Responsibilities of an executor
If you’re the eldest sibling in the family, or deemed to be the “most responsible”; if you’re seen to be a good friend by someone; or a fine upstanding citizen by others, chances are you will be asked to be an executor of someone’s will.
After you’ve enjoyed the warm feeling of being wanted, just pause for a moment and take stock of what it really means to assume this most important role.
You need to be aware that when the person dies, you will be required to spend a significant amount of time executing your responsibilities – and these can be onerous.
The actual functions will vary from one situation to another and, to some extent, depend on the surviving family members. However, the legally defined duties of the executor include:
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Arranging the funeral;
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Determining the assets and liabilities of the estate;
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Applying to the court for probate, if required;
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Determining what assets may need to be sold to pay outstanding debts – this may be defined in the will or by established legal definitions;
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Arranging the sale of all assets which are not to be directly transferred to the beneficiaries – including the home, investments, business interests and personal chattels;
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Lodging tax returns for the estate and the deceased;
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Paying the debts;
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Publishing a notice that you intend to distribute the remaining assets to the beneficiaries;
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Distributing the remaining assets to the beneficiaries according to the terms of the will.
For all this you may find yourself in the middle of family disputes and even subject to legal action from a dissatisfied beneficiary or creditor. If placed in this position, the executor needs to be able to manage his or her responsibilities as impartially as possible.
The executor can be held personally liable if a beneficiary suffers financial loss as a result of the executor’s actions or inaction, and in some instances, be legally liable for any losses incurred.
If, after considering all of this, you don’t think you can honour the person’s request and fulfill the role appropriately, it might be best to decline the offer.
If you’re feeling bad about not accepting, you could suggest that your friend or relative engages a professional executor in the form of a trustee company (or public trustee) or firm of solicitors. This will also ensure the executor outlives the person making the will.
For more information about Estate Planning please contact us on |PHONE|.
Sources:
Your State Government website and search for “Duties of an executor”
Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee takes any responsibility for their action or any service they provide.
Building an emergency fund
An emergency fund (also known as a rainy day fund or savings buffer) gives you some breathing space to deal with life’s ups and downs. You can use this money if something unexpected happens to you or your family, like your car
needs major repairs, or you need to buy a new washing machine.
Here we show you how to build an emergency fund to protect yourself if things go wrong.
What is an emergency fund?
An emergency fund is an amount of money you have set aside to help cover the cost of any urgent and unexpected expenses. Having a savings buffer means you won’t need to borrow money if a crisis happens and you need money quickly. It can give you peace of mind that you can face any bumps in the road.
Start small to build your savings
The secret to building a savings buffer is to start small and save regularly. It doesn’t matter how much – or how little – you save, you just need to make a start, and then keep going.
For example, if you save as little as $10 or $20 per week, you’ll have $520 or even $1,040 by the end of the year. That’s the start of a solid amount of savings that will give you some financial breathing space.
Use MoneySmart’s savings goals calculator to help see how a little saved each week help you reach your savings target.
Automate your savings
Saving regularly is the best way to build up your savings balance. Set up a separate high interest savings account for your savings to go into via automated payments set up with your bank. You can also ask your payroll department if they can send part of your pay to your savings account.
Then you can set and forget, knowing that your savings are growing without you having to transfer them every time you get paid.
If you find a savings account that offers bonus interest for every month you don’t make a withdrawal, you’ll be less likely to touch the money unless it’s an emergency.
If you have a home loan with an offset account, you can use this account as your emergency fund. That way, the money will be working to reduce your interest payments, but will be available to use if you need it.
Ways to save every day
Track your expenses
It’s easy to lose track of the money you spend everyday. Download MoneySmart’s free TrackMySPEND app to help identify areas where you can save.
Avoid impulse buying
Every dollar you spend on an impulse purchase is another dollar you don’t have to build your savings. Check out our tips on how to reduce the urge to impulse buy.
