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Golden years not so golden

15/10/2014

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The retirement years of many people are not as "golden" as is commonly believed, with 40 per cent of retirees saying they have been forced into retirement due to redundancy or illness before they were financially ready.

A survey by Mercer reveals a significant gap between expectations and the reality of retirement. Most people are retiring close to the age of 60, with only 3 per cent retiring at 70 or older. That is despite older people saying they want to work for longer.

"Our research shows uncontrollable triggers can derail the best laid plans for retirement," says David Anderson, Mercer's managing director.  

He says we are living longer but retiring earlier than we expect to, which means more years to fund in retirement and fewer working years to save for it.

While the Mercer research does not break down the experiences of retirees by their previous occupations, it is well known that those in some occupations are hit particularly hard by enforced early retirement.

For example, research by the Australian Centre for Financial Studies (commissioned by the Australian Institute of Superannuation Trustees) which was released earlier this year, showed those working in community and personal services, clerical and administrative roles, sales,  and as labourers are up to 50 per cent more likely to retire before the age of 60 than professional workers.

The actual experiences of enforced early retirement by retirees will be worse than reported by Mercer because the survey excluded retirees on the full age pension.

The research found that almost three-quarters of people approaching retirement believed they  would semi-retire or gradually wind down into full retirement.

Yet, only a little more than a quarter of retirees told the survey that they semi-retired first before moving into full retirement. Two thirds  said they moved immediately into full retirement.

"There is a disconnect between expectations and reality of how long we will have to save for retirement," Anderson says. Compounding the disconnect is that many people underestimate their life expectancy. While everyone knows we are living longer, the official life expectancy tables seriously underestimate by how much. These tables are updated every so often, lump white and blue collar workers together, and are out of date when published.

For example, the Australian Bureau of Statistics shows half of males turning 65 in 2010-12 (the latest available projections), can expect to live to 84 and women in the same age range can expect to live to 87, on average.

However, research by Mercer released in August shows a white-collar male retiring at age 65 today has a 50 per cent chance of living to 88. White-collar women have a 50 per cent chance of living to 91. These are the mortality rates of public sector pensioners, who are a good proxy for white-collar workers.

The latest Mercer survey results come as the government tightens access to the age pension. The Abbott government has further increased the qualifying age for the age pension to age 70 by July 1, 2035. It has also extended its "temporary" freeze on the superannuation guarantee. The guarantee will stay at 9.5 per cent for seven years before resuming its rise to 12 per cent.

There is also a real possibility that the superannuation "preservation" age, the age at which people can access their super savings will eventually  rise, in order to maintain the five-year difference with the pension age. With a pension age of 70, that would imply a preservation age of 65.

"It is really up to individuals to take more control," Anderson says. Most retirees regret not taking action earlier, such as contributing more their super, he says.

"The SG [superannuation guarantee] is going nowhere for seven years and so it is up to individuals to avoid the sort of circumstances that this survey has found."

Source: www.smh.com.au

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Insuring your future against the unexpected

5/10/2014

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Cancer is a devastating illness. Not just for the person who suffers from it, but also for their family, friends, and even workplace colleagues.

When diagnosed with cancer, money is usually the last thing on anyone’s mind. But when the dust settles, the financial stress caused by a cancer event can increase and create many new problems.

There are a large range of trauma insurance products that can provide you with peace of mind, knowing that in the event of you suffering cancer, you and your family will not be financially burdened.

For women, the most common cancer is breast cancer. In 2009/2010 there were 13,668 new cases of breast cancer diagnosed in Australia. Other cancers affecting women include melanoma, colorectal, lung, cervical and cancer of the vulva, vagina, perineum, uterus, ovary and fallopian tube.

And while there are many types and variations, having a family history of cancer may contribute to an increased risk of certain types. Your doctor will be able to provide more information about cancer.

The financial costs of cancer can be distressing—time off work, travel to and from hospital and rehabilitation 
expenses are just some of the additional financial burdens at this time.

Speak to one of our advisers for further information. Email us or call us on (02) 9524 6711.

Source: www.amp.com.au

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Receiving an inheritance

5/10/2014

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Receiving an inheritance can leave you with mixed feelings. Dealing with the loss of a loved one, grief and other emotions can make it difficult to decide what to do. Sometimes during emotionally challenging times, the impact of tax and inheritance rules can be the last thing on your mind.

At such times, it can be comforting-and in your best interests-to speak with your financial adviser. You can then go through the grieving process more freely with the assurance that tax and inheritance rules won't eat into your money unnecessarily.

Depending on the types of assets you inherit and the way any money is passed on to you, there can be issues to consider and manage in order to maximise the amount you receive.

Often when a loved one dies we can be reminded about the importance of planning for our own beneficiaries and ensuring everything is as uncomplicated for them as possible.

Your financial adviser can work with you and your accountant and lawyer to ensure you end up making the most of your inheritance, and can guide you in what you can do to ensure your loved ones are taken care of when you die.

If you'd like to speak with an adviser, please email us or call (02) 9524 6711.

Source: www.charter.com.au

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Ageing parents

5/10/2014

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As Australia's population continues to age, the proportion of people over 65 is rising. Many elderly people aim to remain independent and live in their own homes. But in some cases this isn't possible.

Fortunately, there are many options. Sometimes staying at home with regular support is possible and sometimes full-time in-home care is required. You may find that eventually you're faced with the difficult decision of helping your parents move to another residence where their wellbeing can be better supported.

Working with your financial adviser will ensure you're aware of the options available to your parents, that their needs are met and they do not unintentionally forego any financial entitlements.

Your adviser will look at the structure of your parents' assets to maximise Centrelink aged-care and health-care benefits to help their savings and support them to stay at home.

The impact of capital gains tax as a result of the sale of any assets may also be reduced or avoided altogether.

A financial planner can be there with you from the start to assist you with every aspect of exploring and managing your parents' options and needs. For example, by:
  • connecting you with care assessment teams and home support services
  • participating at family meetings to help ease the stress of challenging conversations during difficult times for your family
  • working with your accountant and lawyer to ensure the needs of your parents are well supported.

Speak with one of our advisers for the right advice and guidance. Email us or call us on (02) 9524 6711.



Source: www.charter.com.au

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    Author

    Sean Thomas - Financial planner 

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