Retirement Income

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Monty Python star's candid financial admission

<p>Monty Python star Eric Idle has made a candid admission about the state of his finances, revealing why he still has to work at the age of 80. </p> <p>The comic legend admitted he receives only a fraction of the millions the Python team have made in the past because the finances are a “disaster”.</p> <p>In messages on X, formerly Twitter, Idle wrote: “I don’t know why people always assume we’re loaded”.</p> <p>“I have to work for my living. I never dreamed that at this age the income streams would tail off so disastrously."</p> <p>“I have been working and earning for Pythons since 1995. And now no more.”</p> <p>Idle also took aim at TV lawyer Holly Gilliam, the daughter of fellow Python member Terry Gilliam, who took over the Python brand in 2013 as part of HDG Projects Ltd. </p> <p>He said, “I guess if you put a Gilliam child in as your manager you should not be so surprised”.</p> <p>“One Gilliam is bad enough. Two can take out any company.”</p> <p>Daughter Lily Idle backed him, writing online, “I’m so proud of my dad for finally finally finally starting to share the truth.”</p> <p>The Pythons, who also included John Cleese, 84, Michael Palin, 80, and the late Terry Jones — made a fortune thanks to their iconic cult films, including <em>Life of Brian</em>, hit stage show <em>Spamalot</em>, which Idle co-wrote, and the original <em>Flying Circus</em> BBC TV series.</p> <p>They were back in the limelight in 2014 with <em>Monty Python Live (Mostly) — One Down, Five to Go</em>: a reference to former member Graham Chapman who died in 1989 aged just 48.</p> <p>It featured interpretations of some of their famous sketches, and reportedly earned the surviving members at least £2 million ($3.87m AUD) each.</p> <p><em>Image credits: Getty Images </em></p>

Retirement Income

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Downsizing cost trap awaits retirees – five reasons to be wary

<p><em><a href="https://theconversation.com/profiles/erika-altmann-361218">Erika Altmann</a>, <a href="https://theconversation.com/institutions/university-of-tasmania-888">University of Tasmania</a></em></p> <p>It’s time to debunk the myth of zero housing costs in retirement if we want to understand why retirees resist downsizing. Retirees have at least five reasons to be wary of the costs of downsizing.</p> <p>Retirees living in middle-ring suburbs face frequent calls to downsize into apartments to free up larger allotments in these suburbs for redevelopment. Retirees who fail to downsize into smaller units and apartments are viewed as being a greedy, baby-boomer elite, stealing financial security from younger generations.</p> <p>It also makes sense to policymakers for retirees to move into less spacious accommodation and make way for high-density housing. Housing think-tank AHURI <a href="http://www.ahuri.edu.au/__data/assets/pdf_file/0021/14079/AHURI_Final_Report_No_286_Australian-demographic-trends-and-implications-for-housing-assistance-programs.pdf">fosters this view</a>. Yet seniors remain resistant to moving, in part because of the ongoing costs they would face.</p> <p>The concept of zero housing costs in retirement is based on a 1940s view of a well-maintained, single dwelling on a single allotment of land where the mortgage has been paid off. This concept is incompatible with medium- and high-density housing and refusing to acknowledge ongoing housing costs may cause significant poverty for retirees.</p> <h2>Reason 1 – upfront moving costs are high</h2> <p>When a house is sold the owner receives the sale funds minus the real estate and legal fees. When the same person then buys a different property to live in, they pay legal fees plus stamp duty.</p> <p>For cities such as Melbourne and Sydney, these costs are likely to exceed A$70,000.</p> <p>These high transfer costs may mean it is not cost-effective <a href="https://theconversation.com/why-older-australians-dont-downsize-and-the-limits-to-what-the-government-can-do-about-it-76931">for the person to move</a>.</p> <h2>Reason 2 – levies are high</h2> <p>Because apartment owners pay body corporate levies, people often assume this is just the same as periodic payment of rates, water, insurance and other costs. It is not.</p> <p>Fees remissions for low-income retirees for rates, power, insurance and water are difficult to apply within a body corporate environment. As a consequence, these are usually not applied to owners of apartments.</p> <p>The costs of maintaining essential services, such as mandatory fire-alarm testing, yearly engineering certification, lift and air-conditioning inspections, significantly increase ownership costs.</p> <p>When additional services are supplied, such as swimming pools, gyms and rooftop gardens, these also require periodic inspections. Garbage collection, cleaning, gardening, concierge and strata management services also <a href="https://eprints.utas.edu.au/cgi/users/home?screen=EPrint%3A%3AView&amp;eprintid=23322">must be paid</a>.</p> <p>Owners of standard suburban homes choose whether they want these services, with those on fixed incomes going without them.</p> <p>Annual levies for apartment buildings vary, but expect to pay between $10,000 and $15,000. They <a href="https://www.strata.community/understandingstrata/faqs">may be more than this</a>.</p> <h2>Reason 3 – costs of maintenance</h2> <figure class="align-right "><figcaption></figcaption></figure> <p>Apartments are often sold as a maintenance-free solution for older people. The maintenance is not free. It needs to be paid for.</p> <p>Maintenance costs are higher in an apartment than a standard suburban home because there are more items and services to be maintained and fixed. Lifts and air conditioning need periodic servicing and fixing. This is in addition to the mandatory inspections listed above.</p> <h2>Reason 4 – loss of financial security</h2> <p>It is a mistaken belief that the maintenance costs that form part of the body corporate fee include periodic property upgrades. This relates to items that are owned collectively with other apartment owners.</p> <p>Major servicing at the ten-year mark and usually each five-to-seven years after that include painting, floor-covering replacement, and lift and air-conditioning repair or replacement.</p> <p>Major upgrades may also include garden redesign or other external building enhancement including <a href="https://eprints.utas.edu.au/cgi/users/home?screen=EPrint%3A%3AView&amp;eprintid=23315">environmental upgrades</a>. All owners share these upgrade costs.</p> <p>Costs of upgrading the inside of an apartment (a bathroom disability upgrade, for example) are additional again.</p> <p>Once the body corporate committee members pledge funds towards an upgrade, all owners are required to raise their share of the funds, whether they can afford it or not. Communal choice outweighs an individual owner’s need to delay upgrade costs.</p> <p>Owners who buy apartments that are part of a body corporate effectively lose control of their future financial decisions.</p> <h2>Reason 5 – loss of security of tenure</h2> <p>Loss of security of tenure is usually associated with renters. However, the recent introduction of <a href="http://www.lpi.nsw.gov.au/__data/assets/pdf_file/0009/25965/Termination_of_a_strata_scheme_by_RG.pdf">termination legislation</a> in New South Wales gives other owners the right to vote to terminate a strata title scheme. When this occurs, all owners, including reluctant owners of apartments within that scheme, are compelled to sell.</p> <p>There are valid reasons why termination legislation is desirable, as many older apartment complexes are reaching the end of their useful life.</p> <p>Even so, as termination legislation is rolled out across the states, owner- occupiers effectively lose control of how long they will own a property for. They no longer have security of tenure, which means retirees may face an uncertain housing future in their old age.</p> <h2>Downsizing raises poverty risks</h2> <p>Because current data sets do not adequately take account of ongoing costs associated with apartment living, the effect of downsizing on individual households is masked.</p> <p>Downsizing retirees into the apartment sector creates ongoing financial stress for older people. Creating <a href="https://theconversation.com/it-will-take-more-than-piecemeal-reforms-to-convince-older-australians-to-downsize-51043">tax incentives to move</a> does not tackle these ongoing costs.</p> <p>Centrelink payments for of <a href="https://www.humanservices.gov.au/customer/services/centrelink/age-pension">$404 per week</a> are well below <a href="http://acoss.wpengine.com/poverty-2/">the poverty line</a>. Yet we expect retirees to willingly downsize and to be able to cede most of their Centrelink payments to cover high body corporate costs.</p> <p>Requiring retirees to downsize for the greater urban good will shift poverty onto retirees who could barely manage in their previously owned standard suburban home.</p> <p>Failing to understand the effect of high ongoing costs associated with apartment living and reinforcing the myth of zero housing costs in retirement will continue to lead to poor policy outcomes.<img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/80895/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /></p> <p><a href="https://theconversation.com/profiles/erika-altmann-361218"><em>Erika Altmann</em></a><em>, Property and Housing Management Researcher, <a href="https://theconversation.com/institutions/university-of-tasmania-888">University of Tasmania</a></em></p> <p><em>Image credits: Getty Images</em></p> <p><em>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/downsizing-cost-trap-awaits-retirees-five-reasons-to-be-wary-80895">original article</a>.</em></p>

Retirement Income

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7 hacks for retirees to make your money last longer

