kristopher

A Financial Planning Case Study About Change – Stephanie’s Story

By Kristopher Meuwissen

*Names and certain details have been changed for privacy

Stephanie first came to us right before the onset of COVID-19 – potentially the worst timing to get things organised as the whole world was about to change and everyone’s livelihood thrown into chaos and disruption.

Obviously not having a crystal ball, Stephanie and ourselves went ahead as per usual, carefully taking into account her work situation (full time at that stage), her personal circumstances (single, approaching 60, never wanting to retire but still having debts that needed paying off), and her goals for the future (pay off the credit card of a whopping $9,000 and do some serious planning to get everything organised by age 65).

The Strategy

We went through Stephanie’s situation with a fine-toothed comb and developed a strategy that, utilising her age and working status, would see Stephanie’s short term goals such as paying off her credit card met immediately, but also a longer-term plan that would allow her to still continue to grow her super until she was ready (if she ever wanted to!) to retire.

Stephanie had a basic industry super fund that wasn’t meeting her goals and expectations of a super fund. There wasn’t much reporting or ability to check in on her funds, which is something that Stephanie really valued as a priority. As such, we found a super fund that would allow her to log in and see her balance, assets, returns, and everything else at a glance, as well as provide her frequent reports to help her feel more in control of her super.

This new fund also had more flexibility regarding rolling between accumulation and pension phase – something that would be crucial for our recommendation for Stephanie.

As Stephanie had reached preservation age and was still working, she had the ability to do something very much like the superannuation equivalent of having her cake and eat it too – commence a Transition to Retirement Pension account, and then roll it back to accumulation once she had withdrawn some funds.

By withdrawing the maximum 10% payment from this TTR account, it would allow Stephanie to meet her goal of paying down her credit card all in one hit, and still being able to put some of those funds aside for emergencies (an essential on-hand cash reserve that she didn’t have to begin with).

The super fund would then be rolled back to accumulation phase so Stephanie could continue to receive her employer super guarantee payments and grow her super until she was ready to retire and use it.

Simple, right?

Well it would’ve been had the coronavirus not reared its ugly head and stuffed up Stephanie’s (and everyone else’s) situation completely.

Stephanie, being in hospitality, went from working full time to no longer being paid by her employer, and sadly had to begin receiving the JobSeeker payments from the government to help keep her afloat until she could start working again.

Losing her job compounded all of Stephanie’s problems, meaning she got behind on her credit card payments and only saw that balance increase. This credit card debt was a huge source of worry and stress for Stephanie, and not having an income for a period of time then only being on reduced government assistance meant she was forced to rely on this more than she wanted to.

Now, we here at Wealtheon like a challenge, and this curveball was no exception. We went into full on planning mode and developed a new strategy that would allow Stephanie to still meet her goals (which hadn’t changed) whilst taking into account this strange new world.

Realising that the TTR strategy would count as income and therefore stuff up her JobSeeker payments leaving her in the lurch for cash flow, we recommended that instead of a TTR strategy, Stephanie take advantage of the government’s COVID-19 Super Access option.

By withdrawing the $10,000 from her industry fund account to pay off her credit card and retaining the rest in her bank account for emergencies or unexpected expenditure, she would meet her goal of paying down her credit card, whilst still allowing her to continue receiving the JobSeeker payments.

On top of this, we had to review Stephanie’s insurance situation, as COVID-19 presented a whole new health risk, particularly as she was in the high-risk bracket. Stephanie let us know that because of this she would like to keep her existing cover held in her industry fund, and we recommended that she do so.

To still meet Stephanie’s goals of having a fund that gave her control and great reporting as well as diversification of investments, we recommended that she open a new accumulation fund with a different super fund as in the previous recommendation.

This way, she could roll the majority of her funds over to the new account giving her the ability to invest as she pleases, and still retain her insurance cover in the industry fund with a minimum balance, keeping her safe and insured during the heightened risk of COVID-19.

Six Months Later

Six months later, and despite all the crap that’s happened in the world and economy, Stephanie is a raging success story.

Despite having taken out the $10,000 government COVID-19 payment, paid two sets of super fund administration and investment fees, our fees, AND insurance premiums all from her super accounts, Stephanie now has more in super than she did when she first sat down with us.

