7 minute read
Your Money, Your Wealth
from Embrace 2021 Issue 3
by Embrace
68 | Embrace
Jacqueline Hodges
We all long for a healthy life in our retirement and enough funds in retirement, enough funds to enjoy ourselves, and some left over for our family. If you can relate to this, then you need consider how you wish to live in your retirement, establish your goals, start planning for your future, and decide how to share your estate among your family and love ones after your death. If you haven’t considered your retirement yet, now is the time to start planning. Because the earlier you start the more likely you will have plenty to enjoy in your later years.
We are fortunate in Australia, that we have guaranteed future retirement savings in the form of superannuation. Those of us we are employed, have the benefit of our employers pay at least 9.5% of our wage into our superannuation fund. If you are self-employed you, your superannuation savings may be more sporadic than you desire. Shaping your future can be confusing and not only involves navigating a myriad of rules, regulations and tax laws but also managing the family dynamics. You should seek the help of your financial team but as an introduction you will need to establish a retirement plan and an estate plan.
Start a Retirement Plan
We all have dreams about how we wish to spend our retirement. It may be a sea change with a life at the beach, a tree change to a farmlet or a lifestyle block, or a caravan trip around Australia.
How you fund your lifestyle choice will require planning and the earlier you start you will be able to control of your retirement savings. Planning requires understanding your goals and values. Spend some time to think about how you wish to spend your retirement and write down you goals.
Once you have your goals established you need to consider how much you will need to fund those goals. Ask yourself. Are your goals feasible? Can you save enough to fund those goals?
Funding your retirement can be a multipronged approach. You may be waiting to downsize from the family home into a smaller property and use the excess equity for your retirement funds. You may already have a sizable superannuation fund and investment portfolio and feel confident that your retirement is secure. If you haven’t got a plan yet, that’s ok. Now is the time to focus on your future, consider what options you have and set your plan in motion.
Transition to Retirement
If you are aged 55 and over and are still working you may be able to supplement your income and your superannuation savings using a Transition to Retirement pension. If transitioning to retirement you can transfer some or all of your current superannuation into pension phase while continuing to earn income. You can boost your super by salary sacrificing additional super into your fund up to the concessional cap. Your additional superannuation contributions will only be taxed at 15%.
You will also receive a pension from your superannuation and although while you are under 60 years of age the pension is assessable, you will receive a 15% tax offset against this income. Effectively, the amount that you put into your superannuation fund will be more than the amount that you take out as a pension.
Start an Estate Plan
Your estate plan is more than simply preparing a will. Your will is just one part of the estate plan. Estate planning is a process. It is a process of deciding how your assets will be organised and managed before and after you pass away. It is an important part of your wealth management.
While your estate plan will include your will, it may also include life insurance, and a testamentary trust. A testamentary trust is a special type of trust that is set up by your will on your death. They are particularly useful for distributing to minors or where you wish to protect the assets from being split in a divorce.
Your superannuation does not form part of your estate, but deciding how the superannuation will be distributed is a part of the estate planning process. Generally you will nominate a beneficiary by way of a Non-Binding Death Benefit Nomination or a Binding Death Benefit Nomination.
Remember, things change, people change, and choices change. Your estate plan is simply a plan and it can also change to reflect your changing relationships, your changing wishes and also changes in the law. You should consider it to be a dynamic document that is to be reviewed regularly.
Binding Death Benefit Nomination
A Binding Death Benefit Nomination is a written direction from you to the trustee of your superannuation fund setting out how you want the remaining superannuation balance to be distributed and to whom it is to be distributed. The BDBN must be renewed each three years, but might also lapse if your marital status changes. The BDBN must be in writing, signed, dated and appropriately witnessed to be valid.
Make a Date with Yourself
Block out some time and clear a space, so that you are mentally prepared to think about your future, your retirement, and your estate. Have a notepad ready. You can use a variety of tools, such as a mind-map, post-it notes, an excel spreadsheet, an electronic notepad or specialist software. Whichever tools you are going to use, have them ready to commence your date.
Setting Goals and Values
Goalsetting is essential in developing your retirement plan. So make it an important part of your life. Set financial goals that align with your values and think about how you direct your current and future cash flows to achieve those goals. Goalsetting helps us align our desires and wants with an actionable plan and timeframe to achieve them.
Align your values to your Goals
Once you know what your goals are, you can see how these align to your values. You may find at times that you move away or diverge from your values. It is normal to change your values at different life stages or when your circumstances change, such as when you are preparing to retire, and when you retire. Remember to revisit your values and align them with your goals on your budget date night.
Give yourself a Gift
Make time to learn about financial matters. You can read blogs and books, listen to podcasts about personal finance and investments and speak with your financial adviser. Financial literacy is something you can learn.
Your gift doesn’t just have to be financially rewarding, you’d earned yourself a treat for doing a good job. So, whether it’s buying a bunch of flowers, burning a tranquil incense or splurging on some wine and chocolates, do this as your gift to you.
Jacqueline Hodges is a Chartered Accountant, Registered Tax Agent and SMSF Auditor. She is a Financial Adviser and an authorised representative of Wealth Today. She has a wealth of experience having worked in the financial services sector for most of her career. Jacqueline is a firm believer in continuing education and holds a Bachelor of Commerce (UQ), a Master of Taxation (UM), and a Financial Planning Certificate. She established her own accounting firm servicing individuals and small businesses in 2005 and complemented the business in 2015 with the opening of the financial advice division.
Disclaimer: The information contained in this article is general in nature and may not be relevant to your personal circumstance and needs. Taxation, legal and other matters referred to in this article are of a general nature only and are based on laws existing at the time and should not be relied upon in place of appropriate professional advice. We recommend that you assess whether the information is appropriate to your needs and if appropriate speak with a financial adviser to discuss your needs, financial situation and investment objectives. HQ Wealth Pty Ltd as trustee for HQ Wealth (CAR 1238791) and Jacqueline Hodges (AR 1238790) are Authorised Representatives of Wealth Today Pty Ltd (ABN 62 133 393 263), AFSL 340289.
