The vital role of retirement planning in Australia: Why you need a financial advisor

As we navigate through the different stages of life, retirement is a significant milestone that deserves careful consideration. Proper retirement planning in Australia is vital for securing your financial future and ensuring a comfortable, stress-free retirement. The importance of retirement planning, the role of a financial advisor, and how financial planning can help you achieve your retirement goals has been summarised below.

The Significance of Retirement Planning

Retirement planning is the process of setting financial goals and creating a strategy to achieve them during your retirement years. In Australia, a robust retirement plan is crucial for several reasons:

1. A Longer Retirement Lifespan: Australians are living longer, and this means that you need a more substantial nest egg to fund your retirement. Proper planning ensures that you won't outlive your savings.

2. Changing Economic Landscape: The economic environment is constantly evolving, making it essential to adapt your financial plans to cope with fluctuations. Retirement planning helps you stay financially resilient.

3. Age Pension Limitations: Relying solely on the Age Pension is not a sustainable retirement strategy for the majority of Australians. It's crucial to build your own financial resources to maintain your desired lifestyle in retirement.

The Role of a Financial Advisor

A trusted financial advisor is a key asset in your retirement planning journey. They bring expertise and experience to the table, helping you make informed decisions and navigate the complexities of financial planning.

1. Personalised Advice: A financial advisor tailors your retirement plan to your unique circumstances, considering your age, risk tolerance, income, and goals.

2. Investment Strategies: Financial advisors can help you build a diversified investment portfolio that aligns with your objectives, whether it's capital preservation, income generation, or growth.

3. Risk Mitigation: They assist in managing risks, ensuring that your retirement funds are protected against market downturns and unexpected expenses.

The Role of Financial Planning

Financial planning is an integral part of retirement planning. It encompasses a wide range of elements that aim to optimise your financial situation for retirement.

1. Budgeting: A financial plan will help you create and stick to a budget, allowing you to save consistently for retirement.

2. Debt Management: Reducing or eliminating debt is an essential part of financial planning, as it frees up more money for retirement savings.

3. Tax Efficiency: Financial planning helps you make tax-efficient choices in managing your finances, reducing your overall tax liability, and boost your retirement savings as a result.

4. Estate Planning: Ensuring that your assets are distributed according to your wishes and with minimal tax implications is an essential aspect of financial planning.

In Australia, retirement planning is a critical component of ensuring a comfortable and secure future. To navigate this complex landscape effectively, enlisting the services of a financial advisor and implementing a comprehensive financial plan is imperative. These professionals can provide the guidance and expertise needed to make informed decisions and secure a financially stable retirement.

Don't wait, start your retirement planning today to enjoy the retirement you deserve. Contact Precision Wealth Advisers to get started on your journey towards a financially secure future. We are here to help you achieve your retirement goals.

Superannuation: Is it time to review your investments?

You may be missing out or taking unnecessary risks if you have a set-and-forget strategy for your super.

A lot can happen between the time you start your first job and the time you retire. From building a career, buying a home and raising a family to dealing with setbacks such as redundancy or divorce, life doesn’t stand still and neither should your investments.

In all likelihood, the investment choice you made at age 25 may no longer be appropriate at age 55 or 60. Or you may not have made an active choice at all, automatically being allocated to your fund’s default investment option.

In most cases, the default option is a ‘Balanced’ or ‘Growth’ investment option which is typically heavily allocated to growth assets. The mix of investments is chosen by the fund manager to suit the average fund member who might be anywhere from 18 to 65 years of age.

The problem with this approach is that we all have a different appetite for risk and different financial circumstances. What’s more, our circumstances and risk appetites usually change as you progress through life.

Check the menu

To make sure your super suits your current needs, start by checking how your money is invested and then compare this with what else is on the fund’s menu.

All super funds have a range of investment options for you to choose from. These vary according to the kinds of assets they hold. Your choice will depend on the amount of risk you are willing to take and the return you’re expecting to make in the long-term.

Most funds offer an a la carte menu of single asset options such as Australian shares, international shares, sustainable shares, property and fixed interest, which you can mix and match to suit if you wish.

Alternatively, you can choose from a selection of ready-mixed options to suit different risk profiles. Different funds use different labels, but according to ASIC’s MoneySmart website there are four broad categories:

• Growth options typically hold around 85% of their funds in shares and property with the remaining balance in cash and fixed-interest investments. High growth options can have up to 100% in shares and property. This aims for higher average returns over the long term, but the ride will likely be bumpier along the way. Losses tend to be higher in bad years when compared with lower risk options.

• Balanced or Moderate options may hold anywhere between 50% and 75% of the investments in shares and property with the rest in cash and fixed interest. Average returns over the long term will be less than the growth option but higher than conservative and cash options.

• Conservative options have around 70% in cash and fixed interest with the remaining balance in shares and property. Average returns are typically lower than growth options over time, however it aims to reduce the risk of loss.

• Cash invests in deposits with Australian deposit-taking institutions or ‘capital guaranteed’ life insurance policies which offer relatively low, stable returns and significantly reduces the risk of loss. A consideration is that returns may not keep pace with inflation.

