for singles and couples.

The current maximum basic rate for a single person is $1047.10 per fortnight. A couple would receive 1,578.60 per fortnight. With extra supplements, those on a full Pension could receive a fortnightly total of $1,144.40 for singles and $1,725.20 for couples.^ix

Get in touch if you’d some help to work out your eligibility for the Age Pension and other government entitlements.

i Retirement and Retirement Intentions, Australia, 2022-23 financial year | Australian Bureau of Statistics (abs.gov.au)

ii, iii Age Pension guide | SuperGuide

iv Eligibility for benefits and payments | Department of Veterans’ Affairs (dva.gov.au)

v Income – Age Pension | Services Australia

vi Asset types – Age Pension | Services Australia

vii Income test for Age Pension – Age Pension | Services Australia

viii Who can get the Work Bonus – Work Bonus | Services Australia

ix How much Age Pension you can get – Age Pension | Services Australia

There is no debate that Australians love investing in property. The value of Australian residential real estate at the end of August 2024 was an estimated $10.95 trillion.ⁱ

Some love it so much that they believe property is a better option for providing a retirement income. They see a bricks and mortar investment as a more tangible and solid approach than say, superannuation, preferring to take their super as a lump sum on retirement to buy property. They may also choose to invest a windfall, such as an inheritance, or the proceeds from downsizing the family home, in property instead of their super.  

So, given that a retired couple above age 65 needs an estimated yearly income $73,337 to lead a comfortable lifestyle, could a property investment do the job?ⁱⁱ

While it’s true that a sizeable property portfolio could deliver rental income to equal a super pension, it might mean missing out on some useful benefits.

After all, super is a retirement savings structure with significant tax advantages. It also has the flexibility to provide investments in a range of different asset classes, including property.

Meanwhile, super fund performance has, generally speaking, outstripped house price movements over the past decade. Super funds (invested in an all-growth category) returned an annual average of 9.1 per cent during that time while average house prices in Australian capital cities grew 6.5 per cent per year over the same period.^{iii, iv}

The performance of superannuation and property

Not that past performance can give you any guarantees about what will happen in the future. Indeed, the average numbers smooth out the years of high returns and the years of negative returns. More important considerations in making an informed decision are your financial goals, your investment timeframe and how much risk you’re comfortable with.

Liquidity

One of the most significant differences between super and property investments is liquidity, or how quickly you can convert your investment to cash.

With super, assuming you’re eligible, funds can be accessed relatively easily and quickly. On the other hand, if your wealth is tied up in property it may take some time to sell or it may sell at a lower price.

Nonetheless, market cycles affect both property and super investments. They can be affected by volatile conditions and deliver negative returns just at the time you need access to a lump sum.

Long-term investing

Superannuation is designed for long-term growth, often spanning decades as you accumulate wealth over your working life. The magic of compounding interest can lead to substantial growth over time, depending on your investment options and the state of the market.

Property investments, on the other hand, can be invested for short, medium, and long-term growth depending on the suburb, the street, and the type of house you invest in. Of course, there are additional costs in buying a property (such as stamp duty) plus costs in selling (including capital gains tax). If there’s a mortgage over the property, you’ll need to factor in the additional costs of repayments and interest (bearing in mind that interest on investment properties is tax deductible).

Risk appetite

Investors’ attitudes towards risk also play a role in choosing between super and property.

Superannuation funds can be diversified across various asset classes, which helps to reduce risk. But property investments expose investors to a single market meaning that while there might be a big benefit from an upswing, any downturn may be a blow to a portfolio.

Making an informed choice

Ultimately, any decision between superannuation and property should align with individual financial goals, risk tolerance, and investment strategies. And, of course, it doesn’t need to be one or the other – many choose to rely on their super while also holding investment property so it’s best to understand how super and property can complement each other in a well-rounded retirement plan.

We’d be happy to help you analyse your retirement income strategy to develop a plan that works for you.

i Monthly Housing Chart Pack – September 2024 | CoreLogic Australia

ii ASFA Retirement Standard – June quarter 2024 | The Association of Superannuation Funds of Australia Limited (ASFA)

iii Super funds deliver strong result in FY24 | Chant West

iv SQM Research Weekly Asking Property Prices , 1 October 2024 | SQM Research

At its latest meeting, the Reserve Bank Board announced it was leaving the cash rate at 4.35 per cent.

Please click here to view the Statement by Michele Bullock, Governor: Monetary Policy Decision.

With the official rate on hold, we’re watching closely what the banks do with their rates, as some of Australia’s biggest lenders may make changes to their rates.

You will be notified directly by your bank if and when they change their interest rate.

Please get in touch if you would like to discuss recent rate movements or if you would like to review your finance options.

It’s October and, as Spring delivers a bracing mix of weather events from rain and wind to snow and hail in some parts, we’re looking forward to the longer, warmer days ahead.

Interest rate speculation is rife after the Reserve Bank of Australia (RBA) kept rates on hold at 4.35% last month. Economists are now predicting it may be several months before rates fall. It’s a different story in the United States where the Federal Reserve slashed interest rates by half a percentage point in September and forecast two more cuts before the end of the year.

Australia’s inflation rate fell to 2.7% in August, down from 3.5% the previous month in the lowest reading in three years. Falling petrol prices and energy bill relief helped drive the slowdown. The jobless rate remained steady in August at 4.2% with the number of unemployed people falling by 10,500 in seasonally adjusted terms. Spending may be down but our net worth rose for the seventh consecutive quarter. Total household wealth was 9.3% higher than a year ago, largely thanks to rising house and land values. Consumer confidence is also positive with an increase in the ANZ-Roy Morgan index on last year’s figures.

The S&P/ASX 200 index hit an all-time high near the end of the month at 8862 points and a low of 7687 a few weeks earlier. It closed the month at a respectable 8266, up 2.2% for the month and 7.89% for the year. China’s plan to stimulate its economy has led to stronger commodity prices with mining and energy stocks the main beneficiaries.

Market movements and review video – October 2024

Stay up to date with what’s happened in the Australian economy and markets over the past month.

Investing cycles – Lessons from the Magnificent 7

When it comes to investing in shares, it’s often said that time is your friend.

The data shows that investing small amounts consistently over time and riding out the ups and downs of the market by holding onto your investments for the long term, can produce a healthy return.

Over the past two decades, the top 500 US companies averaged a 10 per cent annual return and Australia’s S&P ASX All Ordinaries Index recorded an average annual return of 9.2 per cent.ⁱ

Those returns have been delivered despite some catastrophic events that sent the markets plummeting including the dot-com bubble crash, the Global Financial Crisis, and the effects of Covid-19.