<p>As Australians continue to live longer, the squeeze is on to make each dollar last longer – and never moreso than in retirement.</p> <p><a href="https://www.aihw.gov.au/reports/life-expectancy-deaths/deaths-in-australia/contents/life-expectancy">Life expectancies in Australia</a> are now 85.4 years for women and 81.3 years for men. Meanwhile, the <a href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/retirement-and-retirement-intentions-australia/latest-release">average age at retirement</a> for all retirees is 56.3 years. That’s up to 29.1 years of retirement to be paid for without a salaried income.</p> <p>Thankfully, making money last longer is just possible, with the help of a few tips and tricks.</p> <ol> <li><strong>Embrace seniors’ discounts</strong></li> </ol> <p>It was once said that “it’s better to pay full price than to admit you’re a senior citizen”. Really? Who wouldn’t prefer the extra cash!</p> <p>Being “senior” opens the door to numerous discounts and freebies.</p> <p>If you haven’t already, apply for your eligible concession cards, including the <a href="https://www.servicesaustralia.gov.au/commonwealth-seniors-health-card">Commonwealth Seniors Health Card</a> (for discounted healthcare and prescriptions) and state or territory seniors card (for discounted/free vehicle registration, public transport and other services).</p> <p>Additionally, many businesses offer seniors discounts – insurers, retailers, attractions and more. But they may not advertise these discounts widely, so it pays to ask.</p> <ol start="2"> <li><strong>Maintain a plan</strong></li> </ol> <p>Having a plan and keeping it up to date ensures you don’t overdraw from super, losing the income-generating power of those funds and running out prematurely.</p> <p>I prefer a ‘savings and investment plan’, which sounds nicer and is more comprehensive than a ‘budget’.</p> <p>Incorporate your goals, expenses, assets, and incomes – visibility keeps you disciplined and allows you to act quickly if something is amiss.</p> <ol start="3"> <li><strong>Spend points</strong></li> </ol> <p>Many retirees have held their current credit card, store cards and frequent flyer account for years – decades even. How many points are sitting there unused? </p> <p>These points generally aren’t transferable, so can’t be gifted in your will. It’s use them or lose them! </p> <p>Points can pay for everything from groceries to homewares, travel and even your Christmas shopping – conserving your cash and super.</p> <ol start="4"> <li><strong>Get comfortable</strong></li> </ol> <p>Rightsizing your home sooner rather than later has numerous benefits, such as:</p> <ul> <li><a href="https://www.ato.gov.au/Individuals/Super/Growing-and-keeping-track-of-your-super/How-to-save-more-in-your-super/Downsizer-super-contributions/">downsizer super contributions tax breaks</a> to boost superannuation earnings.</li> <li>paying less for your new home, since property prices generally track upwards whilst investing the extra equity.</li> <li>avoiding complications of moving later in life when your health or mobility may not be as good.</li> <li>avoiding a mistake - using the time to find exactly what you want, where you want, rather than being under pressure and having to spend stamp duty again</li> </ul> <p>Home ownership is also a major determinant of how comfortable your retirement will be. And given the current state of Australia’s rental market, selling your home to move into rented accommodation could prove costly. </p> <ol start="5"> <li><strong>Retain protections</strong></li> </ol> <p>Protections are typically a cost – insurance premiums, legal fees, memberships etc. However, the cost of not having them in place can be far higher.</p> <p>Plus, in the case of insurances, prices and restrictions increase with age – meaning you pay more but get less value for that spend, compared with the more favourable terms of a long-held policy.</p> <p>By all means adjust your protections to suit your current and future needs. But think twice before trying to save a few dollars by discarding insurances or cancelling sports and social memberships that keep you active.</p> <ol start="6"> <li><strong>Update estate planning</strong></li> </ol> <p>Considerable costs (and heartache) inevitably hit a grieving partner and family where someone dies without having their affairs properly in order:</p> <ul> <li>funeral costs and medical bills pile up if funds haven’t been allocated for them.</li> <li>delayed payouts from insurances and super if those details aren’t readily available. </li> <li>loss of economies of scale (living costs per person are cheaper for couples than singles). </li> <li>unexpected taxes, debts, and liabilities.</li> <li>legal conflicts arise where wills are unclear or outdated.</li> <li>a person’s wishes may go overlooked or be challenged where guardianships and power of attorney were not devised.</li> </ul> <p>In extreme cases, the surviving spouse may be forced to sell their home to pay associated costs or because they can’t afford to maintain it alone. </p> <ol start="7"> <li><strong>Seek good advice</strong></li> </ol> <p>Just like a good doctor helps you stay physically and mentally healthy, a good financial adviser helps your finances stay healthy, tactically smart and use strategies to reduce tax which stretches your money further.</p> <p>Be sure their accreditation is up-to-date, and they have experience working with retirees (not just those planning for it during their working years).</p> <p>Often, the cost of this advice pales in comparison to the tax saved and additional income earned through benefits, structures and plans you never even knew about. What’s not to love about that!</p> <p><strong><em>Helen Baker is a licensed Australian financial adviser and author of the new book, On Your Own Two Feet: The Essential Guide to Financial Independence for all Women (Ventura Press, $32.99). Helen is among the 1% of financial planners who hold a master’s degree in the field. Proceeds from book sales are donated to charities supporting disadvantaged women and children. Find out more at <a href="http://www.onyourowntwofeet.com.au">www.onyourowntwofeet.com.au</a> </em></strong></p> <p><em>Image credits: Getty Images</em></p>

Retirement Income

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Essential money conversations retirees should have with family

<p>Discussions about funding retirement, aged care and inheritances may be uncomfortable. However, not having them risks your wishes going unmet and family conflicts where details aren’t clear. </p> <p>Hence having discussions about money while you are able to is one of the best (and cheapest!) investments you can make – for both you and your family.</p> <p>Precisely what those discussions entail will depend on your circumstances – and theirs. Yet many points apply almost universally:</p> <p><strong>What matters to you</strong></p> <p>Even the best laid plans mean nothing if those responsible for enacting them don’t know what they are or understand your reasoning behind them.</p> <p>Your will provides a legal overview of who gets what upon your death, while nominated beneficiaries determine how assets are divided from superannuation and some other structures.</p> <p>A separate letter of wishes can informally share your wishes, covering more than just legalities. Sharing this before your death allows family to clarify your wishes and ask questions. </p> <p><em>Go through:</em></p> <ul> <li>How your money should be managed now and longer term (e.g., you may want money set aside for grandchildren’s education, or have instructions for a dependent’s ongoing care).</li> <li>Funeral arrangements; cremation or burial; where you will be laid to rest.</li> <li>Plans for anyone other than direct family, charities etc.</li> <li>Any non-negotiables among your wishes.</li> </ul> <p><strong>Partner protections</strong></p> <p>Ensure your partner knows how they will be looked after if they outlive you. Similarly, your kids should know what if any support they will need to provide – especially important for blended families. </p> <p>Where beneficiaries have divorced/separated, will you exclude their ex from your estate? Are your records updated to reflect this?</p> <p>Ensure everyone knows the difference between joint tenants and tenants in common for property owners – only one automatically leaves your share of the property to your co-owner. </p> <p><strong>Health matters</strong></p> <p>How do you want to be looked after in your final years? Don’t assume your loved ones already know everything.</p> <p>Communicate your wishes, small and large – medications, dietary requirements, retirement living, palliative care, resuscitation.</p> <p>Discuss whether power of attorney and enduring guardianship are needed should you be unable to make decisions over your health and finances (e.g., due to dementia or stroke), and who will assume those responsibilities.</p> <p><strong>Family legacy</strong></p> <p>Consider the legacy you want to leave and whether this aligns with your family’s expectations.</p> <p>Is dividing assets equally among your children really fair if one is well-off while another struggles or has complex needs? </p> <p>Do your plans on inheritance unwittingly create headaches for the recipients – such as leaving property to someone who cannot afford to maintain it, or tax liabilities that eat into any financial gain?</p> <p>Discuss non-financial legacy too: do your offspring know about your (and hence their) heritage? Are there special family mementos/stories to pass on? This knowledge may be lost if you don’t share it now.</p> <p><strong>Place to call home</strong></p> <p>Given their financial, logistical, and emotional implications, living arrangements are crucial to discuss before things need to change (and change can be imposed suddenly, such as by a health emergency). </p> <p><em>Consider:</em></p> <ul> <li>Where would you want to go if you need high-level care?</li> <li>Is your current home suitable in your advanced years? How would any required modifications be paid for?</li> <li>Would you move nearer your kids? Downsize, upsize or sea/treechange?</li> <li>If you move, would you need to sell your current home? Could it be retained somehow?</li> <li>Do you want/expect kids to care for you? Are they capable of doing so? </li> <li>Could/would you live with one of your children? If so – such as paying to build a granny flat on their property – how does this affect your will? Would they be forced to sell so their siblings receive their inheritance?</li> </ul> <p><strong>Team united</strong></p> <p>Having everyone on the same page helps things to run smoothly – especially during difficult times such as a death or serious illness in the family.</p> <p><em>Stay aligned by:</em></p> <ul> <li>Introducing adult children to your financial adviser, lawyer, and accountant.</li> <li>Ensuring everyone knows where to find your will and who is your executor.</li> <li>Disclosing what is and is not up to date.</li> <li>Providing contingency access to passwords, important documents, keys etc.</li> <li>Sharing relevant policy details (e.g., life insurance).</li> </ul> <p>These discussions may be sensitive and difficult to initiate, but are crucial to ensure your wishes are known and enacted. Plus, they may encourage your loved ones to think about their own wishes – and give you all peace of mind for the future!</p> <p><strong><em>Helen Baker is a licensed Australian financial adviser and author of the new book, On Your Own Two Feet: The Essential Guide to Financial Independence for all Women (Ventura Press, $32.99). Helen is among the 1% of financial planners who hold a master’s degree in the field. Proceeds from book sales are donated to charities supporting disadvantaged women and children. Find out more at <a href="http://www.onyourowntwofeet.com.au">www.onyourowntwofeet.com.au</a></em></strong></p> <p><em>Image credits: Getty Images  </em></p>

Retirement Income

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Know thyself, know thy finances: which of the 5 money personalities are you?

<p><em><a href="https://theconversation.com/profiles/ayesha-scott-867030">Ayesha Scott</a>, <a href="https://theconversation.com/institutions/auckland-university-of-technology-1137">Auckland University of Technology</a> and <a href="https://theconversation.com/profiles/aaron-gilbert-867098">Aaron Gilbert</a>, <a href="https://theconversation.com/institutions/auckland-university-of-technology-1137">Auckland University of Technology</a></em></p> <p>When it comes to money, are you a big spender or a fearful saver? Do you give away all your money or ignore financial demands until they become urgent?</p> <p>After decades of focus on financial literacy, it has become clear there is more to how we manage our money than access to information. Now new research has identified five distinct money personalities that drive how we spend.</p> <p>Commissioned by Te Ara Ahunga Ora (Retirement Commission) for their free, independent personal finance site <a href="https://sorted.org.nz/">Sorted</a>, <a href="https://assets.retirement.govt.nz/public/Uploads/Financial-Capability-Research/Report-Money-Personality-Tool-Project-AUT-vFINAL.pdf">our study</a> included an extensive review of the research on personality traits, values and attitudes. We then created an online survey, completed by nearly 500 New Zealanders, exploring how people engaged with their money.</p> <p>The research findings form the backbone of a <a href="https://sorted.org.nz/tools/money-personality-quiz">new online money personality quiz</a> designed to help people understand their money personality and inform their financial decisions and behaviour.</p> <p>With New Zealand <a href="https://www.rnz.co.nz/news/business/492013/new-zealand-in-recession-as-gdp-falls-for-second-quarter">officially in a recession</a>, it has never been more important to understand money management. Despite our best intentions, we often struggle to make “good” financial decisions consistently – including saving enough, using debt wisely, and staying on top of insurance policies and KiwiSaver.</p> <h2>Doing better with our money</h2> <p>According to Te Ara Ahunga Ora, New Zealanders are <a href="https://assets.retirement.govt.nz/public/Uploads/Research/TAAO-RC-NZ-FinCap-Survey-Report.pdf">good with the basics of financial capability</a> – budgeting and keeping track of money. But we score lower than comparable countries like Canada, Norway, Australia and Ireland on more advanced financial capabilities like long-term savings. We also lack confidence when it comes to our cash.</p> <p>There is a growing body of evidence that personality traits, money values and attitudes each play a crucial part in either aiding or hindering us making those “smart” financial decisions.</p> <p>Attitudes towards saving, the degree to which we value material possessions, and how comfortable we are with risk, will all affect the financial decisions we make – and, as a result, our financial wellbeing.</p> <h2>The 5 money personalities</h2> <p>We identified five distinct money personalities, each with their own strengths and weaknesses: the enterpriser, socialite, minimalist, contemporary and realist.</p> <p><strong>An enterpriser</strong> is a financially confident, future-orientated planner who enjoys looking after their finances and is proud of being money savvy. Their strengths include self-control, financial knowledge and making their money work for them.</p> <p>An enterpriser is unlikely to make impulsive or emotional purchases. However, their aspirational approach – viewing money as a priority and a symbol of success – may pair badly with materialism, causing them to spend money to gain status rather than for value or utility. Enterprisers benefit from learning about investing and planning for the future.</p> <p><strong>The minimalist</strong> is frugal, confident with their saving ability, and on top of their financial situation. Minimalists value a simpler life, scoring low on materialism and are not prone to impulsive or emotional purchases.</p> <p>Their weakness is not always making their money work as hard for them as it could, as they are less likely to take financial risks – even where there is a potential for higher investment returns. Low-cost, passive investment strategies may appeal to minimalists.</p> <p><strong>A socialite</strong> is a joyful risk taker, outgoing, and confident with their money handling. A generous extrovert, they are more likely to be materialistic than other personality types and tend to live for today rather than plan for tomorrow.</p> <p>Their high tolerance for risk suggests some socialites may take on unwise levels of financial risk. Those in this group who are also impulsive or prone to emotional purchases may find themselves overspending or vulnerable to over-extending themselves with consumer debt.</p> <p>Socialites may like to explore active investment strategies and riskier investment classes, however. Taking calculated risks and building financial resilience is an important focus for them.</p> <p><strong>A contemporary</strong> doesn’t enjoy managing their money and they lack confidence when it comes to financial matters. They are likely to say they’re a spender despite being less materialistic than others; living for today, they tend to engage in impulsive emotional spending and are generous to a fault.</p> <p>For contemporaries, the focus is increasing financial resilience by paying down debt and building an emergency savings fund, enabling them to share their wealth with others without affecting their own financial well-being. Working on their money mindset and general financial knowledge may allow them to build confidence and savings, then take a passive or “set and forget” approach to their financial life.</p> <p><strong>A realist</strong> is future-focused, very conservative with risk, and values money highly. But they are not confident with their money handling, despite paying close attention to their financial situation.</p> <p>The most introverted personality type, a more aspirational realist may be materialistic but is unlikely to make impulsive or emotional purchases a habit. This suggests building confidence and encouragement to take appropriate investment risks is important. Given they do not like making money decisions, automation of bill payments and savings may appeal.</p> <h2>Know thy money self</h2> <p>Each money personality offers different challenges when it comes to making financial decisions.</p> <p>Taking Sorted’s money personality quiz is fun, but it’s also a useful financial decision you can make right now.</p> <p>It’s not just about the label. Knowing your money personality can help you understand your strengths and weaknesses when it comes to financial decision making, giving you tools to improve your financial resiliency and security.<img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/207621/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /></p> <p><a href="https://theconversation.com/profiles/ayesha-scott-867030">A<em>yesha Scott</em></a><em>, Senior Lecturer - Finance, <a href="https://theconversation.com/institutions/auckland-university-of-technology-1137">Auckland University of Technology</a> and <a href="https://theconversation.com/profiles/aaron-gilbert-867098">Aaron Gilbert</a>, Professor of Finance, <a href="https://theconversation.com/institutions/auckland-university-of-technology-1137">Auckland University of Technology</a></em></p> <p><em>Image credits: Getty Images</em></p> <p><em>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/know-thyself-know-thy-finances-which-of-the-5-money-personalities-are-you-207621">original article</a>.</em></p>