Save spare change
Who said piggy banks are just for kids? Get an empty jar or ice cream container and put your spare change into it at the end of each week. When the container is full, deposit the money into your emergency fund.
Do a budget
A budget can help you get a better picture of your finances, allowing you to plug any spending leaks you might find. ASIC’s budget planner can help you work out what your household expenses are.
Keep adding to your savings
If you happen to get any extra money during the year, for example from a tax refund, you can add this money to your savings pool.
When to use your emergency fund
Receiving an unexpectedly large or urgent expense is never a good feeling, but having a savings buffer will help to keep your stress levels down. You won’t have to worry about where you’ll get the money to pay for it, and you can focus your energy on solving the problem.
Keep your emergency fund for those expenses you really need to pay now. If you want to use your savings for something else, then set up a separate savings goal.
Case study: Briony uses her rainy day fund
Briony had been building an emergency fund for 2 years and had saved more than $1,000. To build up her savings, she had set up automatic transfers on payday from her bank account straight into a high interest savings account.
When her car suddenly broke down, she used some of the money from the high interest account to pay for it to be fixed.
Briony was relieved to know she didn’t have to put the car repairs on credit or ask her family for money. Also, because she has set up automatic transfers, she could top up her emergency fund again from her next pay.
An emergency fund gives you control over your finances in a time of crisis. By regularly saving for a rainy day, you’ll be able to weather life’s storms.
Source:
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at www.moneysmart.gov.au
Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for their action or any service they provide.
The climate and investing - how might one affect the other?
Regardless of one’s personal views, company valuations are already being affected as superannuation funds and other major investors respond to climate change. Investors need to be aware of some key issues, anticipate future developments, and develop appropriate strategies.
The carbon bubble
An investment bubble occurs when investors pay highly inflated prices for an asset.
The prevailing view of climate scientists is that, to have a reasonable chance of limiting global warming to no more than 2oC, most fossil fuel reserves will need to be left in the ground. Oil, gas and coal companies are valued on their potential future earnings, which in turn are based on the resources to which they have extraction rights. If a global agreement is reached that significantly reduces the amount of coal, oil and gas that those companies can produce, then they are worth a fraction of present valuations, and are currently in a ‘carbon bubble’ situation.
The other threat to fossil fuel companies comes from renewable energy. The cost of wind and solar power has fallen dramatically in recent years. While they still have some hurdles to overcome, renewable energy technologies are already reducing the demand for fossil fuels, and in many countries make up the majority of new electricity generation capacity.
Divestment
Divestment has two main aspects to it.
On one hand the ‘divestment movement’ seeks to encourage individuals and institutions to sell their holdings in fossil fuels, primarily on moral grounds. Many churches, universities and investment funds are divesting themselves of these shares. A notable example is Rockefeller Brothers Fund, a fortune originally built on oil.
There is also a purely economic reason for divesting. If the carbon bubble theory is correct, and if companies are prevented from exploiting most of the fossil fuel reserves, it makes sense to get out of the sector before prices plunge.
Norway has the world’s largest sovereign wealth fund, also built on oil revenue. Its government is a major shareholder in many of the world’s biggest mining companies and has written to these companies to raise the issue of them spinning off their coal mining activities. While politics may be involved in this action, the future performance of the fund is the primary concern.
Stranded assets
Assets become stranded when their working life ends prematurely, and their owners don’t receive the expected returns on their investment.
Fossil fuel reserves that can’t be extracted, for either political reasons or because new technologies render them obsolete, are one type of stranded asset. Fossil fuelled electricity plants also face the risk of becoming ‘stranded’ if they are unable to operate and have no chance of being sold.
So it isn’t just coal, oil and gas companies that investors need to watch, but also utilities and other industries that are highly dependent on fossil fuels.
Disruption
Global energy markets may be facing an economic disruption greater than that endured by telecoms and IT companies in the last 30 years. For investors, both opportunities and threats will emerge. The challenge will be to recognise which is which. But with Saudi Arabia investing heavily in solar power it may be wise to heed the words of former oil minister, Ahmed Zaki Yamani: “The stone age came to an end not for a lack of stones and the oil age will end, but not for a lack of oil.”