It takes grit to hold on as the markets plummet, but the best way might be to avoid the hype and tune out the ‘noise’. It can be a trap checking prices every day and week, causing heightened stress and anxiety about your portfolio, a recent example being the mid-2024 Microsoft outage which impacted briefly investor confidence. We can help you maintain a longer-term view, so it you have any concerns give us a call.

The cycle of endless phases of good and bad times are a constant for markets. Most cycles follow a pattern of early upswing, after the market has bottomed out followed by the bull market, when investor confidence is strong and prices are rising faster than average. Then the market hits its peak as prices level out before negative investor sentiment drives a bear market. Finally, the bottom of the cycle is reached as prices are at their lowest.

There are also certain seasonal market cycles that may be helpful in buying and selling decisions. Note, though, that there are always exceptions.

In Australia, April, July, and December have tended to be the strongest months on the All Ordinaries Index. But these patterns have weakened a little over time, with lower average gains in April, July, and December more recently. Performance is usually the lowest in June.ⁱⁱ

November and April have been the strongest months for US shares for the past 30 years, with average monthly gains of 1.9 per cent and 1.6 per cent respectively.

The Magnificent Seven

The performance of Nvidia and the Magnificent 7 is a real-time lesson in market dynamics and cycles.

Despite the rise and rise of seven US technology stocks in the past 18 months – known as The Magnificent 7 – their price pattern has, more or less, followed these seasonal cycles.

The seven stocks – Nvidia, Alphabet, Microsoft, Apple, Meta, Amazon, and Tesla – returned more than 106 per cent in 2023 alone.ⁱⁱⁱ

In the first half of 2024, their prices rose around 33 per cent on the US S&P 500 index while the rest of the index increased by only 5 per cent.

But another story has been emerging in recent months. The Magnificent 7 has now become the Magnificent 3, thanks to intense excitement around artificial intelligence (AI).

Nvidia, Alphabet and Microsoft leapt into the lead on the index, doubling the performance of the other four.^iv

Nvidia has been the market darling, with its price almost tripling in 12 months. But prices have been volatile at times. A correction in June knocked the company from the biggest in the world, a title it held briefly before the plunge, to number three after Microsoft and Apple.

Some describe the activity as a bubble that is due to burst. Others say the Magnificent 7 stocks are undervalued and have further to go.

Either way, be wary about getting caught up in the hype that surrounds rapidly rising prices.

Keeping a cool head and taking the time to understand what you are investing in, and the potential risks will help you stay focussed on your long-term investing goals.

Get in touch if you’d like to discuss your investment portfolio and to review in the context of your long-term investment goals.

i 2023 Vanguard Index Chart: The real value of time – Vanguard
ii The ’best’ and the ‘worst’ months for shares – asx.com.au
iii The magnificent 7: A cautionary investment tale – Vanguard
iv The Kohler Report – ABC News

Estate planning gives you a final say

Planning for what happens when you pass away or become incapacitated is an important way of protecting those you care about, saving them from dealing with a financial and administrative mess when they’re grieving.

Your Will gives you a say in how you want your possessions and investments to be distributed. Importantly, you should also establish enduring powers of attorney and guardianship as well as a medical treatment decision maker and/or advance care directive in case you are unable to handle your own affairs towards the end of your life.

At the heart of your estate planning is a valid and up-to-date Will that has been signed by two witnesses. Just one witness may mean your Will is invalid.

You must nominate an executor who carries out your wishes. This can be a family member, a friend, a solicitor or the state trustee or guardian.

Keep in mind that an executor’s role can be a laborious one particularly if the Will is contested, so that might affect who you choose.

Around 50 per cent of Wills are now contested in Australia and some three-quarters of contested Wills result in a settlement.ⁱ

The role of the executor also includes locating the Will, organising the funeral, providing death notifications to relevant parties and applying for probate.

Intestate issues

Writing a Will can be a difficult task for many. It is estimated that around 60 per cent of Australians do not have a valid Will.ⁱⁱ

While that’s understandable – it’s very easy to put off thinking about your own demise, and some don’t believe they have enough assets to warrant writing a Will – not having one can be very problematic.

If you don’t have a valid Will, then you are deemed to have died intestate, and the proceeds of your life will be distributed according to a statutory order which varies slightly between states.

The standard distribution format for the proceeds of an estate is firstly to the surviving spouse. If, however, you have children from an earlier marriage, then the proceeds may be split with the children.

Is probate necessary?

Assuming there is a valid Will in place, then in certain circumstances probate needs to be granted by the Supreme Court. Probate rules differ from state to state although, generally, if there are assets solely in the name of the deceased that amount to more than $50,000, then probate is often necessary.

Probate is a court order that confirms the Will is valid and that the executors mentioned in the Will have the right to administer the estate.

When it comes to the family home, if it’s owned as ‘joint tenants’ between spouses then on death your share automatically transfers to your surviving spouse. It does not form part of the estate.

However, if the house is only in your name or owned as ‘tenants in common’, then probate may need to be granted. This is a process which generally takes about four weeks.

Unless you have specific reasons for choosing tenants in common for ownership, it may be worth investigating a switch to joint tenants to avoid any issues with probate.

Having a probate is favourable if there is a refund on an accommodation bond from an aged care facility.

Rights of beneficiaries

Bear in mind that beneficiaries of Wills have certain rights. These include the right to be informed of the Will when they are a beneficiary. They can also expect to hear about any potential delays.

You are also entitled to contest or challenge the Will and to know if other parties have contested the Will.

If you want to have a final say in how your estate is dealt with, then give us a call. 

i Success rate of contesting a will | Will & Estate Lawyers

ii If you don’t, who will? 12 million Australians have no estate plans | Finder

Investing mistakes to avoid

Investing successfully and improving your investment portfolio can be as much about minimising mistakes as trying to pick the ‘next big thing’. It’s all about taking a calm and considered approach and not blindly following trends or hot tips.

Let’s delve into some of the most prevalent investment mistakes and look at the principles that underpin a robust and successful portfolio.

Chasing hot and trending shares

Every so often there are industries or shares that are all over the media and you may begin to worry that you are missing out on something. Jumping on every trend is like trying to catch a wave; you might ride it for a bit, but you’re bound to wipe out sooner or later. That’s because the hot tips and ‘buy now’ rumours often don’t pass the fundamentals of investing test.

The key is to keep a cool head and remember that the real winners are often the ones playing the long game.

Not knowing your ‘why’

What would you like your investment portfolio to achieve? Understanding your motivations and goals will help you to choose investments that work best for you.

If you want to build wealth for a comfortable retirement, say 20 to 30 years down the track, you can afford to invest in riskier investments to play the long-term game. If you have already retired and plan to rely on income from your portfolio, then your focus will be on investments that provide consistent dividends and less on capital growth.

Timing the market

Timing the market involves buying and selling shares based on expected price movements but at best, you can only ever make an educated guess and then get lucky. At worst, you will fail.