Retirement Income

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Should I put more money into my super? What are the benefits and can I take it out before retirement if I need it?

<p>Superannuation is never far from the headlines lately, with the government recently calling for <a href="https://treasury.gov.au/consultation/c2023-361383">views</a> from the public on what the objective of super should be. </p> <p>The basic idea behind super is you set aside a portion of your pay over your working life, so you can build up a nest egg to see you through your retirement years. </p> <p>But what if you’re worried you might not have enough super by the time you retire? Yes, you could top up your super now and watch the nest egg grow through the magic of <a href="https://moneysmart.gov.au/saving/compound-interest">compound returns</a>– but what are the downsides?</p> <p>If you’re considering putting more money into your super, and want to know more about how the whole system works, here are the basics.</p> <h2>What are the rules about putting more money into my super?</h2> <p>First, make sure you know where your superannuation actually is and how much you’ve got so far. This <a href="https://www.ato.gov.au/forms/searching-for-lost-super/">page</a> from the Australian Tax Office explains how to search for any lost super.</p> <p>The next thing to know is there are <a href="https://www.ato.gov.au/individuals/super/in-detail/growing-your-super/super-contributions---too-much-can-mean-extra-tax/?page=2#Understanding_contribution_caps">limits</a> to how much you can contribute into superannuation. </p> <p>There are two types of super contributions you can make.</p> <p>The first category is called “<a href="https://moneysmart.gov.au/grow-your-super/super-contributions">concessional contributions</a>”. These are taxed at 15%, which may be lower than the tax you’d otherwise have to pay on that money. So making these super top-ups can not only grow your nest egg, but save you tax.</p> <p>The amount of concessional contributions you can make is A$27,500 per annum. That figure includes all the super your employer puts in your super account and any extra contributions you make under a salary sacrifice scheme or where you are claiming an income tax deduction.</p> <p>The second category, known as “non-concessional contributions”, means money you pay into your super withoutclaiming a tax deduction. This could be, for example, money from savings, an inheritance or a lottery win.</p> <p>There is a limit of $330,000 over three years (or $110,000 per year), for these contributions.</p> <h2>What are the benefits of topping up my super?</h2> <p>Two words: compound returns.</p> <p>Compound returns are where you earn returns not only on the original investment you put in, but also on any returns on that investment. As the government’s <a href="https://moneysmart.gov.au/saving/compound-interest">Moneysmart</a> website puts it, “you get interest on your interest”.</p> <p>Over the years, this means you could earn a lot more than you would if you didn’t top up your super. </p> <p>How much more? Well, it depends on the investment return and fees of your fund.</p> <p>But as an example: thanks to compound returns, putting an extra $100 per month into your super from age 30 could <a href="https://www.calc.help/industrysuper/add-extra-to-your-super">mean you retire</a> with an extra $65,000 in your account (here, I’ve assumed investment returns of 7.5%, accumulation inflation of 4% and salary inflation of 4%).</p> <p>And the longer it is there, the more it will grow – so starting top-ups early might pay off. </p> <p>This is particularly important for <a href="https://theconversation.com/spirals-and-circles-snakes-and-ladders-why-womens-super-is-complex-103763">women</a>, whose super balances may look a bit feeble if they take parental leave or cut their hours while raising a family.</p> <p>Then there’s the tax benefits of super top-ups. If you would normally pay a net tax rate higher than 15% on investments such as shares, your money will grow more quickly inside superannuation than shares.</p> <p>You may also be eligible for government co-contributions that add to your balance if you make a non-concessional contribution during the year and your income is less than $57,016.</p> <h2>So what’s the downside? Can I access my superannuation before retirement?</h2> <p>Basically, no. You must meet a “<a href="https://www.ato.gov.au/individuals/super/in-detail/withdrawing-and-using-your-super/withdrawing-your-super-and-paying-tax/?page=2#Conditionsofrelease">condition of release</a>” before being able to access your superannuation.</p> <p>The most common is retirement, defined as reaching the age of 65 or leaving work after reaching “preservation age” (which is 60 for anyone born after July, 1964).</p> <p>There are some <a href="https://www.ato.gov.au/Individuals/Super/Withdrawing-and-using-your-super/Early-access-to-your-super/">special circumstances</a> where you may be able to access your superannuation early.</p> <p>These are very narrow, and include serious financial hardship or necessary medical treatment that cannot be funded any other way. </p> <p>Death or terminal illness also qualify for release.</p> <h2>But what if I need a deposit for a house?</h2> <p>This is a dilemma for non home-owners. After compulsory superannuation guarantee deductions and HECS-HELP, it may be hard to save a deposit.</p> <p>One of the few circumstances where you access your superannuation early is through the <a href="https://www.ato.gov.au/individuals/super/withdrawing-and-using-your-super/first-home-super-saver-scheme/">First Home Super Savers Scheme</a>. </p> <p>If you make voluntary contributions, you may be able to withdraw these contributions for a home deposit. </p> <p>However, this scheme is very tightly regulated. You can read more about the rules for this scheme <a href="https://www.ato.gov.au/individuals/super/withdrawing-and-using-your-super/first-home-super-saver-scheme/">here</a>.</p> <h2>So… should I put more money into my super?</h2> <p>It depends. If you do, make sure you understand you will not be able to access that money until retirement.</p> <p>If you own your home (or intend to rent until retirement) you may want to put more into superannuation while you can afford it, knowing it is contributing to a secure retirement. </p> <p>But if home ownership is your goal, you should think carefully about choosing between superannuation and saving for a home deposit.</p> <p><em>Image credits: Getty Images</em></p> <p><em>This article originally appeared in <a href="https://theconversation.com/should-i-put-more-money-into-my-super-what-are-the-benefits-and-can-i-take-it-out-before-retirement-if-i-need-it-201950" target="_blank" rel="noopener">The Conversation</a>. </em></p>

Retirement Income

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Don’t let financial shame be your ruin: open conversations can help ease the burden of personal deb

