In this article- our co-founder and Senior Financial Adviser- Chris Brown, answers a range of common questions about financial advice, retirement, superannuation and life insurance.
– I heard my Super already covers me so why should I get more life or income insurance cover? Why do I need to consider cover outside Super when it is easier on my pocket through Super?
The types of life insurance available in a super fund – being life (death), total and permanent disability and income protection (or salary continuance) insurance- can be extremely important to someone or their loved ones in the event of an expected death, illness, or injury.
It is true that super funds may have some in built life insurance cover within them. However, these cover types/ amounts often do not match a person’s actual requirements for cover- which can include covering debt, providing income replacement, and covering medical expenses or funeral expenses.
A financial adviser will always consider a client’s existing life insurance coverage and whether that should be retained, topped up or replaced as part of their advice.
The ‘group insurance’ often attached to employer and industry super funds have policy terms that are less generous and can be cancelled or modified by the fund at any time, and so a more comprehensive ‘retail’ life insurance policy (generally only available through a licensed financial adviser)- should also be considered.
In addition to more comprehensive policy terms which cannot be altered by the insurer once in place, ‘retail’ life policies can offer more flexibility to have premium payment taken from any super fund or outside superannuation or a combination of both.
For cashflow purposes someone may still choose to fund their insurance cover from superannuation.
When deciding on whether to pay for cover from superannuation or from personal cashflow- there are also considerations an adviser can guide a client on including: any tax credits/ deductions that may reduce the net cost of insurance premiums depending on the payment choice, and any tax payable on insurance claim proceeds depending on the cover ownership/ payment choice.
Cover within super also never has trauma/ critical illness cover as this always needs to be owned/ paid for outside super. This important cover provides a lump sum if someone suffers from a critical illness such as heart attack, cancer or stroke (with no work test) and survives the event. So, relying only on cover within superannuation alone means missing out on this important cover.
A financial adviser can determine the correct levels and types of covers a client requires, and then match insurance policy solutions that suit their needs and payment preferences.
– At what age should I start planning for retirement?
You could say as early as possible to build retirement assets and benefit from long term compounding returns.
However, that is not always realistic when people often have many other financial objectives over their lives to be concerned with before retirement such as purchasing an ideal home, raising children, paying off debt, and travel.
We choose to work specifically with people over 50 and to help them with their retirement plans.
We think that getting financial advice in your 50’s is an ideal time to start prospering. Because (usually):
You are at your peak career earnings
If you have children, they are likely older and less dependent on you
Your mortgage might be paid off or is on track to be soon
You are close enough to retirement to be clear on what you want
You have great life experience behind you, but still time on your side if you take action ASAP
This all means great planning opportunities to make the most financially of your remaining work years if you partner with a financial adviser in your 50’s.
However- if any of the above factors are not true, or if you are over 60- then you need help from a financial adviser even more as it’s going to take some heavy Iifting to get you to a comfortable retirement position.
– What are the benefits of a financial adviser for retirement
In general- financial advisers help clients to achieve more wealth, more time and more peace of mind.
A financial adviser can help to define what someone’s unique retirement looks like, can quantify the financial resources required to achieve that, and put in place strategies to maximise the chances of building the required financial position to support their retirement lifestyle.
By having an objective professional to assist with major financial decisions and coach clients through difficult times – positive decision making is encouraged which can make great benefits to a client’s long-term financial health.
– Has Retirement got anything to do with Wealth Creation? How are they related and can I use the same adviser for both?
The two are definitely related! Wealth creation involves activities and strategies to acquire wealth and assets over time. Retirement planning requires assets which then need to be converted or organised into effective income streams to fund a life without paid work. So the wealth creation activities be it building superannuation, cash savings, or property equity- all help with later retirement planning. There are also clients who don’t wish to ever stop working but wish to get into a solid financial position through wealth creation and then keep working by choice not through necessity. The same financial adviser can assist with both wealth creation and retirement (our business however only takes on new clients 50 years and older).
– I have heard that financial planners are ideally for wealthy people with many assets. Can anyone get access to their services and is it affordable?
This is a popular misconception; financial planners can provide valuable services to people from all walks of life. The cost of delivering financial advice has increased in recent years due to increasing regulation and less advisers in Australia. But we provide a complimentary initial call with anyone over 50 and can quickly determine if we can help them and will only take on new clients where we can add value in excess of our transparent professional fees.
– I heard a lot of people lost money in their Super during the 2008 GFC and now there is talk of inflation and recession. Should I invest in cash instead of Super to protect my funds?
