Life is like a roller coaster

Life is quite an adventure and I often liken it to a roller coaster ride – full of ups and downs – many of them unpredictable.

Protecting yourself and your family against the financial impact of death and disability (due to illness and injury) is not a nice subject to think about, but is something that can and does happen to people just like you and I every day.

It is not uncommon to come across people who don’t want to think about it, think it won’t happen to them, or think the government will look after them if something dire does happen.

But here are some sobering statistics:

• On average 1 person has a stroke every 10 minutes
• 1 out of every 4 people will experience a depressive episode in their lives
• You have a higher than 1 in 2 chance of being disabled for more than a month sometime during your working life, and a 1 in 3 chance of being disabled for more than 3 months
• Men have a 1 in 3 chance of being diagnosed with Cancer by age 75, and for women it is 1 in 4
• The leading cause of death for females aged 24-64 is Cancer, and across all age groups it is Cardiovascular disease
• The leading cause of death for males aged 25-44 is accidental injury/poisoning and for males aged 45-64 it is Cancer
• The good news is the 5 year ‘relative survival rate’ for all cancers is around 65% for males and 67% for females

The reason I point these out is because it’s important to think about what protection you have in place if things go wrong. If something happened to you health-wise (be it an illness or accident), that prevented you from being able to work for a period of time, what would happen? Would your family’s standard of living be impacted?

A protection plan can be designed to protect you and your loved ones from the financial impact.

Worried about cost? Worried about complexity? There are strategies available to help with these concerns. Everyone’s needs and circumstances are unique and we recommend you have a personal assessment to determine what you need to protect and how best to achieve that.

If you’d like to find out how you can protect your family, give us a call on 1300 887 528 or contact us via our webpage to arrange an appointment with us at our Financial Planning offices in East Kew.

Sources: OnePath Fast Facts, Zurich’s ‘What Are The Odds’ factsheet, AIA website. Thanks to funnyjunk.com for the image.

Wishing you a Merry Christmas and a Happy New Year

Only 21 sleeps to go

There may only be 14 sleeps to go until Christmas Day is upon us, but did you know that in 21 sleeps new legislation comes into effect that will see Centrelink deem account based pension income when clients apply for income support payments?

Existing clients will have their account based pension income ‘grandfathered’ meaning it will be excluded from the new rules.

Existing clients who move from one payment type to another, for example if moving from a carers payment to the age pension, will have their account based pension income grandfathered from the new legislation as long as they have been in receipt of an income support payment continuously since before 1 January 2015. However, certain events will result in their account based pension becoming deemed, for example consolidation or change of providers of their account based pensions. It is recommended they seek professional advice before making any changes to existing account based pensions.

New clients can still submit a claim for income support and if they start ‘receiving’ their income support payments before 1 January 2015, their account based pension income will also be ‘grandfathered’.

However, for new clients with account based pensions seeking income support from 1 January 2015, their account based pension income will be deemed and will no longer be subject to a deductible amount which was based on the capital value and the client’s relevant number to reflect a return of capital over their lifetime.

Non account based income streams such as fixed term or lifetime annuities will not be subject to deeming, and this can be a good alternative strategy for some clients.

Your income and assets need to be within the income and assets test thresholds to receive at least some income support payment. If you’d like to know more about the new Centrelink rules and how they may impact you, give us a call on 1300 887 528 or come and see us in East Kew for financial planning.

Keeping the fun in festive

The festive season is well and truly upon us! Extended trading hours are now in place and a visit to the supermarket sees shelves overflowing with Christmas decorations, themed foods and of course toys and gift ideas. The hype will see retail sales increase dramatically leading up to Christmas day, but Christmas day itself is the least active day of the year commercially in the western world.

The festive season comes at the end of one year and the beginning of the next, and is a time to reflect on what has been, and what is to come.

It’s a time to have a break, and share some time with loved ones.

However, for some Christmas can be a stressful time and it’s important to reduce stress where possible. Financial stress is probably the number one concern for most people – it helps to put a budget in place, identify your surplus cash and put it aside in a special account, and avoid large amounts of credit card debt that can seem insurmountable when the time comes to pay it back.

Christmas shopping early (before the shops get too busy) or buying off the internet can also reduce stress. Make a list of who you need to buy for, and buy a couple of extra presents, such as chocolates, for emergency spares.

When it comes to buying presents, some strategies to reduce both the financial pressure and working out what to buy for people are to agree with your circle of friends and family a cap on the value of gifts, and/or have a Kris Kringle where each person is responsible for buying just one present. Alternatively you could agree that not everyone receives a present from everyone else – perhaps outside your immediate family you only buy for the children in the extended group.

Delegate some of the tasks associated with hosting Christmas dinner, and keep the menu simple.

A little too much Christmas cheer can result in disputes that can really tarnish what promised to be an otherwise great day. Provide plenty of water and non-alcoholic options.

If you’d like to know more about budgeting give us a call on 1300 887 528 or contact us via our webpage.