As the world-renowned investor Peter Lynch wrote in his book Learn to Earn: “Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves”.ⁱ

Putting all the eggs in one basket

This is one of the classic concepts of investing but it’s worth repeating because, unless you are regularly reviewing your portfolio, you may be breaking the rule.

Diversifying your portfolio allows you to spread the risk when one particular share or market is performing badly.

Diversification can include different countries (such as adding international shares to your portfolio), other financial instruments (bonds, currency, real estate investment trusts, exchange traded funds), and industry sectors (ensuring a spread across various sectors such as healthcare, retail, energy, information technology).

Avoiding asset allocation

While diversification is key, how do you achieve it? The answer is by setting an asset allocation plan in place and reviewing it regularly.

How much exposure do you want to diversify into defensive and growth assets? Within them, how much should be invested in the underlying asset classes such as domestic shares, international shares, property, cash, fixed interest and alternatives.

Making emotional investment decisions

The financial markets are volatile and that often leads investors to make decisions that in hindsight seem irrational. During the COVID-19 pandemic, on 23 March 2020 the ASX 200 was 35 per cent below its 20 February 2020 peak.ⁱⁱ By May 2021, the ASX 200 crossed the 20 February 2020 peak. Many investors may have made an emotional decision to sell out during the falling market in March 2020 but then would have missed the some of the uplift in the following months in.

Seeking out quality and trustworthy financial advice can help to minimise investment mistakes. Give us a call if you would like to discuss options for growing your portfolio.

i From the Archives: Fear of Crashing, Peter Lynch – From the Archives: Fear of Crashing – Worth
ii Australian Securities Markets through the COVID-19 Pandemic – Australian Securities Markets through the COVID-19 Pandemic | Bulletin – March 2022 | RBA

Strategies for long-term investing

Given the inherent volatility of security prices in capital markets, it is useful to remind ourselves of strategies that investors can utilise to meet their investment goals.

This is important when constructing and positioning a diversified portfolio of assets, a challenge that most financial advisers face daily. Reminding ourselves of the fundamentals of portfolio construction can help investors position portfolios appropriately in times of crisis and volatility.

Exploit a long-run time horizon

Investors with a long horizon do not need short-term liquidity, giving them an edge during market sell-offs. As markets fall, long-run investors have often generated excellent returns by buying quality distressed assets across major asset classes.

Additionally, if the market rewards illiquid assets with a higher risk premium, it makes sense that investors over-allocate to such assets, as it is unlikely that they will need to sell during bouts of market volatility. Pockets of traditional asset classes like corporate bonds, small-cap equity, and emerging market equity offer the opportunity for long-run investors to generate superior returns over time.

Whilst many would like to describe themselves as long-term investors, this time horizon can shorten very quickly. During financial and economic turmoil, both institutional and individual investment horizons tend to shorten due to immediate cash flow needs or because of psychological factors. The last thing that any investor wants to do is sell an asset into a volatile and illiquid market, where bid–offer spreads can widen materially, and asset prices can fall well below fair value.

The free lunch

Diversification is the rare free lunch available for all investors: it can reduce portfolio volatility without reducing its return. A key challenge to achieving diversification is reducing the dominance of equity risk in a balanced portfolio. Even if diversification tends to fail in crises (as correlations spike across asset classes), it can still be useful in the long run. This matters more for long-run investors who face less liquidation pressure during market drawdowns.

Most portfolios have positive exposures to the equity market and to economic growth. This directional risk is difficult to diversify away, making those assets with a negative correlation to equities a valuable addition. Despite yields being at all-time lows, cash and high-quality government bonds and gold can play an important role to play in most portfolios.

Diversification, of course, has limitations, one of which is the tendency for correlations to approach one during crises. Many good fund managers distinguish themselves by managing downside risk instead of just relying on diversification. A strong risk management framework and avoidance of large drawdowns is key in generating good long-run compounded returns.

Risk-free is return-free

Developed market central banks have taken the actions that they have with a defined monetary policy transmission mechanism in mind. One of the channels of monetary policy is the asset prices and wealth channel, with lower interest rates and quantitative easing expected to spur demand for higher risk assets. Risk-free assets like cash and government bonds no longer generate a positive inflation-adjusted yield and are return-free. Long-run investors can position for ‘the portfolio rebalancing effect’ that is likely to dominate investment flows in the next decade.

Expected portfolio returns can be improved by increasing the weight of the most volatile asset class. The classic approach is to raise the weight of ‘high-risk, high-return’ equities and reduce the weight of ‘low-risk, low-return’ assets such as cash and government bonds. Taking more risk in this way, and getting rewarded for it, is an easy way to boost long-run returns for investors.

Minimising costs can come at a cost

Passive investing minimises trading costs. However, some costs are worth paying. For example, buying an equity index fund costs more than investing in a bank deposit, but the equity risk premium should make the cost worthwhile in the long run. In general, investors should allocate more to active products the less they believe in market efficiency. Minimising costs is not always smart; being cost-effective and avoiding wasteful expense is.

The importance of being selective

Market outperformance – through the compounding of returns – can help investors increase their ability to achieve their financial goals. Excess returns can be an important driver of wealth creation, and actively managed funds offer the opportunity to outperform the market. Even seemingly small amounts of excess return can lead to significantly better outcomes.

Over the intermediate term, asset performance is often driven largely by cyclical factors tied to the state of the economy, such as corporate earnings, interest rates, and inflation. The business cycle, which encompasses the cyclical fluctuations in an economy over many months or a few years, can, therefore, be a critical determinant of market returns.

As volatility is ever-present in capital markets, protection in the form of safe-haven assets and portfolio diversification will be increasingly important for investors. However, investors must now acknowledge that returns from defensive assets will likely be far less than historic averages. Due to central bank action, riskier asset classes like equities appear likely to attract increasing inflows over the coming decade. The traditional methods of portfolio construction – a long-run horizon, diversification, cost-control, and active investing – remain the best approach to generating sustainable long-run returns.

To find out more about diversifying your investments, please call us today.

Source:
Reproduced with permission of Fidelity Australia. This article was originally published at https://www.fidelity.com.au/insights/investment-articles/strategies-for-long-term-investing/

This document has been prepared without taking into account your objectives, financial situation or needs. You should consider these matters before acting on the information. You should also consider the relevant Product Disclosure Statements (“PDS”) for any Fidelity Australia product mentioned in this document before making any decision about whether to acquire the product. The PDS can be obtained by contacting Fidelity Australia on 1800 119 270 or by downloading it from our website at www.fidelity.com.au. This document may include general commentary on market activity, sector trends or other broad-based economic or political conditions that should not be taken as investment advice. Information stated herein about specific securities is subject to change. Any reference to specific securities should not be taken as a recommendation to buy, sell or hold these securities. While the information contained in this document has been prepared with reasonable care, no responsibility or liability is accepted for any errors or omissions or misstatements however caused. This document is intended as general information only. The document may not be reproduced or transmitted without prior written permission of Fidelity Australia. The issuer of Fidelity Australia’s managed investment schemes is FIL Responsible Entity (Australia) Limited ABN 33 148 059 009. Reference to ($) are in Australian dollars unless stated otherwise.
© 2022. FIL Responsible Entity (Australia) Limited.