Not only that, but Stephanie has met her goal of paying off her credit card, now has an emergency cash fund in her bank account and has a clear plan in place well before age 65.

Stephanie’s story really highlights that no matter what’s going on in the world, it’s always the right time to start planning your finances and future. Change is inevitable and constant, but it can also be amazing.

Have some questions? Want to know how it applies to you? Want a review of your personal situation? Click here to book a Free 15 Minute Discovery Session, give us a call on 1800 577 336, or email us at hello@wealtheon.com.au.

By Kristopher Meuwissen

There has been an undercurrent of fear about this recession (like there is in any recession).

People are scared for their jobs, their incomes and their standard of living.

Fair enough… But…

There are heaps of opportunities out there right now that you can be grabbing with two hands, yes, I know that is what everyone says so how can you find those magic opportunities?

There are a few things that you can do that will shine a light on new investment opportunities, business ideas and new forms of income without needing any special training or background.

1. Start looking: Ok, this is maybe a bit of a nob of a thing to say but it has to be the first thing on the list. Too many times I have had conversations with people who ask me how I find opportunities and they think that somehow they fall in my lap out of nowhere. You need to look for them. If you are interested in buying a new investment property and your looking for a bargain, you NEED to be looking on listing sites as well the local papers and speaking with local estate agents.
2. Identify problems: Has the recession created a new problem? 100% it has. Think about service industries and how people now are conducting all of their business by Zoom. When you identify problems that are happening around you, you can start identifying solutions. Don’t be deterred by someone else possibly having an answer to the problem already. Think of a way that you can differentiate or possibly invest into those solutions.
3. Start speaking about what you are wanting to do: This one is simple. If you are wanting to find a new investment in shares or real estate but all of your mates are talking about cars or the footy then again, you are in for a tough time. Connect with people who are in the field that you want to be a part of. Ask them for advice, talk to them about their ideas and see what happens.
4. See potential and take a risk: You are never going to have the business of your dreams if you don’t put anything on the table. You need to think big about what the potential is for the thing in front of you. I have an annoying habit of critiquing every shop, café, bar or service I have ever used and thinking of how I would do it differently or what I could add to it to make it go from and 8/10 to a 10/10. Indulge your imagination and then look at what it would take to make it your vision a reality.

These simple things will help you find opportunities around every corner.

If you think that you are doing all of these things and nothing is working out for you, well your not alone. Most of the time when I do these things, I am absolutely kidding myself but one in one hundred are ripper ideas and only ne in 10 of those might be feasible opportunities.

So the final piece of advice I can give to you is…

Finding good opportunities is a numbers game. Keep at it, eventually you will land on the perfect one.

Have some questions? Want to know how it applies to you? Want a review of your personal situation? Click here to book a Free 15 Minute Discovery Session, give us a call on 1800 577 336, or email us at hello@wealtheon.com.au.

We have been incredibly busy over the past few months. The rate of disruption since mid-March has been overwhelming for many of our clients. With the continuing threat of the virus, we have all been navigating considerable change and upheaval.

Never before has it been so important that we focus on the things that we can control. It is time to take stock of your financial situation and look at proactive ways to manage this uncertainty.

As your financial adviser, we will continue to work with you to ensure that you make smart decisions with your money and provide you with the peace of mind that comes from having an expert on your side.

Here are 5 easy tips to take control of your finances:

1. Budget…the “dirty” word. There has never been a more important time to become more aware of your finances. This doesn’t mean you have to manage a massive spreadsheet with every expense. However, it does mean being more aware of how you can curb spending that is putting your financial well-being at risk.
2. If there is assistance, take it. Take stock of your current fixed expenses and see if there are opportunities to lighten the load. Many utilities, insurance, and other financial service providers are offering various levels of Covid-19 relief.
3. Consider doing your tax return ASAP! Where your income was affected at the end of the 2019/20 financial year, you may find that you are entitled to a larger tax return than you would ordinarily receive. It is well worth discussing with your tax agent.
4. Review your debt. Not all debt is equal. Spend the time to look at your current credit card, buy now-pay later, mortgage and other debt. Which has the lowest interest rate? Is it possible to roll debt into this lower interest facility?
5. Superannuation withdrawals and mortgage pauses should be a last resort. Of course, the ability to access up to $20,000 of your superannuation in this and last financial year, could potentially be the lifeline that helps you to survive the next few months. However, early super withdrawal will have a long-term impact on your retirement savings. A $20,000 superannuation withdrawal could mean the difference of $55,603 at retirement for a 40-year-old with an $80,000 balance*

Putting your mortgage on hold could take the pressure off for a short period of time. Please be aware that your interest will continue to accrue during this period, and once you re-start your mortgage, your repayments will be increased to reflect these continued interest charges. Some banks are offering to extend the loan period.

