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The challenge for Australia’s changing retirement landscape; it’s not just attitude, it’s action!

There is absolutely no doubt about it that we certainly live in a blessed country here in Australia. In more ways than just one!

MLC recently conducted an independent survey to explore the challenge of how to get more Australians to think about their retirement, with some very interesting results and statistics coming out.

The three-part independent Whitepaper not only looks at the cost of living and the impact it will have on future generations, but also our attitude towards retirement in general and our expectations that go with it.

Interestingly enough, it also found that people who use a financial planner are far more likely to be confident about their financial circumstances, including spending and financial security for their future.

Further the research found that generally, what used to be considered as luxuries such as having the latest technology, entertainment and eating out once a week are today, considered to be essentials among a widening social group which are now defined as the new average Australian.

So it appears that Australian’s are raising the bar so to speak when it comes to disposable income and what we actually dispose of this income on.

Some of the other key themes that were exposed from this research were:

– 66% (a large percentage) feel unprepared for retirement

– Only 15% believe they are well prepared for retirement

– 54% believe their superannuation will be enough to support them when they do actually retire.

However, a very large percentage (85%) of respondents to this research believe that today we live beyond our means as a whole.

So, here we are saying we have to have things (that were considered luxuries only a few years ago) as necessities now, and in the next breadth comment that we live beyond our means…it’s amazing sometimes how research brings out interesting statistics but most importantly, sheds light on people’s attitudes more than anything.

For as long as I can remember now, there has been this on going commentary about how we, as a nation, simply have to change our attitudes towards retirement and the reliance on Government funded pensions to survive.

We must, absolutely must, move away from believing we can fund an entire generation in retirement with Government funded pensions and move towards self-funded retirement via the likes of our own personal superannuation funds.

Yet here is an entire new generation coming through that has an attitude of self-indulgent spending and raising the living-standard-bar so high that they’ll never have any money left over to contribute to anything like a superannuation plan that will accumulate enough to sustain them in retirement.

I’ve said this before in other articles that I firmly believe the place to start to change attitudes on these financial issues is at school with our kids as they’re growing up.

They don’t have to be financial whiz-kids but they should be given the basics of financial health and responsibility at a young age, so that when they enter the work force they can at least have a grasp of what is needed to ensure they have some understanding of the need to save rather than spend, spend, spend!

The issue of retirement and living comfortably when you’re there always gets some press and will continue too. Look at what happened recently with Federal election and the subject of potential changes to superannuation, again.

It received enormous press and every so-called expert shoved his or her two cents worth in along the way.

The bottom line is this; we really are spoilt here in this country and sometimes we take it for granted. Our financial system is one of, if not the strongest financial systems in the world and in particular our superannuation system is certainly generous in comparison to many first world countries.

As a whole we need to educate our children (a whole generation) about the need for some general understanding of financial management and to save first rather than spend first and save some time later on down the track.

If we can do this successfully, our nation could completely reverse the dependence on government funded pensions for retirement and majority of our retirees could be self-funded rather than reliant on tax handouts. It sounds like a pipe dream doesn’t it, but it’s amazing what the right type of education can do for people!

* The author of this article, Gary Fabian, is the Principal of Precision Advisory; Licenced finance broker, risk insurance and superannuation adviser and he teaches his young son about financial management with his pocket money.

It’s funny that when you mention personal risk insurance cover to people the very first thing that springs to mind is OMG, the cost.

“How much is this going to cost me?”

Well, how much is it going to cost you if something does actually happen to you and you don’t have any cover in place?

I sometimes use this following question with my clients when it comes to talking about gold coast income protection;

Question: If you owned a goose that laid golden eggs, which would you insure first; the goose, or the eggs?

Answer: The goose of course! Because as long as you have the goose then you’ll always be able to have the golden eggs, won’t you?

Now most people straight-out agree with me on this because it’s just so logical and pragmatic.

So, what is your most important asset?…your ability to earn an income, isn’t it?

Because without your income, everything else you have, or are going to ever have is academic.