Important:
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Buying shares for kids: a gift that keeps on giving

Many parents and grandparents worry about how to help the children in their lives achieve financial independence. But the value of long-term investment can seem like a dry and complicated idea for kids to get their heads around.

In fact, many young people would like to know more about money, according to a Young People and Money survey by the Australian Securities and Investments Commission MoneySmart website. The survey found more than half of the 15-21-year-olds surveyed were interested in learning how to invest, different types of investments and possible risks and returns. What’s more, almost all those young people with at least one investment were interested enough to regularly check performance.

One way to introduce investment to children may be to begin a share portfolio on their behalf. The child can follow the progress of the companies they are investing in, understand how the market can fluctuate over the short- and long-term, as well as learn to deal with some of the paperwork required, such as filing tax returns.

How to begin

Setting up a share portfolio doesn’t need to be onerous. It’s possible to start with a minimum investment of around $500, using one of the online share trading platforms. Then you could consider topping it up every year or so with a further investment.

Deciding on which shares to buy comes down to the amount you have available to invest and perhaps your child’s interests.

If the initial investment is relatively small, an exchange traded fund (ETF) may be a useful way of accessing the hundreds of companies, bonds, commodity or theme the fund invests in, providing a more diversified portfolio.

ETFs are available in Australian and international shares; different sectors of the share market, such as mining; precious metals and commodities, such as gold; foreign and crypto currencies; and fixed interest investments, such as bonds. You can also invest in themes such as sustainability or market sectors such as video games that may appeal to young people.

Alternatively, buying shares in one company that your child strongly identifies with – like a popular pizza delivery firm, a surf brand or a toy manufacturer – may help keep them interested and excited about market movements.

Should you buy in your name or theirs

Since children cannot own shares in their own right, you may consider buying in your name with a plan to transfer the portfolio to the child when they turn 18. But be aware that you will pay capital gains tax (CGT) on any profits made and the investments will be assessable in your annual income tax return.

On the other hand, you could buy the shares in trust for the child. While you are considered the legal owner the child is the beneficial owner. That way, when the child turns 18, you can transfer the shares to their name without paying CGT. Your online trading platform will have easy steps to follow to set up an account in trust for a minor.

There is also some annual tax paperwork to consider.

You can apply for a tax file number (TFN) for the child and quote that when buying the shares. If you don’t quote a TFN, pay as you go tax will be withheld at 47 per cent from the unfranked amount of the dividend income. Be aware that if the shares earn more than $416 in a year, you will need to lodge a tax return for the child.

Taking it slowly

If you are not quite ready to invest cash but are keen to help your children to understand share investment, you could consider playing it safe by playing a sharemarket game, run by the ASX.

Participants invest $50,000 in virtual cash in the S&P/ASX200, a range of ETFs and a selection of companies. You can take part as an individual or a group and there is a chance to win prizes.

Another option, for children able to work independently, is the federal government money managed website. This is pitched at teens and provides a thorough grounding in savings and investment principles.

Call us if you would like to discuss how best to establish a share portfolio for your child, grandchild or a special young person in your life.

Options and costs of government-funded aged care

If you need help in your home, or can no longer live independently, the Australian Government provides a range of aged care services.

These services are subsidised, but you need to contribute to the cost if you can afford to.

Where to start

The first thing to do is think about what you need. You might want to stay in your own home, but need some help with domestic chores. Or you might be ready to start looking at options for longer-term residential care.

Talk to your family or friends about what you want. This will help you get the right care when the time comes.

Once you have an idea of your needs, contact My Aged Care. They will:

• check your eligibility
• assess your care needs
• assess your financial situation

It’s important to plan ahead, as this process can take time. There are waiting lists for some services.

To discuss your options, speak to us or speak to an Aged Care Specialist Officer (ACSO) at a Services Australia service centre. 

Care and help at home

To help you stay in your own home for as long as possible, the government provides subsidised home care. This is to help with everyday tasks like shopping, cooking and transport, as well as with personal and nursing care.

There are two types of home care:

• entry level care — Commonwealth Home Support Programme for people who can manage but need support with a few tasks
• more complex care — Home Care Packages for people who need more support on an ongoing basis

What you pay

If you can afford to do so, you may have to pay:

• a basic daily fee — a standard amount that everyone has to pay
• an income-tested fee — an amount that will vary depending on your income and assets

If you can’t afford to pay, you may be able to get financial hardship assistance.

Check My Aged Care’s fee estimator to see how much you might have to pay for home care

Residential aged care

If you can no longer live at home, you may choose to move to an aged care home (sometimes called a nursing home or residential aged care facility). Care is available 24 hours a day. This can be a short-term stay or a permanent move.

What you pay

If you can afford to do so, you may have to pay:

• a basic daily fee — a standard amount that everyone has to pay
• an income tested fee — an amount that will vary depending on your income and assets
• accommodation payment — an amount for your room, based on its quality, location and features

The accommodation payment is the biggest cost. You can pay this as a:

• bond or lump sum up-front, which is refundable (called a Refundable Accommodation Deposit, or RAD)
• daily amount (called a Daily Accommodation Payment, or DAP)
• combination of RAD and DAP

If you can’t afford to pay, you may be able to get financial hardship assistance.

Check My Aged Care’s fee estimator to see what accommodation payment you might have to pay.

Selling or keeping your family home

You may be thinking of selling the family home to pay the bond (RAD). Or maybe you’re wondering whether it’s better to rent it out to help pay the daily amount (DAP)?

You have 28 days after you go into aged care to decide how to pay for your accommodation. You must pay the DAP until the RAD is paid:

• if you decide to pay a RAD within those 28 days, you have 6 months to pay the RAD
• if you decide to pay a RAD after those 28 days, it is due as agreed between you and the provider

You may need professional financial advice to work out whether selling or renting your home is the best option, so call us today and we can discuss this option with you.

Either way, be aware that what you choose to do with the family home may affect the Age Pension assets test.

If you sell the home, its value will count towards the Age Pension assets test.

If you rent out the home, its value may count towards the Age Pension assets test, depending on when you moved into aged care.

If you keep the home without renting it out, it is exempt from the Age Pension assets test for two years from the date that you moved into aged care. (This may vary if you are, or were, a couple when you moved into aged care.)

