How to retire successfully
<Adviser’s Name>
<Adviser name> is an Authorised Representative of RI Advice Group Pty Ltd
How to retire successfully
<Adviser’s Name>
<Adviser name> is an Authorised Representative of RI Advice Group Pty Ltd
How to retire successfully
<Adviser’s Name>
<Adviser name> is an Authorised Representative of RI Advice Group Pty Ltd
How to retire successfully
<Adviser’s Name>
My Name Financial
<Adviser name> is an Authorised Representative of RI Advice Group Pty Ltd
How to retire successfully
<Adviser’s Name>
JV logo
<Adviser name> is an Authorised Representative of RI Advice Group Pty Ltd
Disclaimer
Important Notice
RI Advice Group Pty Ltd, ABN 23 001 774 125, holds Australian Financial Services Licence Number
238429 and is licensed to provide financial product advice and deal in financial products such as:
deposit and payment products, derivatives, life products, managed investment schemes including
investor directed portfolio services, securities, superannuation, Retirement Savings Accounts.
The information presented in this seminar is of a general nature only and neither represents nor is
intended to be specific advice on any particular matter. RI Advice Group strongly suggests that no
person should act specifically on the basis of the information contained herein but should obtain
appropriate professional advice based on their own circumstances.
The information presented in this seminar is current as at 21st September 2014.
Past performance is no guarantee of future performance.
Agenda
• Introduction – your dream retirement
• Challenges and considerations
• Retirement income opportunities
• Boosting superannuation
• Investing for the long-term
• The value of advice
• RI Advice Group
Retirement, your next step
For most retirement is considered a goal, an aspiration, a reward for a
lifetime of hard work
Be prepared
Three elements of retirement
• Living: Day-to-day, like keeping a roof over your head, a car on the road, food, bills,
car, insurance, etc.
• Life Balance: The things you want to do, like a hobby, giving back to the community,
further education, relationships, health or other past-time
• Lifestyle: Major lifestyle pursuits, such as overseas trips, home renovations, new
car/boat.
9
Plan for your dream retirement
What kind of lifestyle do you want to lead?
How much income will you need every year?
Will you outlive your savings?
How will you invest for retirement?
How will market volatility affect your plans?
How will you receive an income in retirement?
What does your dream retirement look like?
Travel overseas?
Take a road trip?
Make home renovations?
Spend more time with your grandchildren?
You know what you want … but where are you now?
Where are you
today?
Where do you want
to be?
On track
Shortfall
Can help you:
Keep on track
Get ahead
Can help you:
Get on track
Strategies to get to there
Be prepared
Source: Australian Bureau of Statistics. - Deaths, Australia, 2013
How long a life should we plan for?
 Life expectancy data changes as you attain older ages

A couple age 65 today has a 50% chance one will live past 90

A couple age 70 today has a 25% chance one will live past 95
How much income do I want?
Lifestyle
Modest
Comfortable
➜ No eating out
➜ Eating out occasionally
➜ Clothes from discount chains
➜ Clothes from department stores
➜ Entertaining at home
➜ Entertain at home fortnightly
➜ No private health insurance
➜ private health insurance
➜ Cheap holidays in Australia
➜ overseas holidays every five years
Estimated required income (per couple)
$33,664* pa
$58,128* pa
Estimated required lump sum (per couple)
$512,000**
$885,000**
*The Association of Superannuation Funds of Australia (ASFA) –Retirement Standards Research, June 2014: Retirement living costs
**Estimated lump sum, in today’s dollars – not including any Centrelink age pension entitlements. Assumes 7 per cent pa eturn (that is reinvested) on account balance of
account-based income stream. Annual income from the account-based income stream indexed by 3 per cent a year, and runs out at the age of 87. If you live beyond 87,
then individual relies only on the Age Pension.. Any changes in the assumptions will change the result. This is for illustrative purposes only. Figures are not guaranteed
in any way. Investment performance may go up and down. Source: ASIC’s MoneySmart ‘retirement planner’ calculator
19
Retirement funding
Where’s the money coming from?