Most people don’t give a second thought to insuring their cars, motorbikes, jet skis, household contents and of course, their houses but the income that enables them to fund these purchases is usually completely taken for granted.

According to some statistics I read recently, 83% of Australians have comprehensive insurance for their cars, but only 31% have income protection insurance in place.

Doesn’t this seem a little out of perspective with priorities?

Lets look at it this way; if you were unable to work again, how would you pay your bills such as groceries, home loan repayments, school fees and just general living expenses?…you wouldn’t, would you?

I’m a big believer in young people getting income protection cover whilst they’re young, fit and healthy and subsequently able to get the cover in place without any restrictions or loadings etc. and then have this cover as an integral insurance cover throughout their lives for complete financial protection.

The other aspect to consider here is that the premium payments for income protection cover are usually tax deductible, whether you’re self-employed or an employee.

This will of course result is the real net cost of the cover being cheaper!

On the other hand, the premiums we all pay for insurance on our family cars, household contents and other motorised toys such as bikes, boats and Jet Ski’s are most certainly not tax deductible.

So, what’s it going to be, the goose or the gold egg?

* The author of this article, Gary Fabian, is the Principal of Precision Advisory; Licenced finance broker, risk insurance and superannuation adviser and he has comprehensive gold coast income protection cover.

There is an old saying that goes something like this; “Don’t let a good story get in the way of the truth”

Nothing could be truer than a lot of the stuff we get subjected too these days in the mainstream media…and especially of late since the federal budget came out and now, the impending election.

Every where you turned recently there was some story about how bad superannuation was going to end up and then followed pretty closely behind that was all the talk about property investment and negative gearing etc.

So the general public is subjected to this complete barrage of negativity about how two of the most staple investment vehicles in this country are going to the pack and guess what, everybody gets spooked and freaks out about investing.

What tha!

What has been completely left out of the story about these two things, or superannuation at least, is that the proposed changes will affect a small percentage of people and at the end of the day, super is still a very tax effective method of putting money away for retirement.

And isn’t that what it’s all about when it comes to super? Putting money away in a secure, tax effective way for our retirement.

And, getting some growth on your money whilst it’s in the fund and in a tax effective manner…there’s that phrase again, tax effective!

Let me repeat that; tax effective!!

This is a very important point to make here about the tax treatment of our money going into the super fund, how it is treated when it’s in there and then when we get it back out later when we retire.

There has been much analysis done about this by many expert (and I would guess in some cases, not so expert) consultants who state that superannuation is still a terrific method of socking away money for our retirement, especially for the vast majority of the working population.

As opposed to the small percentage of the population who can be classed as, well, rich!…and this section of people probably don’t really need a super fund anyway!

As for negative gearing, and especially it’s use in the investment property industry as a method of convincing people to invest in property in the first place, again the focus is too much on the so called tax deductions you can get, as opposed to the investment benefits you’ll get in the longer term.

Yes I completely agree that a tax deduction of any kind is a good thing especially in this country of reasonably high personal tax rates.

I’m not for one minute saying that negative gearing and its associated tax deductions are not attractive, of course they are!

I for one would certainly suggest that getting as many tax breaks as possible should be everyone aim when it comes to their personal income, as it only assist us with our overall affordability to live.

But what I’m saying is that for far too long people have focused on the tax breaks first with certain investment classes such as property, and especially residential property, without looking at the medium to long term benefits of the investment itself.

These benefits I’m talking about are of course the capital gain and wealth creation result that come with owning a good investment.

Residential property in particular is an area of focus because it represents such as large portion of the investment property market as a whole, and this is due to the fact that it is the investment-of-choice for what could be best described as the mum-and-dad investment market.

Which is a big market!

80% of Gold Coast residential property investors are everyday working class people who interestingly enough earn less than a $100,000 per year. So, in general terms at least, this market is not multi-millionaire business people.

(Although I’m sure they invest in residential property as well)

It would be a fair guess also that most of these investors had a strong interest in the tax deductions they would receive from the negative gearing benefits associated with owning the investment property and didn’t really think too much about keeping it for the long term, being 10-15 years or more.