Speak to a Services Australia Financial Information Service (FIS) officer for more information.

Short-term help

Short-term help is available, either in your own home or in an aged care home. There are different types of care:

• transition care (or after-hospital care) — for when you’ve been in hospital and need help with your recovery
• respite care — for when you or your carer needs a break (for a few hours, a few days, or longer)
• short-term restorative care — for when you’ve had a setback and want to get your independence back

Private retirement accommodation

As well as government subsidised aged care homes, there are many private retirement accommodation options. For this kind of accommodation, you pay the full amount yourself.

The Australian Competition and Consumer Commission has information about types and costs of retirement homes but please reach out if you need further assistance in this area.

Source:
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/living-in-retirement/aged-care
Important note: This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.  Past performance is not a reliable guide to future returns.
Important
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Planning for what happens when you pass away or become incapacitated is an important way of protecting those you care about, saving them from dealing with a financial and administrative mess when they’re grieving.

Your Will gives you a say in how you want your possessions and investments to be distributed. But, importantly, it should also include enduring powers of attorney and guardianship as well as an advance healthcare directive in case you are unable to handle your own affairs towards the end of your life.

At the heart of your estate planning is a valid and up-to-date Will that has been signed by two witnesses. Just one witness may mean your Will is invalid.

You must nominate an executor who carries out your wishes. This can be a family member, a friend, a solicitor or the state trustee or guardian.

Keep in mind that an executor’s role can be a laborious one particularly if the Will is contested, so that might affect who you choose.

Around 50 per cent of Wills are now contested in Australia and some three-quarters of contested Wills result in a settlement.ⁱ

The role of the executor also includes locating the Will, organising the funeral, providing death notifications to relevant parties and applying for probate.

Intestate issues

Writing a Will can be a difficult task for many. It is estimated that around 60 per cent of Australians do not have a valid Will.ⁱⁱ

While that’s understandable – it’s very easy to put off thinking about your own demise, and some don’t believe they have enough assets to warrant writing a Will – not having one can very problematic.

If you don’t have a valid Will, then you are deemed to have died intestate, and the proceeds of your life will be distributed according to a statutory order which varies slightly between states.

The standard distribution format for the proceeds of an estate is firstly to the surviving spouse. If, however, you have children from an earlier marriage, then the proceeds may be split with the children.

Is probate necessary?

Assuming there is a valid Will in place, then in certain circumstances probate needs to be granted by the Supreme Court. Probate rules differ from state to state although, generally, if there are assets solely in the name of the deceased that amount to more than $50,000, then probate is often necessary.

Probate is a court order that confirms the Will is valid and that the executors mentioned in the Will have the right to administer the estate.

When it comes to the family home, if it’s owned as ‘joint tenants’ between spouses then on death your share automatically transfers to your surviving spouse. It does not form part of the estate.

However, if the house is only in your name or owned as ‘tenants in common’, then probate will probably need to be granted. This is a process which generally takes about four weeks.

Unless you have specific reasons for choosing tenants in common for ownership, it may be worth investigating a switch to joint tenants to avoid any issues with probate.

You will also definitely need probate if there is a refund on an accommodation bond from an aged care facility.

Super considerations

Another important consideration when dealing with your affairs is what will happen to your superannuation.

It is wise to complete a ‘binding death benefit nomination’ with your super fund to ensure the proceeds of your account, including any life insurance, are distributed to the beneficiaries you choose.  You can nominate one or more dependants to receive your super funds or you could choose to pay the funds to your legal representative to be distributed according to your Will.

If a death benefit is paid to a dependant, it can be paid as either a lump sum or income stream. But if it’s paid to someone who is not a dependant, it must be paid as a lump sum.

If your spouse has predeceased you and you have adult children, they will pay up to 32 per cent on the taxable component of your super death benefit unless a ‘testamentary trust’ is established by the will, naming them as beneficiaries.

A testamentary trust is established by a Will and only begins after the person’s death. It’s a way of protecting investments, cash and other valuable assets for beneficiaries.

Rights of beneficiaries

Bear in mind that beneficiaries of Wills have certain rights. These include the right to be informed of the Will when they are a beneficiary. They can also expect to hear about any potential delays.

You are also entitled to contest or challenge the Will and to know if other parties have contested the Will.

If you want to have a final say in how your estate is dealt with, then give us a call.

Unexpected outcomes

David died in his early 60s. He left his estate to his wife Sally in accordance with his Will.

It seemed sensible at the time. But after a few years, Sally remarried. Unfortunately, the marriage did not last. When Sally died some 20 years later, her estate did not just go to her and David’s children but ended up being shared with her estranged second husband.

A testamentary trust, stipulating that the beneficiaries of both David’s and Sally’s estates were to be only blood relatives, may have solved this issue.

i Success rate of contesting a will | Will & Estate Lawyers

ii If you don’t, who will? 12 million Australians have no estate plans | Finder

Welcome to spring, a season that might be motivational for personal, business and financial renewal. We hope you enjoy the sunshine and warmer weather.

Global stock markets – including the ASX – largely stabilised by the end of August after a turbulent month.

It was a rocky start when markets everywhere fell after news of high unemployment figures in the US and an interest rate move by Japan’s central bank. Despite the dramas, the S&P/ASX 200 closed 1.28% higher for the month marking a gain of just over 10% for the 12 months to date.

A slight drop in inflation figures – down to 3.5% in July from 3.8% the previous month – had investors checking the Reserve Bank’s reaction but most economists agree there’s no chance of an interest rate cut this year. The RBA’s not forecasting inflation to get to its preferred levels until late 2026 or early 2027.

While the cost of living has dropped ever so slightly (and partly due to $300 federal government rebates on electricity bills), wages have risen. The Australian Bureau of Statistics reports that wages rose by 4.1% in the year to June. It means that wages are now keeping up with the cost of living.

The good news from the markets and inflation data contributed to a small upswing in consumer confidence although there’s still much ground to recover after the losses caused by Covid-19.

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Market movements and review video – September 2024

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Holidaying off the tourist trail

When we dream of an overseas holiday, our minds often drift to iconic landmarks, bustling cities, and well-trodden tourist paths. While these destinations have their allure, travel to popular destinations is booming and comes with challenges so there are advantages to venturing off the beaten track and seeking out the hidden gems.

Travel is booming – and creating some headaches

It’s no secret that we Aussies love to travel outside our own country. Last year nearly 10 million of us headed overseas, marking a 12 per cent increase from the previous year, and this year is shaping up to continue the trend.ⁱ And it’s not just us enjoying getting out there and travelling the world, global figures anticipate international travel will soon exceed pre-pandemic levels and surpass 2 billion for the second time ever.ⁱⁱ

That adds up to a lot of people out there travelling and some popular destinations are showing the strain with skyrocketing prices, excessive queues, damage at historical sites and environmental impacts all being felt.