For more information about Investing please contact us on |PHONE|.
Important
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for their action or any service they provide.
Super baby debt
Having a family can create a ‘super baby debt’ for mothers of up to $50,000 by the time they reach retirement age.
Taking time off work means you may not have any employer contributions being paid into your super account. And if you are taking a few years off, this can have quite an impact on your retirement nest egg. Even if you are working part-time at all during this period, then your employer will only pay money into your super account if you’re earning more than $450 a month.
To overcome this problem, women should adopt the ‘one per cent rule’ by adding an extra one per cent to their superannuation contributions for the rest of their working lives.
You should also think about what you can do to continue to build on your super savings while you are out of the workforce. One way of doing this is for your partner to make contributions on your behalf. ‘Spousal contributions’ are where your spouse makes a contribution to your super account and they receive an income tax rebate. It’s a great way to keep growing your super while you’re taking time off; be it to raise a family, or for other reasons.
Also, don’t forget about the government’s co-contribution scheme. If you are a low or middle-income earner, you can make an after-tax contribution of $1,000 a year to your super account and the government will provide up to 50 cents for each dollar you contribute, up to a maximum of $500, provided you meet the eligibility requirements.
If you’re taking a few years off, it’s certainly something to consider. But remember, you can always put extra into your super account.
If you would like to discuss, please call us on |PHONE|.
Source:
Reproduced with the permission of the The Association of Superannuation Funds of Australia Limited. This article was originally published at www.superguru.com.au
Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for their action or any service they provide.
A vital SMSF question: A corporate trustee or individual trustees?
A self-managed super statistic that doesn’t seem to change much over the years is the strong preference of new SMSFs for individual trustees rather than a corporate trustee.
The latest-available tax office statistics on SMSF trustee arrangements show that 93 per cent of SMSFs established in 2015-16 had individual trustees – a percentage that has remained more or less static in recent years. Yet 77 per cent of all SMSFs in existence at June 2016 had individual trustees – again a percentage that has remained rather static.
Looking at this from another way, a third of all SMSFs have corporate trustees against just 7 per cent for new SMSFs.
There are perhaps some straightforward explanations for these trustee differences between fledgling and established self-managed funds.
Individual trustee arrangements – with all members individually being trustees – are typically less-costly and simpler to put in place when a fund is being setup.
Yet the statistics suggest that as time goes on, many SMSF members either recognise the potential greater flexibility of having a corporate trustee or a change in their circumstances necessitates a switch to a corporate trustee.
Depending upon their circumstances, some informed would-be SMSF members may decide to bite the cost-and-convenience bullet early and go with a corporate trustee from the beginning. It could be worthwhile gaining advice about the issue from an SMSF specialist.
Let’s run through some of the basic rules regarding trustees for self-managed, which should be understood by all intending and existing SMSF members.
Under superannuation law, all members of an SMSF must be either individual trustees or directors of a corporate trustee of the fund. An SMSF with individual trustees must have at least two individual trustees yet a corporate trustee can have only one director.
An SMSF with individual trustees are held in the names of individual members as trustees. If the membership of an SMSF with individual trustees changes – perhaps following death, marriage breakdown or the addition of a new member such as an adult child – the names on the funds’ ownership documents must also change. This can be costly and time-consuming.
By contrast with a corporate trustee, assets are held in the name of a company as trustee. If trustee directors change, the assets remain in the name of the same company.
If a fund has, say, two individual trustees and one dies, the fund must appoint another trustee in order to continue as an SMSF. (This is because of the requirement that a fund must have at least two individual trustees.) Yet if an SMSF has a corporate trustee, a deceased trustee director may not have to be replaced because a corporate trustee can have a single director.
In short, a corporate trustee will continue to control an SMSF and its assets after the death or incapacity of a member. This is a key estate-planning consideration.
