Today we continue of our last week discussion about ways to improve your retirement planning. Keep in mind that all those steps you can use at any point in your life if you want to put in place some kind of a financial plan.
If for whatever reason you missed my last week article, here is the link to: Part 1 of 31 ways to improve your retirement planning,
16. Be very sceptical of any investing advertised as tax scheme
This is how many investors lost a lot of money over the years. Australians are very tax-driven, this is how politicians win their elections and they know it and promise as much as they can to win your vote.
This is how many heavily advertised investment schemes were introduced over the years, where the only party making any profits were product providers, with most investors never even checking if such schemes were even approved by ASIC and ATO for specific tax ruling.
Fortunately, now there are less of those schemes happening, but that’s due to strict regulations we have in Australia and a watchful eye of ASIC.
But even often legitimate schemes might not necessarily be of any value for you. If the main goal of the scheme is to reduce your tax with no actual return either as income or capital growth, bottom line is, you are losing money, so always do your due diligence before you invest any of your savings into any tax driven schemes.
17. Understand Australian superannuation, tax and legal system
This is a very big task and lots of information to learn not to mentioned how to find details that are exactly applicable to your situation. But if you can achieve this, you will be on a way to utilise every single benefit legally and financially available to you.
This is exactly the reason why wealthy families rely on a good professional advice and superb service.
18. Include the cost of assisting your ageing parents and helping your adult children in your budget and your planning this is what we call sandwich family.
Have your heard of the naming: sandwich family yet? That mostly applies to people aged 50 plus, but could be any age.
A sandwich family is the one that on one hand needs to care for their elderly parents while still looking after their teenage children, or children that are adults, but refuse to leave home to start their own life, and rely on your financial assistance.
My recommendation here is to find the best solution of care for your parents, there are lots of options and some may not cost you, but can be beneficial for you and your parents.
Most people don’t know, but a Financial Planner that specialises in retirement planning will be able to assist here as well. So feel free to contact me if this is your situation.
As far as your kids are concern, of course if you have happy for them to stay with you, do that, but treat them like adults.
If they work (which they should, unless still studying, but even then part-time work experience is recommended), they should contribute their share to family expenses, to your bills, food, you can decide on the contribution value.
You are a parent, you will always be there for them, I am a mother, I would give everything to my son if there was a problem, but as I said, they need to learn their independent life, and you need to look after your needs as well.
19. Do not withdraw from your retirement plan, unless you really have to.
Every single dollar withdrawn from your retirement plan as an extra above what you really need, will reduce longevity of your savings.
It is not only the actual value withdrawn, but also loss of all future income and capital growth that those funds could have earned over the years.
So just to put it into a context, if today at the age of 60 you withdraw $20,000 to buy a better car, because the one you have although in good condition, bored you and you need a change, you have just depleted your future interest earned on that withdrawal by $60,775 based on 7% compound annual return over 20 year period.
So bottom line is that should you keep that $20,000 in your pension fund, at the age of 80 you would have had an additional $80,775 in your retirement fund. This amount of money can go a very long way.
20. Plan for your long-term care
We have not been talking in detail about any expenses that you should consider in your old age, when you might require additional medical of even personal assistance.
Whether it is provided at the Aged Care facility or at your home, you cannot disregard those costs.
If you need any assistance in this area, either for your partner of your parent, check out my article: “Aged Care Planning with ease”, but I will be devoting more time and more videos and articles to this subject. If a matter is urgent, just contact me.
21. Rebalance your portfolio
This one strategy can assist your portfolio performance more that you could expect.
Rebalancing portfolio at the right time to its original asset allocation set up in your investment plan can be very financially rewarding, so you should implement doing it annually or when the opportune time of market conditions is presenting itself.
22. Check the performance of your investments or super at least annually
I have been talking about it extensively in many of my videos. Don’t make rush decisions based on one year performance of your investment, super or pension fund, even if that one year was disappointing. But annual checks are essential and if underperformance continues over couple of years, then reassess if this is a right fund for you.
Having said that, make sure that your expectations are met with the type of the portfolio, taking into account the investment risk.
What I mean by that, if your portfolio has a conservative asset allocation, don’t expect returns of a balance or growth fund or returns of the overall share portfolio. This is unfair comparison and you will end up being always disappointed.
So make sure you compare apples with apples and not with oranges. for more information, have a look at: “11 steps to check your super statement”
23. Check fees and charges included in your investments or super
Government has been on the hunt for the super and pension funds that have been overcharging members for their accounts for couple of years.