<p>Nearly <a href="https://www.ipsos.com/en-nz/19th-ipsos-new-zealand-issues-monitor">two-thirds of New Zealanders</a> are worried about the cost of living, and a quarter are worried about <a href="https://www.canstar.co.nz/wp-content/uploads/2023/03/Consumer-Pulse-Report-NZ-2023-Final-4.pdf">putting food on the table</a>. But the <a href="https://visionwest.org.nz/food-hardship-part-one/">shame</a> that can come with financial stress is preventing some people from seeking help. </p> <p>According to a recent survey, a third of New Zealanders were not completely truthful with their family or partners about the state of their finances, and 12% <a href="https://www.stuff.co.nz/business/money/129477493/financial-infidelity-research-finds-kiwis-hiding-debts-from-their-partners">actively hid their debt</a>. This shame and worry about money can spill over into <a href="https://www.nzherald.co.nz/bay-of-plenty-times/news/concerns-buy-now-pay-later-schemes-could-fuel-addiction-as-kiwis-spend-17b-last-year/VOV3VIDIG2MZBGJEGPMLGWDMJI/">addiction</a>, <a href="https://www.newsroom.co.nz/i-had-serious-concussion-bad-credit-and-15000-debt-abuse-survivor">violence</a> and <a href="https://corporate.dukehealth.org/news/financial-strains-significantly-raise-risk-suicide-attempts">suicide</a>. </p> <p>Considering the effect of financial stress on our wellbeing, it is clear we need to overcome the financial stigma that prevents us from getting help. We also <a href="https://www.apa.org/topics/money/family-financial-strain">owe it to our kids</a> to break the taboo around money by communicating our worries and educating them on how to manage finances better. </p> <h2>The burden of growing debt</h2> <p><a href="https://www.stuff.co.nz/business/money/300817697/mortgage-pain-homeowners-facing-repayment-hikes-of-up-to-900-a-fortnight">Ballooning mortgage repayments</a> are compounding the financial distress of many New Zealanders. At the beginning of 2023, an estimated 11.9% of home owners were behind on loan payments, with more than <a href="https://www.rnz.co.nz/news/business/485045/data-shows-430-000-new-zealanders-behind-in-credit-repayments-in-january">18,400 mortgagees in arrears</a>. </p> <div data-id="17"> </div> <p>Given the <a href="https://www.treasury.govt.nz/publications/an/an-21-01-html">majority of household wealth</a> in New Zealand is in property, our financial vulnerability is closely linked to the ebbs and flows of the <a href="https://content.knightfrank.com/research/84/documents/en/global-house-price-index-q2-2021-8422.pdf">second most overinflated property market</a> in the world. </p> <p>There are also cultural reasons for growing financial distress. Many households have taken on significant debt to “<a href="https://www.stuff.co.nz/business/7616361/Keeping-up-with-the-Joneses">keep up with the Joneses</a>” and to pursue the quintessential <a href="https://www.interest.co.nz/property/99890/westpac-commissioned-survey-suggests-many-new-zealanders-still-pine-quarter-acre">quarter-acre dream</a>. Social comparison and peer pressure act as powerful levers contributing to problem debt and over-indebtedness. </p> <p>The average household debt in New Zealand is more than <a href="https://tradingeconomics.com/new-zealand/households-debt-to-income">170% of gross household income</a>. That is higher than the United Kingdom (133%), Australia (113%) or Ireland (96%).</p> <h2>The rise of problem debt</h2> <p>And we are digging a deeper hole. Over the past year, <a href="https://www.rnz.co.nz/news/business/485045/data-shows-430-000-new-zealanders-behind-in-credit-repayments-in-january">demand for credit cards increased by 21.7%</a>. The use of personal debt such as personal loans and deferred payment schemes <a href="https://www.nzherald.co.nz/business/demand-for-personal-credit-rises-arrears-also-up-as-cost-of-living-bites/YCEM74CII5FQBPJXO3UOG4Y3GY/">is also climbing</a>. There is a real risk this debt could become problem debt. </p> <p>Problem debt can have severe and wide-reaching consequences, including <a href="https://theconversation.com/over-300-000-new-zealanders-owe-more-than-they-own-is-this-a-problem-173497">housing insecurity</a>, <a href="http://www.socialinclusion.ie/publications/documents/2011_03_07_FinancialExclusionPublication.pdf">financial exclusion</a> (the inability to access debt at affordable interest rates), <a href="https://www.tandfonline.com/doi/full/10.1080/07409710.2012.652016?journalCode=gfof20">poor food choices</a> and a plethora of <a href="https://bmcpublichealth.biomedcentral.com/articles/10.1186/1471-2458-14-489">health problems</a>. </p> <p>Yet, the hidden <a href="https://spssi.onlinelibrary.wiley.com/doi/10.1111/sipr.12074">psychological</a> and <a href="https://link.springer.com/article/10.1007/s11205-008-9286-8">social cost of financial distress</a>remains often unspoken, overlooked and underestimated.</p> <p>Even before the pandemic, <a href="https://www.scoop.co.nz/stories/BU1909/S00616/research-shows-financial-stress-impacts-mental-wellbeing.htm">69% of New Zealanders were worried</a>about money. The share of people worrying about their financial situation was higher for women (74%), and particularly women aged 18-34 (82%). It is no coincidence that the latter are particularly at risk of problem debt through so-called <a href="https://acfr.aut.ac.nz/__data/assets/pdf_file/0008/691577/Gilbert-and-Scott-Study-2-Draft-v10Sept2022.pdf">“buy now, pay later” schemes</a>. </p> <p>The stigma of financial distress extends beyond the vulnerable and the marginalised in our society. A growing number of <a href="https://www.rnz.co.nz/news/political/467417/middle-income-families-hoping-for-help-in-budget-as-rising-costs-sting">middle-class New Zealanders </a> are quietly suffering financial distress, isolated by financial stigma and the taboos around discussing money. When pressed, one in two New Zealanders would rather <a href="https://www.scoop.co.nz/stories/BU2203/S00384/research-shows-wed-rather-talk-about-politics-than-our-finances.htm">talk politics over money</a>. </p> <h2>Time to talk about money</h2> <p>Navigating financial distress and <a href="https://digitalcommons.law.seattleu.edu/cgi/viewcontent.cgi?article=2526&context=sulr">stigma</a> can feel overwhelming. Where money is a taboo subject, it may feel safer to withdraw, maintain false appearances, be secretive or shun social support. </p> <p>This tendency to avoid open discussions and suffer in silence can lead to <a href="https://loneliness.org.nz/lonely/at-home/financially-struggling/">feelings of isolation</a> and contribute to <a href="https://theconversation.com/how-financial-stress-can-affect-your-mental-health-and-5-things-that-can-help-201557">poor mental health</a>, such as depression, anxiety and emotional distress. </p> <p>Sadly, the trauma of living in financial distress can also <a href="http://irep.ntu.ac.uk/id/eprint/39442/1/1307565_Wakefield.pdf">break up families</a>. Losing the symbols of hard-gained success and facing the prospect of a reduced lifestyle can be tough. It often triggers feelings of personal failure and self doubt that deter us from taking proactive steps to talk openly and seek help. </p> <p>But what can families do to alleviate some of this distress?</p> <h2>Seek help</h2> <p>First, understand that <a href="https://www.ft.com/content/86767aac-98e0-4dae-8c5a-d3301b030703">you are not alone</a>. Over 300,000 New Zealanders <a href="https://theconversation.com/over-300-000-new-zealanders-owe-more-than-they-own-is-this-a-problem-173497">owe more than they earn</a>.</p> <p>Second, seek help. There are many services that help people work through their financial situation and formulate a plan. In the case of excessive debts, debt consolidation or <a href="https://goodshepherd.org.nz/debtsolve/">debt solution loans</a> may help reduce the overall burden and simplify your financial situation. </p> <p>For those struggling with increasing interest on their mortgages, reaching out to your bank early is critical. During the 2008 recession, banks in New Zealand <a href="https://www.beehive.govt.nz/release/banks-exchange-letters-crown-support-distressed-mortgage-borrowers">worked with customers</a> to avoid defaulting on mortgages, including reducing servicing costs, capitalising interest and moving households to interest-only loans. It is essential to understand that the <a href="https://www.stuff.co.nz/life-style/homed/real-estate/130677426/are-we-on-the-brink-of-a-wave-of-mortgagee-sales">banks do not want mortgagees to fail</a>, and that options exist.</p> <p>To help future generations avoid debt traps, we need open communication about money – also known as “<a href="https://link.springer.com/article/10.1007/s10834-020-09736-2">financial socialisation</a>”. This includes developing values, sharing knowledge and promoting behaviours that help build <a href="https://files.eric.ed.gov/fulltext/EJ1241099.pdf">financial viability and contribute to financial wellbeing</a>. </p> <p>The lessons about handling money from family and friends are crucial for <a href="https://www.frontiersin.org/articles/10.3389/fpsyg.2020.02162/full">improving our children’s financial capability</a>, helping them be <a href="https://www.fsc.org.nz/it-starts-with-action-theme/growing-financially-resilient-kids">more financially resilient</a> and better able to survive the stresses we are experiencing now – and those <a href="https://www.stuff.co.nz/business/money/300836616/heres-how-much-household-costs-are-expected-to-increase">yet to come</a>.</p> <p><em>Image credits: Getty Images</em></p> <p><em>This article originally appeared on <a href="https://theconversation.com/dont-let-financial-shame-be-your-ruin-open-conversations-can-help-ease-the-burden-of-personal-debt-202496" target="_blank" rel="noopener">The Conversation</a>. </em></p>

Retirement Income

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5 retirement derailers and how to avoid them

<p>The business of working life means retirement can sneak up on us. For the unprepared, the speeding train can quickly fall off the tracks – with potentially devastating consequences.</p> <p>Thankfully, if you know what to look for and how to prepare, you can reach your retirement destination safe and sound:</p> <ol> <li><strong>Failing to plan</strong></li> </ol> <p>Failing to plan means planning to fail.</p> <p>Ideally, you haven’t put off having a spending and investment plan until now. So, what’s needed is to update that plan.</p> <p>Your update should cover:</p> <ul> <li>When will you stop working? Will it be gradual? What about your partner?</li> <li>How will you fund your retirement? How much will you need? How often?</li> <li>Your eligibility for a full or part <a href="https://www.servicesaustralia.gov.au/how-much-age-pension-you-can-get?context=22526">age pension</a>? (Remember, the family home isn’t means tested, so you may be eligible even without realising it!)</li> <li>Any benefits/payouts you’re entitled to and what to do with them – e.g., bonuses, share options, proceeds of a business sale.</li> <li>New and changed living costs in retirement – new hobbies, extra travel, higher energy bills from more time at home.</li> </ul> <ol start="2"> <li><strong>Poor super strategy</strong></li> </ol> <p>Superannuation should never be set-and-forget – before or in retirement.</p> <p>Before retiring, look at maximising your super’s value – including <a href="https://www.ato.gov.au/individuals/income-and-deductions/offsets-and-rebates/super-related-tax-offsets/#Taxoffsetforsupercontributionsonbehalfof">spousal contributions</a> and <a href="https://www.ato.gov.au/individuals/super/in-detail/growing-your-super/super-co-contribution/">co-contributions for low and middle-income earners</a>. There are loads of other strategies too.  This money gets invested for faster growth, while delivering you tax concessions now.</p> <p>Then determine how and when to begin drawing from it. Avoid the temptation to go big and risk blowing it all early, leaving nothing to support you in your later years. Check in regularly to ensure continued growth – potentially even offsetting what you’re withdrawing as income.</p> <ol start="3"> <li><strong>No stable home</strong></li> </ol> <p>"Older households that were not able to access or sustain home ownership when they were younger are more likely to face high housing costs in their retirement than similar households who are home owners," a <a href="https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BriefingBook46p/HomeOwnership">Parliamentary paper</a> notes. </p> <p>The family home is effectively our only tax-free asset (save for buyers’ stamp duty). Its equity can be leveraged to fund other income-producing investments – property rents, share dividends etc. Or it can be sold, allowing you to downsize comfortably and still have money left over.</p> <p>Home ownership also offers stability when you need it most – moving is more cumbersome as your years advance, plus securing rental accommodation is usually harder when you’re no longer working.</p> <p>It needn’t be much, but owning property keeps many doors open to you in retirement.</p> <ol start="4"> <li><strong>Inadequate estate planning</strong></li> </ol> <p>There are two major mistakes around estate planning: </p> <ul> <li>Not having a current will: Devising a will is generally simple and not expensive. So don’t put it off. If you do have one, when was it last updated? Does it reflect your current circumstances – relationships breakdown, remarriage, children/stepchildren, grandkids? If not, you could inadvertently lavish your ex or overlook loved ones.</li> <li>Undeclared beneficiaries: Contrary to popular belief, wills don’t cover everything. Superannuation, businesses, trusts etc. are treated separately, requiring you to nominate beneficiaries within their structures. Not doing so can lead to disputes or the government becoming your primary benefactor. </li> </ul> <p>Work with your team – lawyer, financial adviser and accountant to ensure your estate planning is done tax effectively and your loved ones won’t see their inheritance gobbled up in tax or other costs.</p> <ol start="5"> <li><strong>Insufficient protections</strong></li> </ol> <p>Just because you are or soon will be retired, doesn’t mean you don’t need protections. Arguably, you need them even more.</p> <ul> <li>Revisit insurances: Can you get retiree discounts/better coverage? Are any new assets you purchase covered – boat, caravan, artwork? Business/professional insurances may no longer seem relevant, but ensure they really aren’t needed before cancelling them – once they’re gone, you won’t get the same cover at the same price again.</li> <li>Guardianships/power of attorney: We never know what’s around the corner. Explore legal provisions should you become ill, disabled or otherwise unable to make decisions over your affairs or for children/dependents in your care. </li> <li>Social connections: Retirement can be lonely as you cease seeing colleagues daily. Memberships to sporting, crafts, automotive, gardening, and other clubs are good for maintaining social connections. Spend more time with family and friends too, but remember – they may not have as much free time as you do.</li> </ul> <p>Retirement should be enjoyable. Yet by not planning ahead, your twilight years could run off the rails. Investing a little time and effort now is sure to pay big dividends during your twilight years!</p> <p><em><strong>Helen Baker is a licensed Australian financial adviser and author of the new book, On Your Own Two Feet: The Essential Guide to Financial Independence for all Women (Ventura Press, $32.99). Helen is among the 1% of financial planners who hold a master’s degree in the field. Proceeds from book sales are donated to charities supporting disadvantaged women and children. Find out more at <a href="http://www.onyourowntwofeet.com.au">www.onyourowntwofeet.com.au</a> </strong></em></p> <p><em>Image credits: Getty Images</em></p>