Firstly – we would ask you to think more broadly that superannuation it is not itself a type of investment. Its better to think of a super fund as being a tax structure or an investment vehicle and within that you can save and invest into different types of investments (or ‘asset classes’) including shares, property, bonds, and cash.
Inside superannuation you can also have low risk assets for all or a significant part of your super – like cash, and depending on your fund- even a range of term deposits. Superannuation also provides an extremely tax effective place to hold your investments.
So the question then is not if its super vs non super- its more whether you should be invested in a diversified investment portfolio (like you may be already in super) or just in cash (like in an interest earning bank account).
We would recommend you review how much percentage you hold of your super in growth assets (like shares and property) vs income assets (like cash and bonds) and see if that suits your comfort level.
We would also ask what is the purpose behind these funds and does this still match what you need them to do?
If the funds are not required immediately (or you are below 60 and cannot access superannuation funds yet) then a more balanced approach to your investment could still be a good fit as cash returns also do fluctuate, cash generally doesn’t provide a growing income stream to combat inflation over time, and in the long-term cash has not provided the same returns as a more diversified investment approach.
Its important to diversify and we believe in not having too much in any one extreme- ie all shares or all cash.
Quite often the best course of action when investments move around is to do nothing as long as your goals or purpose hasn’t changed.
But we realise that can be hard to do which is why financial advisers like us provide reviews, reassurance and behavioural coaching to clients to ensure they don’t make financial mistakes and can rest easy.
– What is an ideal minimum amount in assets to have before ‘retiring’.
The answer is ‘it depends’! We work with a client to first determine what their ideal retirement looks like and then work backwards from there to quantify the financial resources required to accomplish those lifestyle objectives and then develop a plan with strategies to achieve that. Determining how much someone intends to spend in retirement is an important step and we have written an article on what a retiree typically spends in retirement here
– My home is my retirement nest egg as I have focussed on paying it down. I dont have anything else. How can I retire when I cant move out and it wont generate income for me unless I rent it out. If I rent it out, where will I live? I dont want any debt.
Having a home owned outright provides important financial security entering retirement. It can provide us with the basics of shelter- but also the intangible and lifestyle benefits associated with our own home. A principal residence also has generally no tax on capital gains and is also an exempt asset from Centrelink Age Pension asset test. If someone is 67 or older and happy to live on the Centrelink Age Pension alone- then retaining all their wealth in their home might work.
To have a more comfortable life in retirement though requires an additional layer of retirement income and this would require other assets/ income sources.
If there was an ability to work to earn more income and cashflow prior to retirement- then additional retirement assets including superannuation could be built up to supplement Centrelink Age Pension.
There are some options for potentially releasing some equity in a principal residence to create income- however these would require the creation of debt against the home over time.
Otherwise downsizing the home could be considered to free up more investment assets to fund a more comfortable retirement (than just what the Centrelink Age Pension allows).
– If my spouse passes away what happens to their assets or superannuation. Can you help with my will or do I need lawyers?
When a person passes away- what happens to their assets depends on whether an asset forms part of their estate or not, and what legal documents are in place such as a legal will or a superannuation binding death benefit nomination form.
We can assist with beneficiary nomination forms for superannuation and life insurance policies. But to achieve the best estate planning outcomes and to draft legal documents such as wills and powers of attorney it is important to see an estate planning lawyer who can provide expert advice.
One of the key estate planning lawyers that we partner with recently wrote a very good article for our blog which covers legal wills and common myths and misconceptions- which can be read here
– I have been told to always control my money. How can I do that with an adviser?
We respect that our client’s money is their money at all times.
We only use major trusted, transparent financial products that our clients have full visibility over.
We provide tailored advice to our clients who can then put in place only the strategies they are comfortable with- retaining control over their finances.
Clients of Chapters Retirement Partners commit to working with us for only 12 months at a time by signing an Annual Services Agreement for the 12 months ahead. This gives them control to only choose to continue to work with us if we continue to deliver value and provide great guidance and service.
Note: in the last 12 months we have had 100% of clients renew their annual agreement to partner with us for the next year which is a great vote of confidence in the satisfaction of our clients working with us!
Chapters Retirement Partners are experts in the areas of superannuation and retirement. We find people just want to get clear on what’s going on and know where exactly they stand.
Chapters Retirement Partners will provide a complimentary and honest assessment if they can help someone and won’t undertake any work from there unless they can add value.
Australians over 50 years old can book a private phone consultation on this link right now and start taking position action today- https://calendly.com/finishstrong/15min
The information contained above is general in nature and has been prepared without considering your objectives, financial situation or needs. You should, before acting on any advice, consider its appropriateness to your circumstances (including your objectives, financial situation and needs). You should also consider the relevant PDS before making any decision about any product.