Tensions are high in some areas with tourists in Barcelona, Spain recently doused in water by frustrated locals and authorities in the historic city centre of Florence banning new short-term holiday rentals to try to relieve some of the pressure of over-tourism. 

Taking the road less travelled can help areas suffering from over-tourism and support those communities who would welcome more visitors.

Supporting communities that need it

Tourism plays a significant role in the economic growth of many communities around the world and there are many places that would really benefit from the tourist dollar. The money you spend as you travel can contribute meaningfully to local economies and help support small businesses, artisans, and entrepreneurs, ensuring that future generations can continue to enjoy unique destinations.

But there are plenty of less altruistic reasons to seek out the hidden gems when you travel though.

Authentic Encounters

One of the lovely aspects of traveling to less touristy places is the opportunity to immerse yourself in local cultures. Away from tourist hotspots, communities maintain their unique traditions, cuisines, and ways of life. Imagine strolling through a market where locals gather to sell fresh produce, handicrafts, and homemade delicacies, or stumbling upon a hidden café where the owner shares stories of their town’s history. These encounters create lasting memories and offer a genuine glimpse into the daily lives of people from different corners of the world.

Unspoiled natural beauty

Nature enthusiasts will find bliss in exploring destinations that are off the typical tourist radar. Picture deserted beaches with powdery sand and crystal-clear waters, hiking trails winding through lush forests, or breathtaking untouched landscapes. Whether you’re seeking solitude in nature or hoping to capture stunning photographs without a sea of selfie sticks in the background, less touristy places often boast natural beauty that remains unspoiled and awe-inspiring.

Affordable adventures

Traveling to less touristy places can also be kinder to your wallet. Accommodation, dining, and activities in popular tourist hubs tend to come with inflated price tags due to high demand. In contrast, destinations that are yet to be discovered by the masses often offer more affordable options. You might find charming family-run guesthouses, budget-friendly eateries serving local dishes, and reasonably priced excursions that allow you to stretch your travel budget further.

Destination dupes

Doing a little homework can point you in the direction of alternatives to popular destinations.

For example, instead of Venice – which is literally sinking under the weight of tourism -consider visiting the town of Trieste, an old port town by the Adriatic Sea. If you are after stunning beaches and clear aqua water, Palawan in the Philippines is a good alternative for the Maldives. Or for an alternative to over touristed St Tropez in France, Turkey’s Bodrum coast offers comparable glamour and affordable luxury. Doing a little research can uncover similar destinations that offer the experience you are seeking, with all the benefits and none of the problems of the overhyped placed.

While the allure of ticking off the list of famous places is understandable, exploring less touristy places offers a wealth of unique experiences to the visitor, and benefits the local communities. So, the next time you plan an overseas holiday, think outside the square of the obvious destinations, and discover the hidden gems.

i CATO reveals new trends with Australia’s 10m international travellers – Travel Weekly

ii 2024 international travel boom predicted – VanillaPlus

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How do retirement income options compare?

Retirement is filled with opportunities and choices. There’s the time to travel more, work on long-delayed personal projects or volunteer your help to worthwhile causes.

You also have a host of choices to make when it comes to funding your new life away from paid work. Here are four different options to consider.ⁱ

Account-Based Pension

An account-based pension (ABP) using your superannuation is one of the most common retirement income options. The amount you receive depends on the balance of your account and the drawdown rate you choose, subject to the minimum pension requirements set by the government.

Some considerations:

• Tax benefits – Investment earnings, capital gains and withdrawals are tax-free, unless you have an untaxed component within your super.
• Payment flexibility – Subject to pension minimums, most super funds allow you to adjust the payment amount and frequency, and even make partial or full lump-sum withdrawals if needed. You can also return to work and continue to receive a pension.
• Longevity and market risks – You might outlive your account balance, especially if your withdrawals are high or your investment returns are poor.

Transition to Retirement

A transition to retirement (TTR) strategy allows access to some of your superannuation while still working, if you have reached age 60 (based on current rules).ⁱⁱ

Some considerations:

• Flexible work options – You can reduce your working hours and supplement your income from your super.
• Limits on pension rates – Similar to an ABP, there is a minimum annual pension rate. However, there is also a maximum annual withdrawal of 10 per cent of your TTR account balance.
• Reduced retirement savings – Drawing on your superannuation while still working means your retirement savings might grow more slowly.

Annuities

An annuity is a financial product that provides a guaranteed income for a specified period or for the rest of your life. There are various types of annuities, including fixed, variable, and indexed annuities. You can purchase annuities or lifetime income streams using your superannuation.

Some considerations:

• Predictable income – Provides a stable income stream, which can be reassuring for financial stability and provide an income for as long as you live.
• Lack of flexibility – Once you purchase an annuity, the terms are generally fixed and you cannot alter the income amount. There’s a restriction on capital withdrawals or in some instances no access to capital at all.
• Inflation risk – Fixed non-inflation-linked annuities may not keep pace with inflation unless specifically indexed to inflation.

Innovative Retirement Income Stream

An Innovative Retirement Income Stream (IRIS) is provided by a newer range of products. These were introduced after changes to regulations designed to deliver more certainty to retirement income by paying a pension for life without running out of funds.

Some considerations:

• Age Pension benefits – Centrelink only counts 60 per cent of the pension payments received as assessable income and only 60 per cent of the purchase price of the product counts as an assessable asset until age 84 when it is reduced.
• Certainty – Some IRIS products offer a stable guaranteed income stream, providing financial security.
• No minimum requirements – IRIS products do not require an annual minimum amount, instead just requiring at least one annual payment.
• Complexity – Features vary widely between different IRIS products and may involve complex terms or conditions.

Next steps

How do these different options suit your personal needs and how would they affect your retirement income? Consulting with a financial advisor can help you navigate these choices and tailor a plan that best suits your needs. Speak to us, so we can help you structure a plan to fund the retirement lifestyle you’ve worked so hard for.

i Planning to retire | Australian Taxation Office (ato.gov.au)

ii Transition to retirement | Australian Taxation Office (ato.gov.au)

---

Insuring against loss of income

Protecting income from unexpected illness and injury is particularly important to anyone with a mortgage to service, small business owners and self-employed people with no sick leave available.

With income protection insurance, you can be paid some 70 per cent of your income for a specified period to help when you cannot work.ⁱ

The most common claims are for illnesses such as cancer, heart attack, anxiety and depression.ⁱⁱ Payments generally last from two to five years although you can take a policy up to a certain age, such as 65, and the amount is generally based on 70 per cent of your income in the 12 months prior to the injury or illness.ⁱⁱⁱ

For some, income protection insurance may be part and parcel of your superannuation although more commonly this is limited to life insurance, and total and permanent disability cover. But, if you do have income protection insurance in your super, check the extent of the automatic cover as it can be modest.