Have some questions? Want to know how it applies to you? Want a review of your personal situation? Click here to book a Free 15 Minute Discovery Session, give us a call on 1800 577 336, or email us at hello@wealtheon.com.au.

Source: www.canstar.com.au – 21/05/2020

By Kristopher Meuwissen

The last 10 – 15 years has been a wild ride for investors. Especially for retirees who need income.

Let me explain…

Since the global financial crisis (GFC) there has been a huge monetary response from governments and reserve banks all over the world.

That response is to lower the cash rate and add stimulus into the economy in an “anything goes” effort to kick start growth and keep people in jobs.

This financial monetary easing has done a few things really well.

1. It has seen one of the largest international share market booms in history.
2. It has driven the cost of housing in Australia through the roof as people have had the capacity to borrow more money.
3. It has almost destroyed the ability for Australian retirees to rely solely on more secure investments like term deposits.

Coupling retirees struggle with generating income through traditionally low risk investments with a longer standard of living and an aging population and you begin to have the makings of a disaster waiting to happen.

So what specifically is the problem?

The problem is that someone who is 70 years old and has saved one million dollars over their lifetime is faced with a troubling choice.

They can keep their money in lower risk assets like term deposits and receive maybe $10-15,000 per annum (which is definitely not enough)

Or

They can start getting creative.

There is a case to be made (and in my opinion this is happening all over Australia) that a retiree should just buy a beautiful (and expensive house) with their money and reduce their declarable assets so they can start to receive the aged care pension. The current rate for a full pension for a couple is just over $37,000 per year.

That means that a retiree is going to be better off on the age pension by a factor of two – three times than by investing their money in low risk investments.

It seems like a no brainer, doesn’t it?

Except it causes a lot of problems later on in life and people are unaware of how much risk they are taking by implementing such a strategy.

A couple of the risks involved are:

• Property is a growth asset and having all of your money tied up in one asset means you could lose a lot of money if property prices drop
• Property may be too much for an elderly person to upkeep and thus fall into disrepair
• The retiree may need to be placed into aged care which then may cause issues with the sale of the property or it may have to be sold in an inopportune time.

So what are the other creative ways for retirees to be able to generate income, take less risk and potentially receive the pension?

Annuities:

An annuity is a guaranteed income for your lifetime or a fixed term and can make up the backbone of your retirement plans. Annuities also have the added benefit of a part exemption from Centrelink which means that you will be able o receive the pension sooner and in greater amounts.

Annuities can be great but they have some down falls such as locking your money away which limited or no access.

Fixed Interest (Bonds):

Similar to term deposits, fixed interest can provide income through retirement and should definitely be considered as a part of an investment make-up for a retiree. Whilst it carries a little more risk they definitely offer stability for a retiree and allows for some certainty with long term income.

High Yield Growth Assets:

High yield growth assets can take shape in the form of high income property (directly held or real estate investment trusts) and high income shares (think Coles, BHP and the big banks etc.).

High income growth assets should definitely make up a small part of a retirees income stream because without it, you are completely beholden to interest rates which looks like they are going to stay low for a long time.

The final word:

Your retirement income should be made up of mostly lower risk assets with a small amount of money in some growth style assets. This should allow you the security that you can receive the pension receive long term income which will allow you to have your money outlast you and not have to scrimp and save every last penny.

If you are wondering what mix of investments you should consider, you need to speak with an experienced and licensed financial adviser.

Have some questions? Want to know how it applies to you? Want a review of your personal situation? Click here to book a Free 15 Minute Discovery Session, give us a call on 1800 577 336, or email us at hello@wealtheon.com.au.

If you’re heading towards retirement and want more resources and information about how to make sure you have enough money to fund the retirement you want, check out our other articles like this one: https://wealtheon.com.au/make-your-retirement-income-last-as-long-as-you-do/