• For many approaching retirement, compulsory
superannuation may not be enough
• Age pension may not be enough
- Max. for singles $22,212 pa*
- Max. for couples $33,488 pa*
VOLUNTARY
SAVINGS
COMPULSORY SUPER
• Need a mix of sources
– e.g. super, voluntary savings,
other investments
AGE PENSION
Traditional retirement system based on 3 pillars
Source: Guide to Australian Government Payments, 20 September to 31 December 2014
*Includes Pension and Clean Energy Supplement. Some age pensioners may be assessed under transitional rules
You know what you want … lets get there together
We can help you:
• Work out how much savings you’ll need to fund your retirement goals
• Maximise retirement savings
• Implement super strategies like salary sacrifice, Government co-contribution and
transition to Retirement
• Invest for long-term growth
• Choose the right income stream to suit your retirement income needs
• Ways to supplement your income in retirement
Be prepared
Your financial strategy:
1. How to achieve your goal
a. Investing in growth investments
b. Topping up your superannuation
c. Transitioning to retirement
2. When you retire
a. How you will generate your retirement income stream
b. Are you eligible for government income support to supplement your income?
3. Plan for the unexpected
Getting to retirement
Achieving your retirement goal – investing in growth assets
– You need sufficient growth to stay ahead of tax and inflation
– Shares can provide capital growth and income
The effects of inflation
1980: $3,698
How much would
you pay today?
Over $20,000
24
Impact of tax and inflation
Maria
• $10,000 available to invest
• Chooses 1-year term deposit paying 5% interest pa
• Marginal tax rate 49%
• Inflation 2.5%
Value at end of year 1
Investment
Interest received
Less tax paid
Net value at end of year
Less impact of inflation
Real value at end of year
$10,000
$500
($245)
$10,255
($250)
$10,005
How will your financial plan look
The right combination will depend on your personal circumstances
Income
Growth
•
•
•
•
•
•
•
•
•
•
•
Bank
Term Deposits
Debentures
Annuities/Super Pension
Allocated Pensions/Annuities
Property Securities
Shares
Property
Super/Rollovers
Insurance Bonds
Unit Trusts
26
Invest in growth assets
$500,000
$400,000
Helen
Christian
$145,382
$466,096
$300,000
$250,000
Helen invested her super in a
conservative option returning
6%
$320,714
$200,000
$150,000
At the suggestion of his adviser
Christian invested in a slightly
less conservative option that
returned 8%
$153,060
$100,000
$50,000
$0
6% net return
over 20 years
8 % net return
over 20 years
Source: Colonial First State, 2010
Shares can provide capital growth and income
450,000
Term Deposit - Interest income (RHS)
All Ordinaries Index - Dividend Income (RHS)
Term Deposit - Capital Value (LHS)
All Ordinaries Index - Capital Value (LHS)
20,000
18,000
400,000
350,000
Return on investment of $100,000 in shares vs term
deposits
16,000
Which income stream would you prefer?
14,000
300,000
12,000
250,000
10,000
200,000
8,000
150,000
6,000
100,000
4,000
50,000
2,000
0
0
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
Source: Colonial First State Popular sides 2011
Asset class performance over 20 years
GROWTH OF $10,000 OVER TIME
450,000
400,000
*
*
350,000
*
300,000
**
250,000
200,000
150,000
100,000
50,000
0
83
85
87
89
91
93
Australian Shares $411,954
Australian Fixed Income $178,860
Inflation $30,431
95
97
99
01
03
International Shares $242,254
International Fixed Income $149,467
05
07
09
11
Australian Listed Property $200,309
Cash $109,326
Timeframe: 01/01/83 – 30/06/14 Data: Australian shares - S&P/ASX 300 Accum. Index, International Shares - MSCI World
(ex Aus) in $A, Listed Property Trusts - S&P/ASX 300 Prop Trust, Australian Fixed Interest: Commonwealth Bank Bond Index
(Pre Sept 89) / UBSA Composite Bond All Maturities Index (Post Sept 89), Global Fixed Interest: Barclays Capital Global
Aggregate Index Hedged $A. Cash: 11 am Cash Rate (Pre Apr 87) / UBS Bank Bill Index (Post Apr 87). Source: RBA,
Datastream, ANZ Global Wealth.