Retirement Income

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5 basic principles to follow when giving adult children money

<p>The link between money and relationships is undeniable. Money issues can break couples apart, destroy relationships between siblings and cause tension between parents and adult children.</p> <p>Parents have an important role in ensuring their children are not only financially literate but are able to make sound financial decisions and act responsibly with their money.</p> <p>There is big difference between financial literacy and financial capability. This means parents have a continuing role to guide their children past childhood so they not only understand money concepts but know how to put them into practice as they face major decisions and events in their adult life.</p> <p>However, different attitudes towards money and expectations about parental responsibilities can cause serious issues for both parents and adult children.</p> <p>To what extent should parents interfere with or criticise their children's financial decisions and behaviour? Is it reasonable for adult children to expect financial assistance from their parents at times of need? At what point should parents expect their children to be self-sufficient?</p> <p>Every parent wants to see their children succeed but there are different philosophies about how best to help children get ahead in life. Some parents feel the best way to help their children is to give them a hand through gifts of money or interest-free loans. Others think it is only by children pulling themselves up by their own bootstraps that they will learn how to be successful. These deep philosophical differences can be problematic when one parent has a different view from the other and when children have expectations of parents which are not aligned with their parents' philosophy.</p> <p>Parents give money to their children because it makes them feel as though they are being better parents. It is good to give to others, especially your own family, but there are dangers involved. Giving too much or too often can lead to financial dependency, lack of responsibility, repeated poor financial behaviour, enablement of problem behaviours such as addictions or over-spending, delayed retirement or increased financial risk for parents, and resentment from siblings if one child is seen to be receiving more assistance than the others.</p> <p>There are some basic principles which will help decide how and when to support adult children:</p> <p><strong>Decide how much you can afford to give</strong></p> <p>Every financial decision has long-term consequences. The more you give to your children, the less you will have later on to pay off your mortgage or save for retirement. Make sure you are financially secure before helping others, or financial strife will simply transfer from them to you.</p> <p><strong>Set clear expectations</strong></p> <p>Have conversations with your children about what you are prepared to help them with and to what extent. If you are providing ongoing support, set a time limit for how long this will continue. Expect your children to make a contribution rather than giving them all of what they need.</p> <p><strong>Act like a banker</strong></p> <p>If your adult children went to the bank to borrow money they would need to fully disclose their assets, debts, income and expenses so the bank could decide whether to lend or not. You need to do the same. Make sure you understand why your children are in the situation they are in and what behaviours they need to change to avoid being in the same situation again. If you expect money to be repaid, you need to know how likely it is that this will happen.</p> <p><strong>Get legal advice for large sums</strong></p> <p>It may be necessary to have written loan agreements for large sums to avoid disputes later. If your adult child has a partner, you will need to consider what might happen to a loan or gift to your child in the event that the relationship ends as it may become relationship property.</p> <p><strong>Consider your other children</strong></p> <p>Be upfront with your other children about what help you are giving and why. Sibling rivalry is natural, and children can feel deeply hurt by being treated unequally unless they understand the reasons. Equality can be achieved in the long run by making adjustments to how your estate is divided, taking into account prior assistance.</p> <p>It is good to help your adult children but in many cases, teaching them how to make better financial choices is more beneficial than handing out money.</p> <p>Do you agree with this advice?</p> <p><em>Written by Liz Koh. Republished with permission of <a rel="noopener" href="http://www.stuff.co.nz/" target="_blank"><strong><span style="text-decoration: underline;">Stuff.co.nz</span></strong></a>.</em></p>

Retirement Income

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3 ways to save money without sacrificing your social life

<p><span>It’s hard to stay social when you’re trying to curb expenses. However, there are tricks that will allow you to spend some quality time with friends and loved ones without having to feel like you’re throwing money down the drain.</span></p> <p><strong><span>1. Be honest, be positive</span></strong></p> <p><span>You don’t have to make flimsy excuses to avoid going out – be open about your intentions, but frame it positively. Instead of saying “these events are too expensive”, you can tell them, “I’m trying to be really good at saving and staying home these days”. While it may be uncomfortable to say no to invites outright, your friends may turn out to be more supportive to your goals than you expected.</span></p> <p><strong>2. Provide alternatives</strong></p> <p><span>Fill your social calendar with free or cheap activities. This could be a visit to the new art exhibition in your city, a potluck picnic at the park, a hike by the mountains, a game night at your home, and more. Don’t forget to look out for special promos and discounts on popular websites like Groupon or Scoopon for more affordable options.</span></p> <p><strong>3. Put it in the budget</strong></p> <p><span>Don’t want to skimp on your bar outings or group classes? It’s time to look at your budget. Once you determine the amount you need to save every month, set aside some of the rest for fun-related expenses. Budgeting allows you to figure out your priorities and stay within the limits. Stick to your allocated budget well – once it’s out, do not extend it any further!</span></p>

Retirement Income

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10 exciting retirement adventure ideas

<p>In the words of Mark Twain, “Years from now you’ll be more disappointed by the things you didn’t do than by the one’s you did.” Now you’ve got a little bit of extra time up your hands heed these words and start your own retirement adventure, like one of the 10 ideas mentioned here.</p> <p><strong>1. Drive the Great Ocean Road </strong></p> <p>We’ve already talked about <span style="text-decoration: underline;"><strong><a href="/travel/international/2015/12/driving-the-great-ocean-road/" target="_blank">eight reasons everyone should drive the Great Ocean Road</a></strong></span> in Australia. Observe what remains of the 12 apostles, visit the many amazing sites and enjoy some of the best scenery Australia has to offer.</p> <p><strong>2. Discover the Red Centre</strong></p> <p>By land, air or water there’s never been a better time to discover the Red Centre. And because you’ve got nothing else going on you could do it all. It’s surprisingly cheap to book a helicopter tour of Uluru, a four wheel drive is classic and even a river cruise through Katherine Gorge is nice!</p> <p><strong>3. Head to a music festival</strong></p> <p>There are a number of festivals that cater to older (and more discerning) musical tastes. The Bluesfest in Byron Bay is a popular choice and recent festivals have included classic acts for all ages like Paul Simon, Bob Dylan and Crosby, Stills and Nash.</p> <p><strong>4. Head to Asia</strong></p> <p>You’ve probably been to Asia before, but now you can really explore. Bhutan is one of Asia’s best kept secrets and retirement is a great time to finally explore it. This land of rugged mountains, ancient shrines and awe-inspiring natural wildlife is a must now you’ve got more time.</p> <p><strong>5. European Peace Walk</strong></p> <p>This newly started walking trail (self-guided) sees you walk 550km across central Europe from Vienna to Trieste, via Bratislava, Hungary, Croatia and Slovenia. This annual walk marks the anniversary of World War I and is designed to celebrate and promote the creation of peace in Europe.</p> <p><strong>6. Cross the Arctic Circle </strong></p> <p>This is an ambitious trip, but now that you’ve got some more free time you can afford to be a little bit more adventurous! Depending on your age, budget, fitness and appetite, you can do anything from a four hours trip to an extensive, week-long trek where you’re camping under the stars!</p> <p><strong>7. Master a new sport</strong></p> <p>Now’s your big opportunity to try and master a new sport! Sure, maybe you’ve left it a bit late to try cliff diving, or to get into the octagon as an MMA fighter, but that doesn’t mean there’s any reason to not give any sport you’ve considered trying (but never had the time to) a red hot go.</p> <p><strong>8. Go caravanning</strong></p> <p><span style="text-decoration: underline;"><strong><a href="/travel/international/2016/01/how-i-drove-a-motorhome-around-the-world/" target="_blank">As recently mentioned in our recent community contributor article</a></strong></span>, how I drove a caravan around the world in retirement sometimes retirement can signal the start of your adventures rather than the end! Explore Australia or even head abroad and enjoy the bliss of life on the open road.</p> <p><strong>9. Volunteering in retirement</strong></p> <p>Giving up a little bit of your time to help others can be an adventure in its own right. As we outlined in our article, <a href="/lifestyle/retirement-life/2015/12/reasons-to-volunteer-in-retirement/" target="_blank"><span style="text-decoration: underline;"><strong>5 reasons to volunteer in retiremen</strong></span>t</a>, evidence shows that giving a little time to help others in retirement isn’t just good for the community, it’s good for you.</p> <p><strong>10. Pick up a new hobby</strong></p> <p>With a little bit of extra time on your hands, you’ll relish the opportunity to explore some of your interests. Whether it’s a new musical instrument, arts and crafts, or even <span style="text-decoration: underline;"><strong><a href="/news/news/2015/11/octogenarian-flies-helicopter/" target="_blank">learning how to fly a helicopter</a></strong></span>, with less restrictions on your time you’re only really limited by your imagination. </p> <p><strong>Related links:</strong></p> <div class="advert" style="margin: 20px 0 20px 0; float: right;"></div> <p><span style="text-decoration: underline;"><em><a href="http://www.oversixty.co.nz/finance/retirement-income/2015/12/8-tips-to-help-downsize-in-retirement/"><strong>8 tips that will help you downsize in retirement</strong></a></em></span></p> <p><span style="text-decoration: underline;"><em><strong><a href="http://www.oversixty.co.nz/finance/retirement-income/2015/12/driving-in-retirement/">Do I need a car in retirement?</a></strong></em></span></p> <p><em><strong><a href="http://www.oversixty.co.nz/finance/retirement-income/2015/12/common-mistakes-first-time-investors/">5 common mistakes first time investors make</a></strong></em></p>