This time frame covers what is known as 2 economic cycles being the ups and the downs of our economy and when a residential investment property is kept for about this period, or more, it will in most cases appreciate substantially in value.

I actually have clients who purchased investment property at the absolute height of an economic cycle when the particular properties in question were considered highly priced however, they have kept them over the long term and now they have appreciated in value and represent a good investment.

So, what’s the moral to the story with this?

I think when it comes to any investment, and the associated tax deductions that come with owning it, it’s important to focus on the original purpose of the investment in the first place and that is for it to appreciate in value (with time) and to provide some income along the way (presuming it’s income producing) and then look at the tax benefits last, not first.

Otherwise, there are plenty of very poor performing investments out there that will give you a tax deduction just for owning it but never perform adequately (or in some case, go backwards)

In this case, if the focus was just to be tax relief, then why not donate to a worthwhile charity and help out where it is needed rather than on the pretence of a so-called investment.

* The author of this article, Gary Fabian, is the Principal of Precision Advisory; Licenced finance broker, risk insurance, superannuation and Gold Coast financial adviser.

It never ceases to amaze me in my job as a financial adviser how many people I come across who seem to think they’re bulletproof when it comes to sickness or accidents.

“Oh no, those things happen to other people but I’ll be just fine” or what was a classic comment I heard from someone recently that I was arranging a large home loan for and who had absolutely zero life insurance???…”I don’t have any intentions of getting sick or dying any time soon?

Not only was this said in complete seriousness (along with arrogance) but also that particular person had a young dependent family who he seems to think will be able to cope financially if something happens to him.

I’ve also had numerous finance/home loan clients who borrow as much as they possibly can, stretch their income to pay for the home loan and make payments for house and car insurances without giving even a thought towards insuring their lives and their ability to earn an income through something like income protection insurance.

Then when I happen to mention they should take out life insurance cover to provide financial protection to their family, they say they can’t afford it because of everything else they’re paying.

Go figure??!!

My question to people is this; if you can’t afford to have some life associated insurances in place to protect the debt you have, then you really can’t afford to have the mortgage, can you?

So many people will insure their house and contents, their cars, boats and caravans but completely neglect their own lives and income earning capacity, which enables them to have these things in the first place.

For my mind, unless a person has some health related reason why they simply can’t get life associated insurance in place, then these insurances are the absolute first priority to consider before taking on debts such as home loans, investment loans, car loans etc.

Lets face it; we all will suffer some type of illness and/or accidents in our lives and a little bit of forethought about the financial consequences this will have on our family and loved ones will go a long way towards providing much needed financial protection for them.

So, what are life-associated insurances anyway?

Life-associated insurances generally consist of four main types of insurance cover being; life insurance, which pays a lump sum if you die. Trauma insurance, which generally pays lump sum if you suffer traumatic health setbacks such as cancer, heart attack, stroke etc.

TPD (Total and permanent disability), which also generally pays a lump sum if something happens that, renders you with an ongoing disability and then there is income protection cover, which, as the name implies, covers you for sickness and/or accident to protect your income.

Now of course, a person can have all of these insurances in place for a comprehensive financial protection package or just one or two perhaps if affordability becomes an issue.

So what would be the best insurances to have in place if you couldn’t have all of these four?

Lets look at statistically what insurance covers are claimed on the most and it what order; Apart from life cover which should be fairly easy to determine; i.e. if you dead, then you’re dead!

After that in order it goes income protection claims followed by trauma claims then TPD claims.

So, if you have some debt such as a home loan for $500,000 lets say, then it makes sense to have at least $500,000 worth of life cover to pay out the amount of the home loan if you were to die.

Then it makes sense to have your income protected doesn’t it, as it’s your ability to earn an income that enables you to pay for the home loan repayments in the first place?

After that of course, we come to trauma cover and TPD. One would suspect that if you’ve made an income protection claim for a sickness and/or accident event then it flows on to making a claim for a trauma event and maybe at a later stage TPD.