Alternatively, you could take out a policy outside super where you will enjoy tax deductibility on the premiums. Income protection insurance is the only insurance that is tax deductible. Other life insurance products outside super such as trauma insurance are not tax deductible.^iv

Work out a budget

There are many considerations when looking at income protection insurance and the best place to start is to work out your budget, thinking about how much would you need to maintain your family’s lifestyle if you are unable to work. Then you are able to decide on the appropriate level of income protection insurance as well as other factors that affect premiums such as how quickly you might need the payments to start and how long these payments will last.

Many people think income protection insurance is expensive, but you can fine tune policies to suit your budget by changing the percentage payment amount, the length of time for which you would receive the payment and how soon you start getting a payment once you cannot work. Reducing these parameters can reduce your premiums.

Check the policy details

It is important to be mindful of a number of factors that might affect the success of any claim you might make. So, make sure you read the product disclosure statement.

Every insurer has a different definition as to what will trigger a payment, so you need to understand the difference between “own occupation” and “any occupation” for cover. For example, if you are a surgeon and lose capacity in one of your hands, you will receive a payout from your insurer if you have specified “own” occupation because you can no longer work as a surgeon. But if you opt for “any” occupation, then the insurer could argue that you could still work as a doctor just not as a surgeon and the claim may not be paid.

It is also wise to understand that if your policy does not seek your medical history, it is likely there could be limitations to what illnesses are covered.

Another consideration is whether you have stepped or level premiums. Stepped premiums start low and usually increase as you age. Level premiums begin at a higher rate but typically don’t increase until you reach 65. In the long run, level may work out cheaper for some.^v You must work at least 20 hours a week to take out income protection insurance and you can usually only buy a policy up to the age of 60. Also, if you receive a payout, you need to declare that income on your tax return.

If you want to check that you have sufficient cover to protect you and your family should you lose your income, then give us a call to discuss.

i Income protection insurance | Moneysmart ( moneysmart.gov.au)

ii The Most Common TPD Claims in Australia with Examples | Aussie Injury Lawyers

iii Income protection insurance | Moneysmart ( moneysmart.gov.au)

iv ATO Community – Stand alone Trauma Insurance and income tax | Australian Tax Office ( community.ato.gov.au)

v Income protection insurance | Moneysmart ( moneysmart.gov.au)

Welcome to Spring, a season that might be motivational for personal, business and financial renewal. We hope you enjoy the sunshine and warmer weather.

Global stock markets – including the ASX – largely stabilised by the end of August after a turbulent month.

It was a rocky start when markets everywhere fell after news of high unemployment figures in the US and an interest rate move by Japan’s central bank. Despite the dramas, the S&P/ASX 200 closed 1.28% higher for the month marking a gain of just over 10% for the 12 months to date.

A slight drop in inflation figures – down to 3.5% in July from 3.8% the previous month – had investors checking the Reserve Bank’s reaction but most economists agree there’s no chance of an interest rate cut this year. The RBA’s not forecasting inflation to get to its preferred levels until late 2026 or early 2027.

While the cost of living has dropped ever so slightly (and partly due to $300 federal government rebates on electricity bills), wages have risen. The Australian Bureau of Statistics reports that wages rose by 4.1% in the year to June. It means that wages are now keeping up with the cost of living.

The good news from the markets and inflation data contributed to a small upswing in consumer confidence although there’s still much ground to recover after the losses caused by Covid-19.

---

How do retirement income options compare?

Retirement is filled with opportunities and choices. There’s the time to travel more, work on long-delayed personal projects or volunteer your help to worthwhile causes.

You also have a host of choices to make when it comes to funding your new life away from paid work. Here are four different options to consider.ⁱ

Account-Based Pension

An account-based pension (ABP) using your superannuation is one of the most common retirement income options. The amount you receive depends on the balance of your account and the drawdown rate you choose, subject to the minimum pension requirements set by the government.

Some considerations:

• Tax benefits – Investment earnings, capital gains and withdrawals are tax-free, unless you have an untaxed component within your super.
• Payment flexibility – Subject to pension minimums, most super funds allow you to adjust the payment amount and frequency, and even make partial or full lump-sum withdrawals if needed. You can also return to work and continue to receive a pension.
• Longevity and market risks – You might outlive your account balance, especially if your withdrawals are high or your investment returns are poor.

Transition to Retirement

A transition to retirement (TTR) strategy allows access to some of your superannuation while still working, if you have reached age 60 (based on current rules).ⁱⁱ

Some considerations:

• Flexible work options – You can reduce your working hours and supplement your income from your super.
• Limits on pension rates – Similar to an ABP, there is a minimum annual pension rate. However, there is also a maximum annual withdrawal of 10 per cent of your TTR account balance.
• Reduced retirement savings – Drawing on your superannuation while still working means your retirement savings might grow more slowly.

Annuities

An annuity is a financial product that provides a guaranteed income for a specified period or for the rest of your life. There are various types of annuities, including fixed, variable, and indexed annuities. You can purchase annuities or lifetime income streams using your superannuation.

Some considerations:

• Predictable income – Provides a stable income stream, which can be reassuring for financial stability and provide an income for as long as you live.
• Lack of flexibility – Once you purchase an annuity, the terms are generally fixed and you cannot alter the income amount. There’s a restriction on capital withdrawals or in some instances no access to capital at all.
• Inflation risk – Fixed non-inflation-linked annuities may not keep pace with inflation unless specifically indexed to inflation.

Innovative Retirement Income Stream

An Innovative Retirement Income Stream (IRIS) is provided by a newer range of products. These were introduced after changes to regulations designed to deliver more certainty to retirement income by paying a pension for life without running out of funds.

Some considerations:

• Age Pension benefits – Centrelink only counts 60 per cent of the pension payments received as assessable income and only 60 per cent of the purchase price of the product counts as an assessable asset until age 84 when it is reduced.
• Certainty – Some IRIS products offer a stable guaranteed income stream, providing financial security.
• No minimum requirements – IRIS products do not require an annual minimum amount, instead just requiring at least one annual payment.
• Complexity – Features vary widely between different IRIS products and may involve complex terms or conditions.

Next steps

How do these different options suit your personal needs and how would they affect your retirement income? Consulting with a financial advisor can help you navigate these choices and tailor a plan that best suits your needs. Speak to us, so we can help you structure a plan to fund the retirement lifestyle you’ve worked so hard for.

i Planning to retire | Australian Taxation Office (ato.gov.au)

ii Transition to retirement | Australian Taxation Office (ato.gov.au)

---

Insuring against loss of income

Protecting income from unexpected illness and injury is particularly important to anyone with a mortgage to service, small business owners and self-employed people with no sick leave available.

