The Government announced in the May 2014 Budget that there will be an increase to the age pension qualifying age to 70 years. 

Effective 1 July 2025, the age pension qualifying age will commence rising by six months every two years, from the current qualifying age of 67 years to gradually reach a qualifying age of 70 years by 1 July 2035.

People born before 1 July 1952 will not be affected by this change as shown within the following table:

You need to clearly understand this does not mean that people will need to work to age 70, just that they will need to be self-reliant on their superannuation and other savings between retiring from the workforce and reaching age 70.

Our service proposition to those seeking advice is now even more relevant and we will work with you to control you finances so that the retirement date decision is under your control and not at the will of this or future Governments.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

It’s no use pointing out flaws in people’s strategies without also offering some form of solution. So I’ll do a bit of both.

In a recent survey of over 2000 people almost 1 in 3 women still feel they have “far from enough” money to maintain desired lifestyles in retirement. 68% of Australians do not factor in major future financial setbacks in their expectations on how much money
they will have in retirement and only 8.5% of participants had a well-considered plan for major setbacks. 

1. major health issues,
2. loss of employment and
3. lack of formal investment plan

A majority of respondents expect to have at least some or a major shortfall in retirement funding at their desired retirement age.

People are also ignoring some very relevant wealth destroyers like divorce, financially supporting elderly parents, and career break to raise children that were not seen as matters to worry about.

This may be a result of a lack of understanding of the rising costs involved in funding aged care, costs of single households and the massive gap in retirement funding that 4-5 years of lost contributions early on in a career can have on your retirement savings especially if you then move gradually back in to the workforce on part-time basis. I will deal with these in separate article.

You can find more details on the findings of the survey at the following link – MLC Wealth Sentiment 2015 Q3

Now as promised some solutions to consider:

Back-up plan for major health issues: 

• Private Health Insurance to manage medical and ancillary costs so you can get back to work sooner.
• Income Protection cover to ensure you and your family can continue to meet your living expenses including mortgage during prolonged sickness or injury. Tight budget? Then look to your superannuation for cover.
• Use the Retirement Protection Option within IP cover to ensure that you continue to build your superannuation during illness.
• Trauma insurance to ensure you have a lump sum to cover unforeseen costs or the short-fall on Income Protection. Often this will provide enough money so that a spouse can take some time off to help you recuperate or make it to appointments and aid recovery.

Loss of employment

• Stay connected. No matter how you love your job and your industry you need to be aware that the average person will have 5 mini careers in their lifetime so you need to be ready for change. Use LinkedIn to keep in touch with those who may lead you to your next career. It is easy to connect when you are comfortable in your job and much harder to make that connection when you are out of the workforce.
• Keep up to date. Nearly every job these days will involve some form of continuous education or professional development. Embrace the opportunities and see it as employment protection insurance. Employers will keep those who increase productivity and add value. New employers will embrace those who have a track record of stepping up to challenges and managing change well.
• Redundancy Cover – Redundancy cover pays a monthly benefit of 3 – 6 months if you become involuntarily unemployed. This benefit payment is intended to help you cover basic necessities and meet any pressing financial commitments whilst you are looking for new, full-time employment.

Lack of formal investment plan

It’s never too early to start planning but hopefully it is also never to late to be able to make a difference. The key is to use the tax and superannuation system to your advantage without taking on additional risk if possible. Start with some easy goals and low risk strategies like:

• Setting up a cash reserve savings account in the lower-income earner’s name and have funds direct debited on your pay-day so it’s automatically building up.
• Getting ahead on your mortgage payments using an offset and pay no tax on savings
• Salary Sacrificing to save tax and build wealth. Minimise your tax to the 15% bracket on all money saved. Concessional Limit is $35,000 this year for those over 49.

Advanced Wealth Creation:

When you have learnt the power of compound interest from the easy savings measures then consider stepping it up. Each of these strategies involves risk, but with increased risk comes increased rewards as you should receive a premium for taking on additional risk over time. That is the basis of capitalism and includes our stock market and property markets. Those willing to take on “researched, managed and targeted” risk get the rewards for their proactive strategy. This is not a suggestion to go speculative, it is all about measuring risk v reward on each investment over the longer term.

• In your 20’s to late 40’s take more risk in your investment strategies inside and outside of super. Look at the Growth and High Growth options. For anyone with 20 or more years to retirement your risk of losing with these strategies over that term is reduced.
• Introduce leverage either by borrowing for an investment property or margin loan for shares or consider a managed fund with internal gearing. This should be done before your 50’s not as you near retirement. Always leave 10-15 years for any gearing strategy to pay off.

Budgeting, Budgeting, Budgeting

Track your spending for 3 months and that means everything from that morning coffee to the sneaky Big Mac on the way home! When you review the costs they may be scary so look for small ways to cut costs like:

• Making your own lunch or buy a 24 pack of your favourite soft drink rather than buying individual cans from store or takeaway. You might laugh but one client saved $300 a month over 5 years and lost 15Kgs eating healthier over time. So boosted his savings and his quality of life!
• Buying a small coffee machine in the office and even one for home. We bought an ALDI Xpressi machine and it makes decent coffee for less than 50 cents a cup.
• Turning off all electrical items at home. this can reduce your power bill by 10% a year.
• Reducing your Pay TV bundle to the basics package or cutting it out for 3-6 months each year. Many offer no lock in contracts so use it to you advantage!
• Think before moving houses as this eats in to your wealth. Plan ahead and make sure that a property will suit you and possibly a growing or smaller family for 10-20 years.
• Think outside the box. Could you add a granny flat for extra income or could you buy a dual occupancy to share costs with children or parents in their later life.

These are just a couple of ideas. Visit the website run by a mate of mine and subscribe to their emails to get regular tips. The site is called Humble Savers

Here’s just a sample of their posts which minimise the jargon and give helpful tips:

Other valuable Posts

• Buying Your First Home
• Top Five Tips To Repair Your Credit History
• 5 Tips To Help You Create A Realistic Budget
• Five Ways To Save Money – To Be A Millionaire
• How To Get The Best Mortgage Deal Out Of The Banks

Once you work out your objectives and capital needed for your retirement you should consider seeing a Financial Planner to see what other strategies are available to you to boost your savings such as using a Transition to Retirement Pension and Salary Sacrifice strategy from 56 onwards to save on personal and superannuation tax and build your nest egg.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.