SMSFs – it pays to do your due diligence

Self Managed Super Funds (SMSFs) are very popular, and growing like wildfire. Ten years ago there was approximately $11 billion invested across 80,000 SMSFs in Australia. That grew to $439 billion across 478,000 SMSFs by 2012 which equated to about 30 per cent of the total funds Australians had put aside for their retirement. The growth rate for SMSFs continues to grow at a great rate with Australians directing about $500 million into SMSFs on a weekly basis.

There are a number of reasons why SMSFs are so popular – the control, transparency, flexibility and flat costs being the main reasons.

If you set up a SMSF, you are responsible for its investment decisions and complying with the strict rules regulated by the Australian Taxation Office. Not complying can be extremely costly. When you establish an SMSF you become a trustee of the fund and ultimate responsibility rests with the trustee.

So it pays to have good advice – and that’s what we’re here to provide – we guide and support our clients to ensure their fund is managed according to the rules and remains compliant. We carry out all the required administration and help with the investment decisions. We also consider very carefully whether or not a SMSF is indeed suitable because we do not set up our clients to fail.

Cost is another factor, and you don’t always get what you pay for when you engage the services of a professional provider.

We recently met with a potential client who had already established a SMSF with the help of their accountant at a cost of $10,000. This particular client had another 3 super funds that hadn’t been consolidated into their SMSF. Furthermore, their SMSF borrowed money to invest in property and a Bare Trust was established to enable this – yet they had enough money in their other super funds to buy the property outright and still have sufficient liquidity, and could have avoided the cost of establishing a Bare Trust and the subsequent borrowing and running costs.

It pays to do your due diligence before establishing a SMSF.

If you’d like to know more about SMSFs for wealth generation and income streams give us a call on 1300 887 528 or contact us via our webpage.

Frankly my dear, we give a damn!

Australian companies that pay dividends to their shareholders are taxed under what’s known as the ‘imputation’ system, because the tax is imputed (or assigned) to the shareholders in the form of franking credits attached to the dividend payments.

Investors can use franking credits to offset tax payable on all forms of income (not only dividends) and taxable net gains.

What some people don’t know is, you do not necessarily need to submit a tax return to receive a refund on your franking credits.

You can claim a refund on your franking credits dating as far back as 2001.

Even if you choose to reinvest your dividends, you can still claim a refund of any franking credits.

We recently had a client come in to see us, who is retired and receiving a tax-free income stream, and no longer submits tax returns. Part of their portfolio consists of shares, and they have been receiving franking credits for many years and had not sought a refund. We were able to get them a lovely refund of $16,000 dating back to 2002. Not bad for a client who walked in to see us with a Centrelink enquiry, and walked out with a $16,000 refund on its way to them!

If you’d like to know more about wealth generation and income streams give us a call on 1300 887 528 or contact us via our webpage.

What do cows and shares have in common?

Cows wander around paddocks, enjoying the grass. Cows have good times and bad times. Sometimes the grass is green, but other times the grass can’t be seen! Regardless of which paddock they are in, they are called in twice daily for milking, and bless their little cotton socks, they reliably produce milk albeit the volumes may fluctuate.

Likewise, shares can go up, down and sideways. They have good times and bad. Shares that pay dividends deliver yields twice a year regardless of how the shares have performed, however it should be noted that the dividend amount is directly linked to the company’s performance.

For this reason, we like to use the shares/cows analogy when we establish a share portfolio for our clients nearing or in retirement phase. A portfolio consisting of, let’s say, dividend paying bluechip shares selected from the ASX 200 means that year in year out, those shares will be producing regular and reliable payments. This can be a good strategy for retirees looking for a regular income stream.

A dividend is basically a distribution of profits paid by a company to its shareholders. The company determines whether to re-invest back into the business, or distribute some, all or none of the profit or surplus to its shareholders.

Shares that pay dividends pay out in two ways. Firstly there’s the dividend payments received twice a year as income, and secondly over time the shares capital value can also increase. A capital gain is where the difference between the original purchase price and the price you ultimately sell it for has increased. It’s important to note however, that the capital value can also decrease in value resulting in a capital loss.

The cream on top, pardon the pun, is the franking credits that often go hand in hand with dividend payments.

Franking credits are designed to stop company profits being taxed twice. The tax that companies pay on their profits can be passed on to their shareholders as a tax credit which is factored into the dividend payment. This can subsequently be used to offset the tax payable on the investor’s assessable income.

If you’d like to know more about wealth generation and income streams give us a call on 1300 887 528 or contact us via our webpage.

(Image courtesy of http://www.memecenter.com/)

MD Financial Planning

MD Financial Planning provides a full range of financial services, specialising in Aged Care Services, Wealth Accumulation and Wealth Protection. We are here to hold your hand and support you throughout the journey.

Our Corporate Authorised Representative number is 432861, and is provided by Interprac Financial Planning, (Australian Financial Services Licence 246638). We are located in East Kew, and provide specialised advice in Aged Care Services, Wealth Accumulation and Wealth Protection.

MD Financial Planning Website