When you look at it like this logically then, you should have income protection, life cover and trauma in place if nothing else.

Hang on a minute; I can hear you saying that life cover was supposed to be the first priority followed by income protection and so on.

You’re right, I did say that but it’s also important to take note that statistically when we die, 9 out of 10 of us die slowly not quickly so there’s a big chance you’ll probably need income protection and/or trauma claims before you’re estate will rely on a death benefit to pay out all of your debts including your home loan.

I’m not for one minute saying we should go through our lives focusing on how mortal we really are, not by any means.

But it is important to be realistic about how life in general really is and that none of us is bulletproof and when (not if) something unfortunate happens, then you want to be sure your family can at least not be burdened by additional financial problems that you may have inadvertently left them with.

Get the right financial protection in place and get peace of mind as well.

* The author of this article, Gary Fabian, is the Principal of Precision Advisory; Licenced finance broker, risk insurance and superannuation adviser.

Here in Australia we have a complex finance market, which is constantly changing and evolving, it is very much a highly regulated industry. Currently we have about 70 banks and over 80 building societies and credit unions, and there are a number of non-bank lenders and growing.

The dominance of the big 4 banks has certainly contributed to the perception that all lenders are the same, but this is most definitely not the case.

The reality is that consumers are actually spoilt for choice when it comes to getting a home loan at least.

We have many lenders and literally hundreds of ever-changing mortgage products available for people to choose from so is there any wonder there can be confusion when it comes time to get a home loan, or to look at refinancing your current home loan.

The use of mortgage brokers has become more and more integral in not only getting the right home loan, but also in getting the right advice in how to structure your home loan for your individual requirements.

Whilst there are differing statistics on the exact numbers, we know that Mortgage brokers now account for more than 50% of the market for new home lending.

The mortgage broking industry came about in the early 1990’s and grew slowly for about the first decade however, it quickly took hold after that as it became apparent that mortgage brokers had a distinct edge for borrowers in that they were able to deal with numerous different lending institutions, as opposed to representing just one bank.

Also and most importantly, a mortgage broker (in concept at least) acted for the borrower as their client and not the bank from where the loan was coming from, and when the loan settled it was the bank that paid the broker for introducing the business, not the borrower.

A very unique concept and one that has worked very successfully to date to assist the mortgage broking industry to prosper and grow every since.

For the vast majority of people, their home loan is the biggest loan they will ever undertake and it makes sense that they should get it right in the first place and ensure the loan they get is right for them, and not the bank who is lending them the money.

A relationship with a professional mortgage broker can, and should result in you receiving unbiased, broad ranging advice on home loans that will ensure you have, and always have, the best possible home loan in place for your individual circumstances.

Of course the very nature of home loans today don’t really allow you to chop and change your home loan every year, or even every few years, but if you start off right from the beginning and your mortgage broker stays in touch with you, then you should always be on top of what is happening.

Plus, when the time is right you could look towards refinancing your home loan at some point to get a better deal, or should I say, a much better deal.

Then there is the matter of using equity built up in your home for further investing such as buying an investment property or two, or three maybe, so that you can supplement your superannuation to secure a better financial position in retirement.

The key here is always to have a relationship with a financial broker/adviser who has your best interest at heart and knows what they are doing, is professional in what they do and has a relationship-attitude about having you as a valued long-term client.

With this in mind, you should be assured of getting a very good home loan in place from the beginning and receiving the right advice in the process. 

* The author of this article, Gary Fabian, is the Principal of Precision Advisory; Licenced Gold Coast mortgage broker, insurance and superannuation adviser.

I watched a YouTube video recently with this very title. It told the story of a blackboard which was erected in the middle of New York City asking this simple, yet profound question and inviting people to share their biggest regrets.

As people from various walks of life came past the blackboard, some stopped and decided to share their own regrets of things they wished they had done or pursued in their life-gone-by.

It was as if this blackboard soon became a way for lots of people to publicly expose their regrets in a way that might help each one of them to move past whatever it was that was holding them back, and to rid themselves of these emotional ghosts.