With income protection insurance, you can be paid some 70 per cent of your income for a specified period to help when you cannot work.ⁱ

The most common claims are for illnesses such as cancer, heart attack, anxiety and depression.ⁱⁱ Payments generally last from two to five years although you can take a policy up to a certain age, such as 65, and the amount is generally based on 70 per cent of your income in the 12 months prior to the injury or illness.ⁱⁱⁱ

For some, income protection insurance may be part and parcel of your superannuation although more commonly this is limited to life insurance, and total and permanent disability cover. But, if you do have income protection insurance in your super, check the extent of the automatic cover as it can be modest.

Alternatively, you could take out a policy outside super where you will enjoy tax deductibility on the premiums. Income protection insurance is the only insurance that is tax deductible. Other life insurance products outside super such as trauma insurance are not tax deductible.^iv

Work out a budget

There are many considerations when looking at income protection insurance and the best place to start is to work out your budget, thinking about how much would you need to maintain your family’s lifestyle if you are unable to work. Then you are able to decide on the appropriate level of income protection insurance as well as other factors that affect premiums such as how quickly you might need the payments to start and how long these payments will last.

Many people think income protection insurance is expensive, but you can fine tune policies to suit your budget by changing the percentage payment amount, the length of time for which you would receive the payment and how soon you start getting a payment once you cannot work. Reducing these parameters can reduce your premiums.

Check the policy details

It is important to be mindful of a number of factors that might affect the success of any claim you might make. So, make sure you read the product disclosure statement.

Every insurer has a different definition as to what will trigger a payment, so you need to understand the difference between “own occupation” and “any occupation” for cover. For example, if you are a surgeon and lose capacity in one of your hands, you will receive a payout from your insurer if you have specified “own” occupation because you can no longer work as a surgeon. But if you opt for “any” occupation, then the insurer could argue that you could still work as a doctor just not as a surgeon and the claim may not be paid.

It is also wise to understand that if your policy does not seek your medical history, it is likely there could be limitations to what illnesses are covered.

Another consideration is whether you have stepped or level premiums. Stepped premiums start low and usually increase as you age. Level premiums begin at a higher rate but typically don’t increase until you reach 65. In the long run, level may work out cheaper for some.^v You must work at least 20 hours a week to take out income protection insurance and you can usually only buy a policy up to the age of 60. Also, if you receive a payout, you need to declare that income on your tax return.

If you want to check that you have sufficient cover to protect you and your family should you lose your income, then give us a call to discuss.

i Income protection insurance | Moneysmart ( moneysmart.gov.au)

ii The Most Common TPD Claims in Australia with Examples | Aussie Injury Lawyers

iii Income protection insurance | Moneysmart ( moneysmart.gov.au)

iv ATO Community – Stand alone Trauma Insurance and income tax | Australian Tax Office ( community.ato.gov.au)

v Income protection insurance | Moneysmart ( moneysmart.gov.au)

---

Holidaying off the tourist trail

When we dream of an overseas holiday, our minds often drift to iconic landmarks, bustling cities, and well-trodden tourist paths. While these destinations have their allure, travel to popular destinations is booming and comes with challenges so there are advantages to venturing off the beaten track and seeking out the hidden gems.

Travel is booming – and creating some headaches

It’s no secret that we Aussies love to travel outside our own country. Last year nearly 10 million of us headed overseas, marking a 12 per cent increase from the previous year, and this year is shaping up to continue the trend.ⁱ And it’s not just us enjoying getting out there and travelling the world, global figures anticipate international travel will soon exceed pre-pandemic levels and surpass 2 billion for the second time ever.ⁱⁱ

That adds up to a lot of people out there travelling and some popular destinations are showing the strain with skyrocketing prices, excessive queues, damage at historical sites and environmental impacts all being felt.

Tensions are high in some areas with tourists in Barcelona, Spain recently doused in water by frustrated locals and authorities in the historic city centre of Florence banning new short-term holiday rentals to try to relieve some of the pressure of over-tourism. 

Taking the road less travelled can help areas suffering from over-tourism and support those communities who would welcome more visitors.

Supporting communities that need it

Tourism plays a significant role in the economic growth of many communities around the world and there are many places that would really benefit from the tourist dollar. The money you spend as you travel can contribute meaningfully to local economies and help support small businesses, artisans, and entrepreneurs, ensuring that future generations can continue to enjoy unique destinations.

But there are plenty of less altruistic reasons to seek out the hidden gems when you travel though.

Authentic Encounters

One of the lovely aspects of traveling to less touristy places is the opportunity to immerse yourself in local cultures. Away from tourist hotspots, communities maintain their unique traditions, cuisines, and ways of life. Imagine strolling through a market where locals gather to sell fresh produce, handicrafts, and homemade delicacies, or stumbling upon a hidden café where the owner shares stories of their town’s history. These encounters create lasting memories and offer a genuine glimpse into the daily lives of people from different corners of the world.

Unspoiled natural beauty

Nature enthusiasts will find bliss in exploring destinations that are off the typical tourist radar. Picture deserted beaches with powdery sand and crystal-clear waters, hiking trails winding through lush forests, or breathtaking untouched landscapes. Whether you’re seeking solitude in nature or hoping to capture stunning photographs without a sea of selfie sticks in the background, less touristy places often boast natural beauty that remains unspoiled and awe-inspiring.

Affordable adventures

Traveling to less touristy places can also be kinder to your wallet. Accommodation, dining, and activities in popular tourist hubs tend to come with inflated price tags due to high demand. In contrast, destinations that are yet to be discovered by the masses often offer more affordable options. You might find charming family-run guesthouses, budget-friendly eateries serving local dishes, and reasonably priced excursions that allow you to stretch your travel budget further.

Destination dupes

Doing a little homework can point you in the direction of alternatives to popular destinations.

For example, instead of Venice – which is literally sinking under the weight of tourism -consider visiting the town of Trieste, an old port town by the Adriatic Sea. If you are after stunning beaches and clear aqua water, Palawan in the Philippines is a good alternative for the Maldives. Or for an alternative to over touristed St Tropez in France, Turkey’s Bodrum coast offers comparable glamour and affordable luxury. Doing a little research can uncover similar destinations that offer the experience you are seeking, with all the benefits and none of the problems of the overhyped placed.

While the allure of ticking off the list of famous places is understandable, exploring less touristy places offers a wealth of unique experiences to the visitor, and benefits the local communities. So, the next time you plan an overseas holiday, think outside the square of the obvious destinations, and discover the hidden gems.

i CATO reveals new trends with Australia’s 10m international travellers – Travel Weekly

ii 2024 international travel boom predicted – VanillaPlus