Retirement Income

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How to make your retirement money go the distance

<p>Retirement should hopefully be a long and rewarding experience and you’re obviously going to need to fund it. Here are a few tips to assist you and your nest egg in supporting your plans.                            </p> <p><strong>Planning</strong></p> <p>Planning for an unknown timeframe is a challenge, but the bottom line is the more effort you put into preparing and regularly reviewing your options, the better. </p> <p>A key starter is determining your needs. It might be worth sitting down with a financial planner to review your circumstances. Try to visualize the lifestyle you want during retirement – travel, moving house, new car, new hobbies, interests. Then look at the cost implications of this lifestyle and whether you’re going to be able to afford it based on your current income and spending.</p> <p><strong>Understand your retirement accounts</strong></p> <p>Take the time to review all your investments, accounts and other services to ensure they are the best fit for your retirement lifestyle. Rebalance your portfolio to align your finances with the most effective investments for this stage of life.                          </p> <p><strong>Income</strong></p> <p>An obvious choice for extending your income is deferring retirement. This doesn’t necessarily have to mean continuing with full time work – it could just be part time or casual work in order to create additional income. You might be surprised at the variety of work opportunities available as our workforce becomes increasingly focused on part time, casual and consulting roles. It may also be possible to make money from your hobbies or crafts.</p> <p><strong>Downsizing</strong></p> <p>While you might be comfortable with the lifestyle you have enjoyed for a while, downsizing on some aspects of life can assist greatly in getting more mileage from your retirement savings. Housing is the most obvious and usually the most beneficial in terms of boosting savings. This might be in the form of a smaller home but it may also involve looking at where you live. You might consider a more cost-effective suburb, shaving those mortgage repayments or bolstering your savings even further. The same downsizing might apply to cars, boats and memberships, just to name a few.</p> <p><strong>Health</strong></p> <p>As you may be requiring health services more often in retirement, remember that the most cost-effective way to approach this is through prevention by ensuring your ongoing health and fitness is as good as it can be. Keeping active with a healthy diet and regular exercise is the best way to stave off illness and health issues, often without spending anything extra. </p> <p><strong>Entitlements</strong></p> <p>Become aware of the broad range of concessions, discounts and entitlements that are available to you in retirement. Always keep your senior status in mind with future purchases and payments – it never hurts to ask!</p> <p><strong>Sell stuff</strong></p> <p>Now’s the perfect time to clean out the garage, attic and storage of all that accumulated stuff. While you probably want to save your biggest treasures for the family, sites like eBay, Gumtree and Craigslist are an easy way to make a bit of money out of items you no longer want.</p> <p><em>Image credits: Getty Images </em></p>

Retirement Income

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Great money saving hacks

<p>If you’re looking for some simple tips on how to save on everyday costs, here’s a few handy pointers:</p> <p><strong>Buy your groceries online</strong> – Take advantage of online-only specials and free delivery. You won’t have to pay for parking, and you won’t be tempted to impulse buy as much. Just check the prices are comparable to what you pay in store.</p> <p><strong>It’s time to share</strong> – Collective consumption is spreading across the globe and cannot only save you money but could help save the planet. You can save bucketloads from car-share networks such as GoGet, renting out a spare room, renting out your whole place on Airbnb, or doing the same with items you don’t use as much anymore such as ski gear.</p> <p><strong>Haggle for a discount</strong> – If you’re looking to make a deal with a service provider such as a utility or home loan, jump online to compare what competitors are offering and ask to price match or beat your current offer.</p> <p><strong>Start a piggy bank</strong> – Emptying your pockets into a piggy bank every day is a great habit to get into to save money. You mightn’t have done it since you were a youngster, but storing your change away can really add up.</p> <p><strong>The power of $50</strong> – Pay an extra $50 off your credit card or home loan each month. This will have a significant impact on your balance by saving you hundreds – even thousands – of dollars in interest charges and make you debt-free sooner.</p> <p><strong>Get savvy with coupons, discount and promo codes</strong> – Coupons are a great way to save money on grocery and everyday items. Start clipping them from your local paper or go to a website like <span style="text-decoration: underline;"><strong><a href="http://www.shopadocket.com.au/" target="_blank" rel="noopener">shopadocket.com.au</a></strong></span> and print them out.</p> <p><strong>Check out eBay</strong> – there are tons of auctions on there every day, from furniture, and household items to designer clothes, and you can get great deals on your next new item or outfit.</p> <p><strong>Grow a vegetable garden</strong> – You may not think you’ve got a green thumb but it’s not that hard and growing your own veggies means less money spent at the supermarket. Maybe start with your own herbs. Small herb gardens are easy to grow, you can keep them inside you home or on a windowsill and fresh herbs taste heaps better too!</p> <p><strong>Buy used cars</strong> – Buying a car that’s only one or two years old is a much better investment than a brand new one. They don’t depreciate as quickly.</p> <p><strong>Buy in bulk</strong> – purchasing your food and household products in bulk is a great way to save money over the long term.  </p> <p><strong>Borrow from the library</strong> – why buy books when you can borrow them from your local library for free?</p> <p><em>Image: Getty</em></p>

Retirement Income

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Who wants to be a billionaire? Thankfully for the planet, most people don’t

<p>Reality check: most people don’t actually want to be billionaires.</p> <p>A <a href="https://dx.doi.org/10.1038/s41893-022-00902-y" target="_blank" rel="noreferrer noopener">new study</a> is challenging the long-held economic belief that it’s in human nature to have unlimited wants, finding this widely held assumption only applies to a minority of people.</p> <p>In a survey of nearly 8,000 people from 33 countries across six continents, social psychologists asked people how much money they wanted to accrue in their “absolutely ideal life”.</p> <p>They found that in 86% of countries most people thought they could achieve the ideal life with US$10 million (AUD$14.3 million) or less, and in some countries the ideal was as little as US$1 million (AUD$1.4 million), across their entire lives.</p> <p>To put that into context, the current richest person in the world, Elon Musk, has a net worth of more than US$200 billion – that’s enough for 200,000 people to achieve their perceived ideal lives.</p> <p>The push to continually increase individual wealth and pursue unending economic growth has had dire environmental consequences for the planet, with resource use and <a href="https://cosmosmagazine.com/earth/earth-sciences/global-pollution-mapped-for-good-and-bad/" target="_blank" rel="noreferrer noopener">pollution</a> increasing alongside wealth.</p> <p>But these findings, published in <em>Nature Sustainability</em>, challenge the idea that approaches relying on limiting wealth and growth to achieve sustainability are against human ideals and aspirations.</p> <p>“The findings are a stark reminder that the majority view is not necessarily reflected in policies that allow the accumulation of excessive amounts of wealth by a small number of individuals,” explains co-author Dr Renata Bongiorno, a social psychologist at the University of Exeter and Bath Spa University in the UK.</p> <p>“If most people are striving for wealth that is limited, policies that support people’s more limited wants, such as a wealth tax to fund sustainability initiatives, might be more popular than is often portrayed.”</p> <h2>Would you want to win a billion in the lottery?</h2> <p>The researchers specifically asked people to imagine their absolutely ideal life, and then consider how much money would want in that life.</p> <p>Participants made a choice of their preferred prize in a hypothetical lottery, choosing from US$10,000, US$100,000, US$1 million, US$10 million, US$100 million, US$1 billion, US$10 billion or US$100 billion.</p> <p>It was emphasised that the odds of winning each lottery were identical.</p> <p>The researchers hypothesised that people with insatiable wants – those who cannot conceive of a point where their wants would be fully satiated, so they will always aspire to accumulate more/better goods – would choose the maximum of US$100 billion over all the lesser (limited) amounts.</p> <p>But while people with unlimited wants were identified in every country surveyed, they were always in the minority. They tended to be younger people and city-dwellers, who placed more value on success, power and independence.</p> <p>They were also more common in countries with greater acceptance of inequality, and in countries that are more collectivistic – that focus more on group than individual responsibilities and outcomes. </p> <p>“The ideology of unlimited wants, when portrayed as human nature, can create social pressure for people to buy more than they actually want,” says lead researcher Dr Paul Bain, from the Department of Psychology at the University of Bath, UK.</p> <p>“Discovering that most people’s ideal lives are actually quite moderate could make it socially easier for people to behave in ways that are more aligned with what makes them genuinely happy and to support stronger policies to help safeguard the planet.”</p> <p><em>Image credits: Getty Images</em></p> <p><em><img id="cosmos-post-tracker" style="opacity: 0; height: 1px!important; width: 1px!important; border: 0!important; position: absolute!important; z-index: -1!important;" src="https://syndication.cosmosmagazine.com/?id=195370&amp;title=Who+wants+to+be+a+billionaire%3F+Thankfully+for+the+planet%2C+most+people+don%E2%80%99t" width="1" height="1" /></em></p> <div id="contributors"> <p><em>This article was originally published on <a href="https://cosmosmagazine.com/news/who-wants-to-be-a-billionaire/" target="_blank" rel="noopener">cosmosmagazine.com</a> and was written by Imma Perfetto. </em></p> </div>

Retirement Income

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How much net-worth do you need to retire?