The decision about whether to have a corporate trustee or individual trustees could have financial and personal implications for as long as an SMSF remains in existence, including when a member leaves the fund and/or a new member joins.
Unfortunately, some SMSF members may not understand the differences between having individual trustees or a corporate trustee until it is too late.
For more information about SMSFs please contact us on |PHONE|.
Source:
Written by Robin Bowerman, Head of Market Strategy and Communications at Vanguard.
Reproduced with permission of Vanguard Investments Australia Ltd Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.
© 2017 Vanguard Investments Australia Ltd. All rights reserved.
Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for their action or any service they provide.
Buying A Tenanted Investment Property
There are plenty of upsides to buying an investment property that already has a tenant, as well as a raft of risks. Here’s how to minimise them.
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Purchasing an investment property that already has a tenant means you collect rent from day one, with no vacant period and no lease fees to find a new tenant. The lease just carries on as it did before you purchased the property. Sound good? Of course it does. There are some possible problems to be aware of though.
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It’s very important to check whether the lease on your prospective investment is current or the tenants are on an expired lease. If the tenants are off-lease, they can give a short period of notice and vacate the property, so those upsides mentioned above could come to nought.
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A current lease, on the other hand, offers security, it also means that you are stuck with the lease, its conditions (or lack thereof), the current rental return and the tenants.
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There are steps you can take to minimise your risk:
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Make sure the bond has been lodged properly. Your agent will arrange for the bond guarantee to be transferred into your name on settlement.
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Check the property condition report, making sure that it is a complete and accurate record of the property as you inspected it.
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Ensure there are no rental arrears. If there are, or if a landlord has agreed that rental arrears can be taken out of a bond payment, stipulate that this amount is deducted from the purchase settlement amount.
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Ask the leasing agent about the tenants and their payment record. You cannot demand that you meet the tenants, but attending the open house will give you a sense of how they live in the property. If possible, sight the tenants’ original application for the property and rental ledger.
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Look at the yield for rental properties in the area and compare them to yours. You won’t be able to increase the rent until the end of the lease.
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Be aware of any concessions or conditions that are either in the lease or have been agreed with the landlord or property manager, because these will become your responsibility. For example, does rent include electricity or other utilities? Has the landlord agreed to install a new oven or paint a room?
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Of course, if you love a property but have doubts about the tenants, the lease or the managing agent, all is not lost. You can easily change the managing agent when you settle. You can also make vacant possession of the property a condition of settlement. You may need to wait until the lease expires to settle, but you aren’t taking on the previous owners’ problems and responsibilities.
If your only problem with a tenanted property is the rental yield, keep in mind that increasing rent on a good, long-term tenant may well drive them away anyway, so do your sums. Work out whether the amount you’d like to increase the rent by equates to more over the year than the lease fee plus any rent lost if your property is vacant for a few weeks.
If you would like to discuss, please call us on |PHONE| or email |STAFFEMAIL|.
Source:
Reproduced with the permission of the Mortgage and Finance Association of Australia (MFAA)
Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for their action or any service they provide.
A realty check for accessing super early
When it comes to the basics of life the issue of finding shelter – putting a roof over one’s head – ranks high on most people’s list.
So as the dream of home ownership continues to recede further into the financial distance for younger Australians in our major cities it is not surprising that the public debate about levels of housing affordability is increasing in volume.
Australians have an ingrained faith in property – both on the shelter front and as an investment.
Residential property is like other investment markets and it moves in cycles and it is strongly influenced by things like interest rate rises or jumps in unemployment but convincing younger Australians that property prices may fall in the future is one of the great communication challenges of our time.
Today we are living in a record low interest rate environment. That – as someone who had their first mortgage application rejected at a time of 16% variable rates – has not always been the case nor can it be relied on to stay that way forever.
The economics of supply and demand will play out over time particularly as house price growth outpaces household income levels and we are already hearing warnings about oversupply particularly in apartment markets in Melbourne and Sydney.