13
Getting the right mix
Diversification is important.
Choosing the right assets will depend on your personal situation.
Insurance
bonds
Super/
Income
Unit trusts
Bank
Rollovers
Term
deposits
Property
Debentures
Shares
Growth
Property
securities
Pensions/
Annuities
Quote
“The sharemarket is the transfer of wealth
from the impatient to the patient”
-Warren Buffet
31
Keep a long-term view
Source: Data to 31 October 2010. IRESS Chart shows the value of $10,000
invested on 31/12/79, S&P/ASX All Ordinaries Accumulation Index. Past
Performance is no indication of future performance.
Use dollar cost averaging to smooth returns - illustration
Movement in the unit price of a managed fund
over a 10 month period
Historic Source: ING, 2009
Case study: dollar cost averaging - illustration
Investor
Total units Value of shares Invested Profits made on
purchased
at month 10
investment
Danni
104,154
$102,071
$100,000
$ 2,071
Eric
98,039
$96,078
$100,000
$ -3,922
Source: ING. Return is indicative only.
When is the right time to retire?
In research released in January 2014, a commonly reported reason for people ceasing
their last job was reaching retirement age/ preservation age; where they have the
eligibility to draw form their superannuation or pension. (44% of men and 30% of
women.)
Source: ABS, 6238.0 - Retirement and Retirement Intentions, Australia, July 2012 to June 2013
Which path will your retirement follow?
In 60% of cases retirement savings ran out in less than 30 years.
$2,000,000
$1,800,000
$1,600,000
$1,400,000
1982
$1,200,000
$1,000,000
1950
$800,000
$600,000
Average
$400,000
$200,000
1929
$0
60
65
70
75
80
1940
85
90
95
100
Data: $500,000 invested in a diversified, multi-sector balanced portfolio comprising 25% Australian shares, 25% International shares, 30%
International bonds and 20% Australian bonds rebalanced annually. Historic retirements commence in 1875 and every 2nd and 5th year thereafter
until last commencing in 1985. Each portfolio funds an initial 5% drawdown in year one, thereafter an amount adjusted by actual historic inflation
for that year to maintain real purchasing power. Inc 1.8% fees. Source: Wealth benchmarksTM
Getting to retirement
Achieving your retirement goal – top up your superannuation
• Boosting savings with salary sacrifice
• Government incentives – co-contribution
So plan for the long-term
• Use super to your advantage
• Invest in growth assets
• Keep a long-term view even in times of market volatility
• Use dollar cost averaging
Super is super
Contributions
taxed at
only 15%
Can be used to
buy retirement
income streams
Earnings taxed
at only 15%
Super
Can be used to buy
pre-retirement
income streams
Tax free
draw-downs
after age 60
Help from
Government to
boost savings
Topping up super: salary sacrifice
Salary sacrifice – as at 1 July 2014*
• Making super contributions directly from your pre-tax salary
• You do not pay income tax on salary sacrifice contributions
• Check your employer will let you implement this arrangement
Concessional contributions caps
As At 1 July 2014
Age
Under 50
Over 50
Contribution Cap
$30,000*
$35,000*
Salary sacrifice: If you earn $1,000 how much can you invest?
$900
$850
$800
$790
$700
$655
$610
$600
$510
$500
$400
$300
$200
$100
$0
15%
21%
1
2
34.50%
3
Tax rate
Medicare levy included
39%
49%
4
5
Scenario – Casey
•
Casey is 45 years old and earns $150,000 p.a. (including 9.5% Super).