<p>I’m often asked ‘How much net worth do I need to accumulate before I can retire?’ While everyone will have a different number depending on their wants and needs, let’s try to figure out yours.</p> <p><strong>Net Worth, Assets &amp; Liabilities</strong></p> <p>Your net worth (aka net assets, net wealth) is what’s left over if you cashed in all your assets, and paid out all your liabilities. </p> <p>Keeping things simple, an asset is something of value, and a liability is a debt you owe. For example, if you purchased a car using a car loan then the car’s value is the asset, and the balance of the car loan is the liability.</p> <p>You can further split your assets and liabilities into two categories: lifestyle and financial. Lifestyle assets are items of value you own for necessity or enjoyment: home, clothes, car, furniture, etc. Lifestyle debt is money you borrow to purchase lifestyle assets. Financial assets are investments you purchase for return, and financial debt is money you borrow to purchase financial assets.</p> <p>Here’s a diagram that summarises how to calculate your net assets (i.e. net worth):</p> <p><img src="https://oversixtydev.blob.core.windows.net/media/2022/11/net-worth-graph-1.jpg" alt="" width="1280" height="720" /></p> <p><strong>Are You Rich?</strong></p> <p>If you find yourself in a situation where your liabilities are higher than your assets then you have negative net worth and are said to be ‘underwater’. Someone who can’t repay their liabilities is said to be insolvent, or more colloquially, flat out broke.</p> <p>If you’d like to compare your situation against the so-called Joneses, a Credit Suisse report ranked Australia as the richest country in the world, noting that at the end of 2021 the average Aussie had a net worth $410,000. The same report declared there were an estimated 390,000 Aussie millionaires, so pulling out my trusty calculator and dividing by our estimated population of approx 25.5m people, if you have a seven figure net worth then congratulations – you are in the top 1.5% of wealth builders and are amongst the richest of the rich.</p> <p>Before moving on, have a go at filling in the boxes in the diagram above to tally up your lifestyle and financial assets and liabilities and calculate your net worth.</p> <p><strong>What Do The Results Indicate?</strong></p> <p>Here’s a saying to remember: the more you do of what you’ve done, the more you’ll get of what you’ve got.</p> <p>Your present net worth is the product of your financial mindset and habits applied over time. Therefore, unless you improve your financial IQ and / financial EQ (i.e. the way you think, act and feel about money) then your future is unlikely to be any better than your present, and possibly considerably worse once you retire and cease receiving employment income.</p> <p>If your current net worth is strong, then well done and keep it up. If it’s not, or you want it to be better, then you’ll need help to up-skill and change your thoughts and behaviours before it’s too late.</p> <p><strong>What’s Your Magic Number?</strong></p> <p>My suggested magic number for a net worth number to aim for enough financial and lifestyle assets to afford the lifestyle you want in retirement. The goal is to be debt-free and have no financial or lifestyle liabilities.</p> <p>It’s important to point out that retirement isn’t necessarily the domain of older citizens. More and more, younger people are quietly quitting or seeking to be financially independent sooner so they can retire early.</p> <p><em>Financial Assets</em></p> <p>The amount of financial assets you need can be calculated by working backwards. That is, by dividing your desired annual income by your expected average investment return.</p> <p><img src="https://oversixtydev.blob.core.windows.net/media/2022/11/net-worth-graph-2.jpg" alt="" width="1280" height="720" /></p> <p>For example, if your annual desired income was $80,000, and you had the skill to achieve an 8 per cent annual return, then you would need financial assets totaling $1,000,000.  That is, $1,000,000 invested at 8 per cent per annum will generate an income from your investments of $80,000 each year for the rest of your life.</p> <p>If you’re finding this all a bit confusing then you might find my ’10 and 8 Rule’ helpful. Simply multiply your current gross income by 10 to get your debt-free financial asset goal, and then multiply that result by 8 per cent (0.08) to get your estimated annual investment income. For instance, if you earned $70,000 per annum then your debt-free financial asset goal would be $700,000, and you would have an annual investment income of $56,000 to fund your retirement.</p> <p><em>Lifestyle Assets</em></p> <p>The amount of your lifestyle assets, such as home, furnishings, car, clothes, etc. all need to be added into the mix. The more extravagant your lifestyle needs, the larger your annual income will need to be to pay for it (and hence you’ll need more financial assets or the ability to achieve higher investment returns), and the bigger the lifestyle asset balance will need to be. </p> <p><strong>Summary</strong></p> <p>Taking into consideration everything we’ve discussed, here’s a blueprint you can follow to calculate your required net worth, and that also reveals how much more wealth you need to attract and keep to achieve your goal. </p> <p><img src="https://oversixtydev.blob.core.windows.net/media/2022/11/net-worth-graph-3.jpg" alt="" width="1280" height="720" /></p> <p>Have a go at filling in the boxes, working across each row left to right. If you end up with a surplus then you already have enough assets, you just need to redeploy them so your money is working harder for you.</p> <p><strong><em>Edited extract from Steve McKnight’s Money Magnet: How to Attract and Keep a Fortune that Counts (Wiley $32.95), available now at all leading retailers.</em></strong></p> <p><em>Image credits: Supplied / Getty Images</em></p>

Retirement Income

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Gender pension gap: why women save less - and why that’s changing dramatically

<p>One issue <a href="https://www.scottishwidows.co.uk/knowledge-centre/gender-pension-gap/">that has</a> attracted <a href="https://prospect.org.uk/article/what-is-the-gender-pension-gap/#:%7E:text=The%20gender%20pension%20gap%20is,gap%20that%20year%20(17.3%25).">growing attention</a> in <a href="https://www.aviva.co.uk/aviva-edit/your-money-articles/women-know-gender-pension-gap/">recent years</a> is the “gender pension gap” – the fact that on average, women have lower private pension wealth and lower income in retirement than men. But before rushing to conclusions about how to “fix” this, it is crucial to understand what lies behind any pension differences between men and women. </p> <p>There are three main potential drivers behind this phenomenon:</p> <ol> <li> <p>Different labour market experiences: the “<a href="https://www.ifs.org.uk/publications/10358">gender pay gap</a>”, and the fact that <a href="https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Duration_of_working_life_-_statistics#:%7E:text=In%202019%2C%20the%20estimated%20expected,aged%2015%20years%20and%20more">men have</a> longer paid working lives than women;</p> </li> <li> <p>Different investment strategies: when it comes to <a href="https://www.gov.uk/pension-types">defined contribution pensions</a>, <a href="https://s-h-w.com/news-articles">men choose</a> to invest in portfolios with a higher expected rate of return.</p> </li> <li> <p>Different saving rates: as <a href="https://www.ifs.org.uk/publications/15425">we investigate</a> below, men and women may also differ in how likely they are to be offered a pension in their job, or tend to work for employers that contribute more or less to a pension, or tend to make different contributions themselves.</p> </li> </ol> <p>Importantly, the role of these potential drivers will have changed over time for various reasons. Mothers <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/articles/familiesandthelabourmarketengland/2019#:%7E:text=In%20April%20to%20June%202019%2C%20three%20in%20four%20mothers%20with,mothers%20in%20employment%20in%202000.">have increasingly participated</a> in the labour market over the years, for example. Final salary pensions have been reformed to career average schemes, which in particular reduced the generosity for long stayers and those with stronger pay growth, <a href="https://www.pensionspolicyinstitute.org.uk/sponsor-research/research-reports/2013/17-05-2013-the-implications-of-the-coalition-governments-public-service-pension-reforms/">affecting men</a> more than women. Also, <a href="https://www.pensionsadvisoryservice.org.uk/about-pensions/pensions-basics/automatic-enrolment">automatic enrolment</a> has been introduced for workplace pensions, which affected everyone’s participation in them. </p> <p>Gaps in pension income today may therefore reflect labour markets and pension arrangements from many years ago, and the gap in pension income for current working-age individuals may be quite different when they reach retirement. In an ongoing programme of work at the Institute for Fiscal Studies, funded by the <a href="https://www.nuffieldfoundation.org/">Nuffield Foundation</a>, we are examining in detail differences in pension saving rates between men and women that will contribute to a future “gender pension gap” for today’s working age individuals. </p> <h2>Making sense of the gap</h2> <p>In a <a href="https://www.ifs.org.uk/publications/15421">first publication</a>, we have documented differences in average pension saving between male and female employees before the introduction of <a href="https://www.pensionsadvisoryservice.org.uk/about-pensions/pensions-basics/automatic-enrolment">automatic enrolment</a> in 2012. We found that on average across all employees (whether saving in a pension or not), women of all ages actually contributed more as a proportion of their earnings each year than men. </p> <p>However, this was driven by the fact that women were more likely to work in the public sector, where contribution rates are typically higher. Examining average pension saving among men and women within each sector reveals a different pattern. The average saving rates of male and female employees were similar until around age 35 but then diverged, with average contributions continuing to increase with age for men but not changing for women. </p> <p>The graphs below unpick what was driving this pattern among private-sector employees in Great Britain (though the pattern was broadly similar for public-sector employees). It was caused by the extent to which men and women participated in a pension. </p> <p>The proportion of men and women saving anything in a private pension was similar until around age 30 but then diverged, with men increasingly likely to be saving in a pension as they get older, while women’s pension participation plateaued. On the other hand, average contribution rates for those saving in a pension were actually slightly higher as a share of earnings among women than men. </p> <p><strong>Pension participation in overall savings</strong></p> <p><img src="https://oversixtydev.blob.core.windows.net/media/2022/10/graph-1.jpg" alt="" width="1280" height="720" /></p> <p><strong>Average contribution rates in pension savings</strong></p> <p><img src="https://oversixtydev.blob.core.windows.net/media/2022/10/graph-2.jpg" alt="" width="1280" height="720" /></p> <p>What might have been driving differences in pension participation? The timing of the divergence in people’s lives mirrored the evolution of the gender gaps <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/genderpaygapintheuk/2020">in pay</a>, <a href="https://www.ifs.org.uk/publications/13673">commuting</a> and <a href="https://www.ifs.org.uk/publications/14032">firm productivity</a>, and suggested that the arrival of children and related employment decisions was an important factor. </p> <p>So in our ongoing programme of research we are examining whether the gap in pension participation is associated with the arrival of children, and the extent to which female employees received a different pension offer from their employer, or made different saving decisions when presented with the same offer as male employees. </p> <h2>Effect of automatic enrolment</h2> <p>The introduction of automatic enrolment into workplace pensions has substantially changed pension-saving behaviour – in particular, substantially increasing pension participation among employees targeted by the policy. The graph below shows the proportion of male and female employees of different ages who were saving in a private workplace pension in 2012 and 2019 in Great Britain. </p> <p>The pattern in 2012 is represented by the two sets of dashed lines, with men again in blue and women in purple. It is similar to that estimated in the first graph in this article. </p> <p>But the pattern in 2019 is totally different. Rather than participation diverging at a particular age, women are now slightly less likely to be in a pension at all ages than men (but the level of participation among both is considerably higher). Automatic enrolment will therefore have fundamentally changed the nature of the gender gap in pension-saving rates going forwards. </p> <p> </p> <p><strong>Pension participation 2019 vs 2012</strong></p> <p><img src="https://oversixtydev.blob.core.windows.net/media/2022/10/graph-3.jpg" alt="" width="1280" height="720" /></p> <p>This highlights the importance of examining gender differences in saving rates, rather than just accrued pension wealth or pension income. Focusing on the latter risks developing policies to fix a perceived problem that has already changed.</p> <p><em>Image credits: Getty Images</em></p> <p><em>This article originally appeared on <a href="https://theconversation.com/gender-pension-gap-why-women-save-less-and-why-thats-changing-dramatically-160648" target="_blank" rel="noopener">The Conversation</a>.</em></p>

Retirement Income

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Woman wins lottery with her deceased mother’s numbers