This is not to dismiss the need for a public debate on the issue of housing affordability. Clearly that is a significant social issue and a key challenge facing our state and federal political leaders.
It also impacts different parts of our community in different ways – there is the obvious challenge to the aspiring new home buyer but increasingly it can also involve parents providing loans or guarantees to enable children to enter the property market.
It is also not surprising that when housing affordability is being discussed alternative funding solutions are often raised. Recently the idea of allowing access to superannuation accounts to help finance house purchases has again surfaced.
In investing, as in life, it is all about trade-offs. The appeal of allowing part of your super balance to be used to buy a home is understandable. For a start as a younger person your super is locked away for what seems a long, long time. So being able to access it to do something useful and personally beneficial right now is instantly appealing.
The immediate risk is that markets will adjust accordingly and all you will achieve is artificially inflating house prices to allow for the additional loan from the super account. Beneficiaries are more likely to be the sales agents courtesy of the commission structures in the industry rather than new home buyers.
But the longer term risk is that by taking a lump sum out of the super account investors will lose the impact of compound earnings over several decades. You do not have to be much of a mathematician to work out that your retirement account balance will be significantly lower than it otherwise would be.
Independent consulting firm Rice Warner modelled the impact on a fund member aged 35 who is earning average wages and takes $100,000 out of their super account to use as a housing deposit.
The loss of compounding investment earnings over many years would dramatically affect the young member’s retirement balance. Rice Warner calculates that allowing someone to withdraw $100,000 from their super account would mean the federal government would have to pay them an additional $92,000 in age pension.
What is often not well understood is that the investment earnings usually represents a larger component of the retirement benefit than your contributions.
So a short-term solution on housing could mean long term pain on retirement savings.
If you would like to discuss anything in this article, please call us on |PHONE|.
Source:
Written by Robin Bowerman, Head of Market Strategy and Communications at Vanguard.
Reproduced with permission of Vanguard Investments Australia Ltd
Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.
© 2017 Vanguard Investments Australia Ltd. All rights reserved.
Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for their action or any service they provide.
Defying mortgage stress
Technically speaking, if more than 30 percent of your pre-tax income goes towards paying your mortgage, you meet the common definition for being ‘mortgage-stressed’ – and it’s more common than you think!
When thirty-something professionals Harry and Sally were house hunting for their first home they were on high incomes and had saved a healthy deposit. Even so, they cautiously did their homework, entering their information into several bank online calculators to determine their borrowing capacity.
They entered:
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Borrower |
Couple |
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Dependents |
1 |
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Reason |
Residence |
|
Pre-tax salary |
$190,000 annually |
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Living expenses |
$4,000 monthly |
|
Current loan repayments |
$0.00 |
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Personal loan repayments |
$600 monthly |
|
Credit card limits |
$15,000 |
How much?
The highest amount suggested by one of these calculators was around $976,000 with monthly repayments of $4,650 over 30 years. Based on their current combined income this would take up 29.3% of their pre-tax income.
It’s natural to want the best home affordable. “We’re on good money. We figured we could afford it,” Harry said during our first meeting.
“But it’s a lot of money to owe,” Sally added as she started to understand what other costs might be involved. “A larger house costs more to maintain and furnish; plus higher council rates.”
When inflation is low and wage growth is next-to-nothing, households with large mortgages could be in real strife when costs of living go up or interest rates rise – regardless of the Reserve Bank of Australia’s (RBA’s) management of the cash rate. Already banks are increasing the rates on home loans off their own bats.
Online calculators generally use limited information to give applicants an idea of what might be available to them. Supporting a mortgage up to thirty years requires more detailed consideration than credit card limits and pre-tax earnings.
The banks’ calculations would take Harry and Sally perilously close to the 30 percent threshold. Increased living expenses, or small interest rate rises would tip them into the danger zone.