•
($136,987 salary + $13,013 superannuation guarantee)
•
Casey would like to save $12,600 per annum for her retirement in 20 years’ time.
•
Her employer allows her to salary sacrifice into super. Should she take
advantage of this or invest her savings in a managed fund outside super?
•
As the funds are not required for 20 years she wishes to invest her savings in
shares.
Salary sacrifice into super vs savings outside super
Salary Sacrifice into Super
Savings outside Super
Gross salary
Less salary sacrifice
Taxable income
Tax including Medicare Levy
Super contribution
$12,600
$12,600
$0
$0
$25,613
$12,600
$0
$12,600
$4,914
$13,013
Contributions tax
$3,842
$1,952
Net amount invested
$21,771
$18,747
Super $1,307,206
Super
$692,095
Managed Fund $439,392
Total
$1,131,487
Investment value
after 20 years
Superannuation assumptions
Earning rate 7.62%
Salary sacrifice contributions indexed by AWOTE per annum
Employer SG Going up by AWOTE
Managed fund assumptions
Earning rate7.62% ( 3.04% growth, 4.58% income, 21% franking)
Contributions indexed by AWOTE per annum
Entry fees ignored in both scenarios
2014/15 tax rates have been used.
Topping up with extra contributions
Extra contributions
• Personal, from after-tax salary or other money
• Known as ‘non-concessional’ contributions
• Not taxed again when contributed into super
• May be entitled to Government co-contribution of up to $500 (if you earn less
than $49,488)
• Limited to $180,000 pa
• Or, if under 65 on 1 July of relevant year, $540,000 total in a three year period
Getting to retirement
Achieving your retirement goal – transition to retirement
• Delaying retirement, and boosting savings with salary sacrifice
• Reducing work hours, and supplementing your income with a transition to
retirement income stream
What is Transition to Retirement?
• Allows working Australians access to their super
• Establishing a ‘Transition to Retirement’ pension with your existing super
savings.
Transition to Retirement pensions can allow you to:
✔ Income remains the same  Boost savings
✔ Income remains the same  Reduce working hours
 Increase income
✔ Own home sooner
Accessing your super – preservation age
Date of birth
Age you may qualify to
access your super
Before 1 July 1960
55
Between 1 July 1960 and 30 June 1961
56
Between 1 July 1961 and 30 June 1962
57
Between 1 July 1962 and 30 June 1963
58
Between 1 July 1963 and 30 June 1964
59
After 30 June 1964
60
Meet Eleanor
Eleanor is 55 years old
• She earns $100,000
• She has $220,000 in her super account
• Eleanor loves her work and is happy to work another ten years.
By age 65 Eleanor’s retirement savings would
grow to only $543,202 if she does nothing...
Eleanor's strategy Await update from Jeanette
Implement a Transition to Retirement strategy, draw $16,000 from the pension and
salary sacrifice $20,000 into super.
The outcome...
•
Her salary falls to $96,000 (before tax) while she supplements her income
with pension payments.
•
Elenor receives the same income after tax.
Eleanor’s income position - Year 1
Any earnings on her pension account are now tax free
Without strategy
With strategy
$100,000
$100,000
Less salary sacrifice
Nil
($20,000)
Pension income
Nil
$16,000
Taxable income
$100,000
$96,000
Net tax and Medicare levy
$26,947
$22,987
Nil
$2,400
$73,053
$73,013
Salary package
15% pension tax offset
Net cash after tax
Eleanor’s retirement savings
Retirement savings on reaching age 60 are tax-free...
Without strategy
With strategy
If everything was left in super,
Eleonor’s retirement savings
would grow to $543,202.
Retirement savings with strategy
will be $589,168, a whopping
$45,966 more than if she
hadn’t used this strategy.
Retirement savings
Retirement savings
$589,168
$543,202
Assumption: Earnings at 7%, CPI at 2.5%, 9.50% SG paid on full salary package and no
loss of employment benefits.
How does Eleanor benefit?