For now this new legislation applies to MySuper products, so what we call default funds, but that will be extended to more super products in coming years. Please see: “Fees you pay in super“ to have full clarity as to the types of fees most super funds charge.
24. Review charges and cover for insurance in or outside of superannuation
I have not really discussed insurance in any great length on this channel as it has never been requested, but also as we progress in life, the need for insurance reduces.
But if you still have insurance, you really need to understand the cover provided as oppose the cover required, cost payable as oppose your affordability.
If you require insurance, should it be within super or outside?
There are many things that need to be taken into consideration before you apply or cancel your insurance, so if insurance is what you need, feel free to reach out, so we can review what you have and what you need.
25. Have a realistic expectation for retirement
Well, what can I say, unfortunately we love to believe in miracles:
– I cannot save today, I will make it up next year or the year after – it never happens. – My money will last me forever, because my super funds is the best and has always provided the best returns. Good luck with this one.
Nobody can predict the market, so please start being realistic with your calculators, with the budget you set up, with the amount of money spent and how much you might actually need in the future.
Once the money is gone, it is gone and your retirement might take a different turn.
26. Always include inflation in your retirement calculator
When using any calculators, please ensure that CPI (Consumer Price Index) is included. This will ensure that whatever financial outcome the calculator gives you, will be subject to inflation, meaning a real value of money in the future.
27. Age Pension is a bonus, not certainty, don’t rely on it, but do what you can to get the most out of it.
This is my work’s bread and butter, on daily basis I try to find ways how I can improve my client’s Age Pension. Why? Not because I want our government to pay for your lifestyle, but because I know well, that this is the guaranteed portion of your income.
The more you receive from the government, the less of your own money you have to spent, hence you are protected with your savings for longer. But Age Pension should be a bonus, don’t sacrifice all your savings, all your assets just to get it. It is still better to own and control your 2mil portfolio with no Age Pension, then to give the 2mil to your kids just to get Age Pension of $25K. That is just a ridiculous exchange in my book.
28. Utilise every single benefit you can that is available to you from the government
There are many ways how you can benefit from government, strategies that can reduce your tax, boost your super savings and support you financially for longer. Review: “Improve your super and reduce tax” as well as : “EOFY – Zero Risk – 50% return” easy strategies and yet, so many don’t do it.
29. Understand the importance of estate planning
This is another area that is a huge topic to discuss, I have only scratched the surface with couple of videos, but they are still worth watching: “Wills, are they really necessary?” and “Super Death Nomination gone terribly wrong”.
The second video will tell you exactly why estate planning is so very important, but obviously it is not just limited to creating a Will of providing a Death Benefit Nomination form to your super trustee. The more complicated your life has been, the more you should pay attention to estate planning and employ specialist to assist you if you wish your assets to be distributed to the right beneficiaries in the right way.
30. Do not forget about Aged Care costs in your retirement planning
I have mentioned Age Care before. We tend to live longer and longer, medical progress keeps us alive for much longer than we might anticipate, but what if you run out of money? What if you need to use services of Aged Care facility, but you have no savings to pay for it?
This is a big drama for many, this is why I stress greatly to safe aggressively before you retire and spend modestly once you no longer have a job related income. There are ways to assist you in reducing ongoing Aged Care fees, so if this is your problem, please contact me, but the fact remains you do need to include Aged Care expenses in your planning as well.
31. Always, always work with professionals – accountant, lawyer, financial planner, mortgage broker – google is just not enough
This has always been my moto, I save where I can on things that don’t matter or are of less importance, but I never try to cut down expenses on any professional service that I need. Good advice, service and support are blessing.
Not only you will have things done correctly from day one, so no fixing, updating and explaining. It will be done for the best benefit for you. There is not trial and error situation.
By paying for a good professional advice, you end up not only saving money in case of mistakes, but if the $2K, $3K $4 or higher cost of advice provides you with a financial benefit of considerable increase of income or capital growth, or avoiding costly mistakes, or assets security and peace of mind, it is money well spent.
So always use the best professional that really has your best interest in heart.
So voila, this is the list of 31 ways to improve your retirement planning.
I really hope this extensive list will assist you in your retirement planning efforts, but if in doubt, or if you wish a professional take on your situation with the best advice for your long-term benefit, just contact me directly.
By: Katherine Isbrandt CFP®
Money Strategist & Retirement Planner
Principal of About Retirement