Together we looked at an independent mortgage calculator on the ASIC MoneySmart website. By working on the couple’s AFTER tax income of $140,536[1] and applying 25% of this to calculate monthly repayments of $3,000, MoneySmart’s calculator returned a more realistic estimate of $629,000[2].
Though disappointed, they pragmatically decided to continue growing their deposit and even looked at ways of increasing their saving potential.
Options for increasing a loan deposit
Harry’s friend is saving for a home deposit by being a ‘house-sitter’. Initially popular for grey nomads, house-sitting has become a growing trend for potential home-buyers to live rent-free in exchange for caring for pets and plants. While this sounds idyllic, the nomadic lifestyle doesn’t suit everyone, and Harry’s friend occasionally ends up on his mum’s couch between sitting engagements. With a small child, this was not an option for this couple.
Alternatively, they could rent their spare room to Sally’s niece studying at a nearby university. That appeared more workable, not to mention a free baby-sitter!
And managing risk
Finally, we talked about insurance. It’s imperative that the couple’s income – their most valuable asset – be protected. Additionally, life cover, to provide for their daughter should anything happen to either of them was vital.
Unfortunately, too many people are in over their heads. If you’re experiencing mortgage-stress or you’re losing sleep worrying about an interest rate rise, speak with your licensed adviser about a strategy to relieve the pressure.
Contact us on |PHONE| to discuss how you can save for your first home and manage your debt.
[1] $100,000 + $90,000pa = $190,000pa combined income after tax and Medicare levy.
[2] Calculated at 3.99% interest over 30 years, not including fees or charges.
Almost the world's best for retirees
What are the best countries for a comfortable retirement? What countries have the best retirement-income systems? It seems the answers to these questions are rather positive for Australian retirees.
The recently-published 2017 Best Countries survey from US News & World Report, BAV Consulting and the Wharton School at the University of Pennsylvania ranks Australia as the world’s second-best country for a comfortable retirement – behind New Zealand and ahead of Switzerland, Canada and Portugal in the top five.
Survey respondents aged 45 years and up ranked the best countries for retirement on seven attributes: affordability, favourable tax environment, friendliness, “a place I would live”, pleasant climate, respect for property rights and a well-developed public health system.
The questions were asked in the context of where a person would consider moving to upon retirement if cost were no object. It is worth noting that the Best Countries survey did not seek views about the adequacy of a country’s retirement-income systems.
Up to approximately 21,000 survey participants from around the world were asked to grade countries under such headings as best countries overall (Australia came eighth with Switzerland taking first place), best countries for women (Australia sixth), quality of life (Australia fourth), best countries to invest in (Australia 22nd) and best countries for a comfortable retirement.
The latest Melbourne Mercer Global Pension Index, as discussed by Smart Investing late last year, once again ranked Australia’s retirement-income system third out of 27 countries assessed (accounting for 60 per cent of the world’s population) in terms adequacy, sustainability and integrity. While Australia was given a B-plus, the front-runners – Denmark followed by the Netherlands – received A grades.
Australia’s high rating in the pension survey was largely due to our “robust” superannuation system and Government-funded age pension, but “there was work to be done” to achieve an A grade.
Irrespective of each country’s social, political, historical and economic influences, the pension report stresses that many of their challenges in dealing with an ageing population are similar. These include encouraging people to work longer, the level of retirement funding and reducing the” leakage” of retirement savings before retirement.
Although the suggestions of the Global Pension Index are directed mainly at government and the pension/retirement sectors, individuals may pick up useful personal pointers from most of its suggestions to, perhaps, discuss with a financial planner. In other words, consider taking a personal perspective on this global retirement-incomes challenge.
These personal pointers may include:
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Think about whether to work until an older age than initially intended. The longer a person remains in the workforce, the greater the opportunity to save for what will be a shorter and therefore less-costly retirement. (An individual’s ability to work longer will much depend, of course, on personal circumstances including health and employment opportunities.)
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Try to save more in super within the annual contribution caps. And if self-employed, consider making voluntary super contributions. Unlike employees, the self-employed in Australia are not required to save in super.