More savings for Eleanor
Salary sacrifice taxed at
15% not 34.5%
15% tax offset on taxable
pension payments
Investment earnings
on pension taxed at
0%
Pension payments tax-free
from age 60
You are ready to retire
At retirement – generating income
• How receive your income
• Government support – age pension and concessions
What are the options?
Invest in:
•
Assets with higher earning potential
•
Account based income streams
•
Non Account based income streams
How allocated pensions help you
•
Regular monthly or quarterly income
•
Select the level of income you require (above a prescribed minimum)
•
Alter income level each year
•
Income assessed favourably by Social Security
•
Account balance not lost on death
•
In-built investment options
Stay in control
55
Age pension won’t be enough …
The Age Pension:
• For singles - $22,211 p.a.
• For couples - $33,488 p.a.
NOTE: Age pension rates are inclusive of the pension and clean energy
supplements.
Some age pensioners will be assessed under transitional rules.
Source: Guide to Australian Government Payments, 20 Sept to 31 Dec 2014
56
Social security – assets test
Homeowners
Single
Couple (combined)
For full pension
up to $202,000
up to $286,500
For part pension
less than $771,750
less than $1,145,500
Non-homeowners For full pension
Single
up to $348,500
Couple (combined) up to $433,000
For part pension
less than $918,250
less than $1,292,000
Pension entitlement reduces
$1.50 for every $1,000 over thresholds (single and couple)
Example: $10,000 over the lower threshold reduces pension by $390 pa
Thresholds apply from 20 Sept 2014
57
Social security – income test
Family situation
Single
Couple (combined)
For full pension (pf) For part pension (pf)
up to $160
less than $1,868.60
up to $284
less than $2,860.00
Pension entitlement reduces
• 50 cents for each dollar over the limit (single)
• 25 cents for each dollar over the limit (couple – each)
Example: $100 per fortnight over threshold reduces pension by $1,300 per
annum
Thresholds apply from 20 Sept 2014
58
Pension concession card
The Pensioner Concession Card gives you:
•
Concessional travel
•
Discounts on
- Council and water rates
- Prescriptions
- Electricity and gas bills
- Car rego (in most states)
- Public transport
- Some eye and hearing services
Note that some other concession cards provide some but not all of these
benefits.
59
Not eligible for Age Pension
Commonwealth Seniors Health Care Card
• Income of less than $51,500* (single) or $82,400* (couple – combined)
• May assist with costs in retirement such as
• Discounts on eligible prescriptions
• Bulk billing with some medical practitioners
• Some state and territory based concessions (eg discount transport
costs)
*Thresholds apply from 20 Sept 2014
60
You know what you want … but where are you now?
Where are you
today?
Where do you want
to be?
On track
Shortfall
Can help you:
Keep on track
Get ahead
Can help you:
Get on track
Strategies to get to there
We can help you achieve your goals
Talk to us about building a retirement income plan to suit you
We can:
• Assess your situation
• Estimate how much money you will need in retirement
• Suggest ways to maximise retirement savings
• Give you strategies to maximise income in retirement
• Help you choose the right income stream
• Talk to you about the possibility of using protection to secure enough income to cover
cost of necessities in retirement
• Help you transition to retirement, if desired.
Why us?
We are part of RI Advice Group who:
•
Have over 30 years experience providing advice to Australians
•
Are one of the most well-known adviser groups in Australia
•
Are backed by one of the country’s largest wealth managers
•
Have access to its leading research and technical teams
•
Have a dedicated local team, closely connected to the community
•
Pride ourselves on quality service with a personal touch
•
Are experts in retirement planning
•
Provide holistic advice to meet your circumstances
Would you like more information?
Please call me if you’d like to find out how I can
help you with your retirement plan.
<< insert adviser name >>
<< insert adviser job title >>

Ph: ( )

Mob: (

Email:

<< insert adviser work address >>
)
<< insert adviser work address >>
<< insert adviser work address >>