I guess we all have them to a certain extent but it really depends on what we do with them and how we manage them from affecting our future-selves?

This was a very interesting social experiment and before too long a very big list of regrets had been written in chalk on this board and it became apparent that just about every one, from all different backgrounds, religions, race, colour and gender have regrets they harbour that have gotten in the way of them living their lives with fulfilment…or in some cases, with the one they truly loved.

It’s a cliché that fear can, and does hold people back from achieving their dreams. We hear it time and time again and most of us just put it to the back of our minds as if it doesn’t apply to us…”oh no, that’s not me” or “oh no, I’m not one of those people who lets regret in get my way”

Ask yourself this question; what’s stopping me from achieving my goals in life? What stands in my way from being who I really want to be? Is it having enough time or money?

Is it your health or available resources? Or, is it fear of failure????

What would you do if you knew you wouldn’t fail? Imagine that, what would you go and do if you really knew you weren’t going to fail at it?…the mind boggles!

This blackboard video goes on to ask people what happens when their regrets are simply wiped clean, gone, so they can all start fresh again. People come away from the blackboard feeling enthused and encouraged about their future.

More often than not, having a realistic plan in place about what it is you want to do and achieve in your life can, and usually does, give you great clarity and along with clarity comes some motivation.

But not only does your plan need to include what it is you want to achieve, it also needs to include the steps you’re going to take to get there i.e. “What do I want and how am I going to get it?”

More times than not, finances form a large part of people’s life plans.

As it is often said, money doesn’t necessarily buy you happiness and I completely agree with this statement however, whether we like it or not, money also plays a very large role in our lives today in being able to live in modern society with a reasonable level of comfort (and dignity) and to be able to support and provide for our families.

Where am I going with this?…simple, if you haven’t got some type of plan for your future, then get one (to get some clarity)

It doesn’t have to be fancy or complicated; in fact, it’s best if it’s simple and to-the-point.

And, get to your plan NOW rather than saying you’ll get to it tomorrow, or the day after that

Remember, life moves fast and before you know it you’ll wake up one day and 20 years would have passed you by.

Get a financial plan and put it into action, because action is the start of every thing.

* The author of this article, Gary Fabian, is the Principal of Precision Advisory; We develop plans for people’s financial future including, finance, insurance and superannuation retirement funding.

A recent survey conducted by MLC has unearthed some interesting perceptions of how Australians think about money and especially wealth, class and retirement, compared to 20 or 30 years ago.

Some striking revelations from this survey such as; Twenty per cent of those with a household income of $200,000 are living pay-to-pay and having $1 million does not make you rich.

46% of survey respondents said they were living from pay-to-pay, which on it’s own is very alarming.

Also, about the same proportion (48%) said living comfortably requires at least $150,000 per annum income.

This survey was conducted by MLC for the purpose of providing advisers and wealth managers with a better understanding of how Australians identify themselves and discover their financial aspirations.

It seems the results are confusing and alarming to say the least, I would say anyway!

There were other misconceptions revealed from this survey about how Australians view their own, and other people’s wealth. Two thirds (66%) labelled themselves as middle class or lower middle class whilst in reality only 20% actually fit this category.

The research suggest there is a clear disconnect between the definition of “lifestyle” and “standard of living” with many of the respondents saying the pre-requisites for a typical middle class Australian were; having a professional job, the ability to send their children to private school and owning a house and a car. With the average household income of the middle class now sitting at $77,676 per annum it seems most Australians attitudes are a mismatch with financial reality.

It seems that managing people’s expectations as we move forward is going to be harder and harder when it comes to money and especially retirement.

One thing is for sure; our spending patterns have changed dramatically and are most certainly not in line with our savings patterns.

It also seems that financial apathy is becoming more of the norm as this research tells us that Australians are looking to the government for answers with almost half of the survey respondents believing the government should do more to help middle class families.

Personally, I thought government was there to govern and lead the country as a whole and provide the resources for its citizens to take advantage off. Since when is the government there to provide us all with wealth in retirement…wait, didn’t communism promote that and fail miserably, time and time again.