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Think carefully before accumulating pre-retirement debt with the purpose of repaying it with super savings – it could reduce your standard of living in retirement. This is part of the pre-retirement “leakage” referred to by the Global Pension Index.
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Take your superannuation pension rather than a lump sum upon retirement if possible. This will keep your savings in the concessionally-tax or tax-free super system for longer and, most importantly, make your retirement lifestyle as comfortable as possible for as long as possible. The report for the Global Pension Index suggests that one possible way to improve Australia’s retirement-income system might be to compel super members to take part of their super as a pension.
It’s comforting that thousands of people around the world regard Australia as one of the very best places for a comfortable retirement if they could afford to shift to another country after leaving the workforce and cost was not a barrier. And it must provide a degree of comfort that Australia’s retirement-income system is “relatively well placed” in the worlds of the Global Pension Index.
Unfortunately, other research has long shown that a large proportion of Australians have inadequate – often grossly inadequate – retirement savings.
As global retirement-income systems grapple with the demographic shift of an ageing population with declining birth rates and seemingly ever-greater longevity, individuals should be doing as much as they can to maximise their own retirement savings.
If you would like to discuss anything in this article, please call us on |PHONE| or email |STAFFEMAIL|.
Source:
Written by Robin Bowerman, Head of Market Strategy and Communications at Vanguard.
Reproduced with permission of Vanguard Investments Australia Ltd
Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.
© 2017 Vanguard Investments Australia Ltd. All rights reserved.
Important:
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Six Ways To Fund A Renovation
Any renovation project, large or small, can be all-consuming in terms of your energy and money. Here are six loan types that can help you with the latter.
Considering transforming your home from ‘blah’ to ‘brilliant’, but lacking the funds to support your major makeover? Never fear, we’ve rounded up a few different home renovation loans to help you turn your dream into a reality.
Whether you want to make a few finishing touches to your home with the help of a paint job or completely turn your home into something magical, there’s an option to suit your needs.
1 Home equity loan
This is probably the most common way people borrow money when they want to renovate. It involves borrowing against the current value of your home, before any value-adding renovations. You won’t be able to borrow the full value of your home but, without mortgage insurance, you can usually borrow up to 80 per cent of its value if you own it outright. One potential problem is that the cost of your renovations may actually be higher than the equity you have available.
2 Construction loan
This is similar to a home equity loan, except the lender will take into account the final value of your home after the renovation. You won’t be given the full loan amount upfront, but in staggered amounts over a period of time.
3 Line of credit
This may be ideal for ongoing or long-term renovations. When you apply, you can establish a revolving credit line that you can access whenever you want up to your approved limit. You only pay interest on the funds you use and, as you pay off your balance, you can re-borrow the unused funds without reapplying. However, care must be taken not to get in over your head in terms of serviceability – make sure you can make repayments on the line of credit that will reduce the principle. Read more about Line of credit here.
4 Homeowner mortgage
If you’re planning to completely transform your home and undergo a major makeover, this may be a good option as you can spread the cost over a long period of time. You could even possibly borrow up to 90 per cent of the value of your home and take advantage of mortgage rates, which are often lower than credit card and personal loan rates.
5 Personal loan
If you’re only making minor renovations – personal loans are usually capped at around $30,000 – this might be suitable, but interest rates on personal loans are higher than on home equity loans.
6 Credit cards
This option is only if you want to undertake really small renovation projects. The interest rates are usually much higher than on mortgages, but for a very small project that extra interest might actually total less than loan establishment fees.
One thing you must do
There are very few exceptions to the rule that your renovations should add more value to your home than they will cost to carry out. Think about how the money you spend on a renovation will increase the value of your property. For example, consider making changes that would appeal to the majority of potential buyers to help you sell your house faster and at a higher price.
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Source:
Reproduced with the permission of the Mortgage and Finance Association of Australia (MFAA)
Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for their action or any service they provide.