A matter of time

The thing to remember about risk in investment, as in life, is that time often heals wounds. If you have 20 or 30 years left to work and save, you may consider taking a little more risk than someone with less than 10 years till retirement. That’s because you have more time to recover from the swings and roundabouts of global investment markets.

Time can also eat away at your savings if you invest too conservatively. That’s because inflation reduces the buying power of money over time. So, those with at least 10 years to retirement may consider keeping a substantial portion of their retirement savings in a growth or balanced option.

The argument for reducing your investment risk grows stronger as you near retirement and have less time to recover from a market downturn. Even so, people entering retirement nowadays may still have up to 30 years to plan for. Depending on your circumstances and appetite for risk, it may be appropriate to keep some money in growth assets to avoid depleting your capital too quickly.

Just because super is a long-term investment doesn’t mean it should be filed away in a drawer until you retire. Given that many of tomorrow’s retirees can look forward to living well into their 90s, the reward for taking an active interest in your super is that your savings are more likely to last the distance.

Want to know more?

Speaking to a financial adviser can help you identify what mix of investments are appropriate for you. An adviser can work with you to assess your circumstances and invest accordingly to your needs. If you would like to speak to a financial adviser about your superannuation strategy please contact us today on (08) 8372 7826 for a free financial health check.

When is the right time to seek financial advice?

There’s no bad time to seek financial advice, however here are five situations where it’s more important than ever to see a financial adviser.

If you think financial advice is just about helping you save more for your retirement, think again. No matter where you are in life, getting quality financial advice can help put you in the best possible place to achieve your life goals, and protect you if things don’t go to plan.

Here’s how your adviser can help you through some of life’s big events.

1. Moving in with your partner

Starting a new relationship can be an exciting time – and it can be easy to get carried away. As you start your life together, a financial adviser can help you plan a new budget, so you can start saving for mutual goals.

Your adviser can also make sure you’re both protected with adequate insurance – something that’s particularly important if you have joint debt or children.

2. Setting up house

These days, buying your first home is harder than ever, with property prices at record highs in most Australian cities. An adviser can help you create a realistic plan to save for a deposit, helping you get your start in the property market.

Once you’ve found the right property, your adviser can help you choose a mortgage and manage your repayments – potentially saving you thousands of dollars in interest over the life of your loan.

3. Ending a relationship

Not every relationship lasts, and break ups can be painful – and often financially detrimental.

Your adviser can help you realign your goals and provide financial structure during a very stressful time. They can also help you get your finances back on track, with a budget to suit your new situation and lifestyle.

4. Changing direction

It’s unlikely that you’ll stay with the same job for your entire lifetime. So if you’re thinking of changing your workplace or embarking on a new career, it’s time to sit down with your adviser. They can help you understand the financial implications of working less, or help you make the most of a promotion or pay increase.

If you’re nearing retirement, you may want to discuss a transition to retirement strategy, so you can spend less time in the office and more time at home. Or if you want to be your own boss, make sure you talk to your adviser about making tax-effective contributions to your super, so you don’t retire without a nest egg.

5. Taking time out

There may be times in your life when commitments like parenting, taking care of elderly parents, studying or travelling will take priority over full time work.

If you’re planning on taking a break from work, your adviser can help you understand your financial options for funding this time off. Remember that while you’re not working you won’t receive any employer contributions to your super. So it’s important to talk to your adviser to help make sure your retirement savings don’t fall behind.

Want a SMSF without ongoing compliance? A Super Wrap Platform may be for you!

A common theme that has emerged in recent years is the popularity of the Self-Managed Super Fund (SMSF).

Some investors choose this option for the control it brings over their investments, others for the ability to invest in direct property; or simply because it can prove to be a cost-effective option (usually for balances over $250,000).

However, many people are unaware of the responsibilities and ongoing compliance burdens related to maintaining a SMSF - or that alternative options are available - which also allow high levels of control over your super investments.

An alternative option to an SMSF is a ‘Super Wrap Platform’

The option is called a ‘Super Wrap Platform’ because it does exactly that, it gives you the ability to invest your super into managed funds, term deposits and direct equities such as listed shares, Exchange Traded Funds (ETFs) and Listed Investment Companies (LICs) in one easy and accessible portal.

Super Wrap Platforms have been very popular with clients who wish to invest directly into the market, which can help keep costs down, while still providing strong levels of diversification and growth opportunity.

The beauty of customising your portfolio is that it allows you to ‘sell’ or ‘increase’ selected holdings, without affecting the rest of your investments (unlike the traditional managed fund options used by many super funds). This can be particularly beneficial for people drawing a pension from their super fund and looking for more income, or for those looking to take advantage of currency fluctuations or changes in international interest rates.

We can help you create a customised portfolio that meets your individual needs, and provide ongoing assistance in managing your investments, to ensure you meet you goals and objectives. We will help you identify value opportunities and provide insight to financial markets, which is based on access to comprehensive filtered research and proven results.

Want to know more?

If you would like to know more about Super Wrap Platform options, or feel this is suitable for your individual circumstances, please contact us today for an obligation-free consultation.

Related links: Exchange Traded Funds, Superannuation & SMSF