Yes I totally agree that whatever government has power they should put in place the systems for people to prosper, but it’s up to us to get off our collective butts and actually do something with it, not sit back and wait to retire on a government (less than subsistence) pension.

And without doubt our superannuation system should have long-term certainty to match its long term proposed outcome of self-funded retirement. Rather than being tinkered with by successive governments who look to superannuation as a means to recoup the massive multi-billion dollar losses from whichever government has stuffed up previously.

All this being said, and regardless of extensive surveys that reveal that Australians have unrealistic financial expectations, we do still have a fairly robust and workable superannuation system that caters for the vast majority of us working Australians so, why the hell not take advantage of it??

Come on people, get real about your financial future!

I’ve said it before and I’ll say it again, we need financial literacy to be taught at schools to educate our young generations about the need to plan, to budget and to be mindful of money so they do something positive about their financial futures.

And I don’t just mean at high school. This is an important issue and it needs to be taught to our kids at a young age across the board so future generations will be savers, not just spenders and end up with nothing.

I’m a father and I try to teach my son to be financially responsible and it seems to be working as he has a healthy attitude towards working for his pocket money and saving it rather than blowing it on worthless, meaningless stuff….and he seems to understand the meaning of what’s good value and what’s not.

At 11 years old he’s even asked me what superannuation is and when I told him he asked me if he could have a super plan, wow! I really wish he could have one at 11 years old.

Imagine what the future finances of this country would look like if every 11-year-old child wanted to have a super plan to save for their retirement?

That’s a debate worth having, don’t you think?

* The author of this article, Gary Fabian, is the Principal of Precision Advisory; finance, insurance and superannuation advice and consultancy.

I hear a lot of people make all sorts of comments about superannuation being too hard, or too far away to think about, or can’t see the point etc. etc. and it goes on and on.

The simple fact remains that only 5% of the population has enough money at retirement to be comfortable and self-sufficient, so isn’t it about time you got serious about a financial vehicle that, if used properly really could make you financially comfortable in retirement and not having to think about the government pension?

Now I know there are limits to what each of us can contribute to our super funds and we all have to live day to day and pay our usual bills such as the home mortgage, school fees, holidays etc. and there is that matter of age and time you have until retirement age comes around.

Regardless of all the splutter that has gone on for years about superannuation and what the government is doing with it and changes they make to it, super (in general) is still a very tax-effective method to self-funding your retirement for the baulk of the population.

And, if you start early enough and stick to making consistent contributions to your super fund you could actually end up very financially comfortable when the time comes to retire.

I come across a lot of people in my day-to-day work who actually have some surplus funds available to contribute towards superannuation, yet they think because it’s for retirement they’ll get to doing something about it sometime later.

Why is it that apathy sets in about this particular subject?

Don’t be fooled into thinking that time is on your side because one day you’ll wake up and you’ll be 55, 56 years old and thinking “OMG retirement is getting close and I wish I had put more money into my super”

I’m especially passionate about superannuation when I’m speaking with sub-30 year olds about financial planning issues and try hard to get them to see the many benefits for them to get serious about their super and what it could really do for them.

That doesn’t mean to say I’m not passionate about the subject when I’m talking to people over 30 years old, of course I am!

I’m always passionate about my work and the outcomes we can achieve for people who are motivated, regardless of their age bracket.

All I’m saying here is that people who are under 30 have the added benefit of time being on their side giving them 35 + years to go to reach age 65.

WOW!… the right super fund, plus a reasonable level of consistent contributions being made into the fund AND time actually being on your side in this tax-effective financial environment will result in a terrific retirement outcome.

So, regardless of your age superannuation is still a terrific means of saving and accumulating funds for our twilight years of retirement and really should receive much more attention by the majority of the working population.

Perhaps if it did, there would be more people with more available money when it comes time to retire?

* The author of this article, Gary Fabian, is the Principal of Precision Advisory and advises on superannuation and SMSF.