<p dir="ltr">A woman has won the lottery by using her dead mother’s lucky numbers that she found when she was clearing out her late mum’s home. </p> <p dir="ltr">Kelly Firth, a mother-of-two from Halifax, UK, would buy her mother Carol's Lotto Hotpicks tickets every week before the 65-year-old died last year.</p> <p dir="ltr">Kelly didn't play the lottery herself, but months later she found her mother's numbers, 7, 17 and 37, written on a card while later clearing out her flat and decided to play them in a tribute to her mum. </p> <p dir="ltr">She bought numbers for Wednesday and Saturday draws but when her numbers didn't come up on the first draw, she ripped up the ticket and threw it away.</p> <p dir="ltr">However, she was stunned when three numbers came up on the weekend draw.</p> <p dir="ltr">Kelly believes it was a sign from her mother and was celebrating and shouting to Carol's ashes on her TV stand when her mother's favourite song - <em>You're Simply the Best </em>by Tina Turner - came on the radio.</p> <p dir="ltr">Kelly then had to sift through the garbage bin to find the discarded ticket, and was thrilled when her local shop accepted the taped-up winning ticket to claim her £1,600 prize, which she used to take her family on a holiday. </p> <p dir="ltr">Kelly said, “I still can't believe I won with mum's numbers.”</p> <p dir="ltr">“My daughter and I would nip to the shop for mum every week for her lottery.”</p> <p dir="ltr">“She had the same numbers on her little card that she gave me and always told me to put both sides on the numbers.”</p> <p dir="ltr">“We did the same numbers for mum for years and never - never did she win.”</p> <p dir="ltr">“I decided to carry them on in remembrance of mum.”</p> <p dir="ltr">“I couldn't believe I won when mum never did, and I just knew she was still around looking after me when the numbers came up.”</p> <p dir="ltr">“I'm still in shock and always will be. It was a sign from mum and I still can't believe it.”</p> <p dir="ltr"><em>Image credits: Getty Images</em></p>

Retirement Income

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Being in a couple can leave women with less savings – here’s how to make nest eggs more equal

<p>Growing <a href="https://www.oecd-ilibrary.org/employment/oecd-employment-outlook-2015_empl_outlook-2015-en">job insecurity</a>, <a href="https://news.sky.com/story/signs-of-worst-year-for-stock-market-investors-in-a-decade-after-wall-street-slips-into-bear-market-and-bitcoin-crashes-12633745">financial market volatility</a> and <a href="https://www.theguardian.com/business/2022/may/18/uk-pensioners-cost-of-living-crisis">rising prices</a> have created an extremely uncertain environment for UK savers. The country’s welfare provisions are <a href="https://www.oecd.org/unitedkingdom/PAG2017-GBR.pdf">among the lowest</a> of all OECD countries and a growing number of pensioners are finding it difficult to gain <a href="https://www.theguardian.com/society/2022/mar/17/number-of-pensioners-in-relative-poverty-in-uk-up-200000-in-a-year">financial security</a> in later life. Even well-known <a href="https://metro.co.uk/2022/03/20/money-saving-expert-martin-lewis-runs-out-of-advice-on-cost-of-living-crisis-16309470/">money-saving experts</a> have run out of ideas to help those struggling with their finances.</p> <p>In such tough times, people planning for old age must be even more canny about their money to ensure there is enough for a comfortable retirement. Pension planning typically starts with a long-term savings goal to ensure an adequate income during retirement. Then savers usually make regular contributions to suitable investment products in line with this goal over the course of their working lives.</p> <p>Our recent research shows, however, that there are differences in the way people decide on and work towards those goals. We believe these differences may contribute to a wealth gap between men and women in the UK, with more women in danger of being left financially vulnerable than men.</p> <p>The commitment you make when you set a goal essentially motivates you to achieve that goal, according to certain <a href="https://www.sciencedirect.com/science/article/pii/S0022053113000033?casa_token=0_ot9tQqosQAAAAA:Br_9n9OaTKs25D1plcAHmBefoy5suGqafNYG3Ab0FZXhlLd4sLnumW6JHa80ArKHx5zfDGNT">behavioural science</a> theories. In other words, people with ambitious savings goals can be expected to end up with more money in their retirement accounts, compared with those with modest savings goals.</p> <p>Less ambitious savers may not strive to put away more than planned because they believe they will fail. Based on our <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/kykl.12294">recent research</a> into long-term savings goals, we believe such differences in attitudes may contribute to the <a href="https://www.prospectmagazine.co.uk/other/gender-wealth-gap-women-investing">£15 billion wealth gap</a> between men and women.</p> <h2>Growing gender wealth gap</h2> <p>Our study <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/kykl.12294">explores long-term savings goals</a> among 1,760 clients at a well-established UK investment firm, combined with insights from 56 interviews with another group of UK-based men and women savers. It uncovers a third possible explanation for a rising gender wealth gap in the UK, besides income differentials (based on the <a href="https://www.aeaweb.org/articles?id=10.1257%2Fjel.20160995&amp;source=post_page---------------------------">gender pay gap</a>, the <a href="https://www.aeaweb.org/articles?id=10.1257/app.20180010">child penalty</a>, <a href="https://www.journals.uchicago.edu/doi/full/10.1086/511799?casa_token=icrT0aW2dYUAAAAA%3A7k6cPuNg15qaB6ICZbBe7OO8tffw6404qf-kN-1e5lIVWjNyTlC2MOUD7We4CMNUOVWz8krjIQ">the motherhood penalty</a>) and investment differentials that generally show men earning higher financial returns because they tend to <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/j.1465-7295.2008.00201.x?casa_token=Bf3MjE7ar9UAAAAA%3A3lEvIUQjvDM4OaPUTW5tnUkbMAnn8-EZtknAR9Mx98_BNwNttlxF6i7jEYYCGHxr_3b9BLM_UxCr">take more risk</a>. </p> <p>This third reason, our analysis suggests, is that gender norms influence attitudes towards saving. This tends to negatively affect women in couples most of all.</p> <p>We found that men and women who are married or cohabiting tend to strongly diverge when it comes to their chosen savings goals, compared with those who live on their own. More specifically, married or co-habiting men are more likely to be in charge of long-term saving for the household and they typically choose more ambitious personal savings goals.</p> <p>Those higher savings goals were not affected by expected levels of income and so could not be attributed to a gender pay gap. Similarly, we also controlled for varying attitudes toward risk-taking in investment portfolios.</p> <h2>The role of gender norms</h2> <p>So why do men and women in couples save so differently? Our research shows that these differences are linked to the traditional gender roles often assigned to particular members of households. When women are in charge of caring and domestic work such as childcare, grocery shopping and short-term budgeting, there is a tendency to focus on short-term financial security. Perhaps in anticipation of adverse events affecting their daily budget management, these women tend to choose modest savings goals and accessible financial products such as <a href="https://www.gov.uk/individual-savings-accounts">individual savings accounts</a> (ISAs).</p> <p>On the other hand, we found that men in couples tend to choose more ambitious goals and use investment products that are designed for longer-term savings habits and have the potential for <a href="https://www.vanguardinvestor.co.uk/articles/latest-thoughts/retirement/sipp-or-isa-how-do-you-decide#:%7E:text=SIPP%20or%20ISA%3A%20how%20your%20hypothetical%20savings%20might%20grow">better returns</a>. For example, <a href="https://www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics/self-invested-personal-pensions?source=mas">self-invested personal pensions</a> provide more options and control over what you can invest in and when, compared with a standard personal pension or an ISA. </p> <p>Men are also more often assigned to the role of managing long-term investing tasks, according to our research. This encourages a focus on long-term wealth growth and reinforces their willingness to set challenging goals. These findings are intensified within couples with a more “traditional” division of roles - that is, when the man is the breadwinner.</p> <p>For single people, however, men and women perform both the short- and long-term financial tasks and we found no gender differences in savings goals among this type of study participant. This absence of any gender-based effect among the people in our study who are not part of a couple shows a clear need to move beyond simply accepting that all men and women <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/j.1465-7295.2009.00251.x?casa_token=DjyY7QO3AbYAAAAA%3Alqjh1kacbeO6WWPm8a778_QyzCAEYEQ4L5DISL4yRPjIMBh_Vne1e1UkFSyXeIlWpKbDBS9wMJ_V">think differently</a> about saving and investing when discussing retirement planning and financial risk-taking. </p> <p>Exploring the context in which people make financial decisions is much more important. Highlighting when goals are unambitious compared to people with similar wealth and incomes, for example, could reduce the effect of gender norms on financial decisions. </p> <p>In particular, it should be emphasised that, by leaving their male partner to accumulate money for the household, women may increase their financial dependency. In that context, late divorce or separation could have a dramatic effect on financial security for those <a href="https://www.theguardian.com/lifeandstyle/2017/mar/19/divorce-women-risk-poverty-children-relationship">without legal protection</a>.</p> <p>Given the continued uncertainty around the economic outlook, addressing the gender wealth gap in this way will help to create a more secure future for all UK savers.</p> <p><em>Image credits: Getty Images</em></p> <p><em>This article originally appeared on <a href="https://theconversation.com/being-in-a-couple-can-leave-women-with-less-savings-heres-how-to-make-nest-eggs-more-equal-186269" target="_blank" rel="noopener">The Conversation</a>. </em></p>

Retirement Income

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How do I find out what my superannuation fund invests in? A finance expert explains

<p>You want your superannuation savings to be invested in things that also serve the planet’s long-term interests. But how can you be sure your fund’s values align with yours – or even its own claims?</p> <p>This question has become increasingly pertinent as demand for environmentally and socially sustainable investments <a href="https://asic.gov.au/about-asic/news-centre/find-a-media-release/2022-releases/22-141mr-how-to-avoid-greenwashing-for-superannuation-and-managed-funds/">grows</a> – and with it incentives for financial institutions to put the best spin on their offerings. </p> <p>One consultancy specialising in “responsible investment” reckons <a href="https://thenewdaily.com.au/finance/superannuation/2021/08/16/greenwashing-super-funds/">10% of the funds</a> it has examined do not have the sustainability orientation they claim.</p> <p>Among those <a href="https://www.edo.org.au/2022/08/10/hestas-fossil-fuel-investments-may-amount-to-a-breach-of-the-law/">accused of greenwashing</a> in recent months is one of Australia’s biggest super funds, HESTA (the industry fund for health and community service workers), which has promoting its “clean energy” credentials while still holding shares in fossil-fuel companies <a href="https://www.ai-cio.com/news/australias-hesta-accused-of-greenwashing/">Woodside and Santos</a>.</p> <p>So how can you check what your superannuation fund invests in? </p> <p>Super funds are legally obliged to disclose how they invest your money in two different disclosure documents – a Product Disclosure Statement and a Portfolio Holdings Disclosure. </p> <p>Both will be available on a super fund’s website, though how easily you can find them will vary.</p> <p>The rest of this article is going to explain what information these documents provide, how useful this information is likely to be, and your best bet to ensure your super fund reflects your values.</p> <h2>The Product Disclosure Statement</h2> <p>Product disclosure statements are required by the financial regulator (the Australian Securities and Investments Commission) for all financial products. </p> <p>This document outlines the most basic but important information of an investment product’s features, benefits, risks and costs, including fees and taxes. The format is standardised, with one section (Section 5) covering with “How we invest your money”. </p> <p>The information it contains is broad. At best you’ll learn how the fund splits its investments between safe and riskier assets, and between different asset classes – Australian shares, international shares, property trusts, infrastructure trust, cash and so on.</p> <h2>Portfolio Holding Disclosure</h2> <p>For a comprehensive look at where your money is invested in, you can consider the Portfolio Holdings Disclosure. </p> <p>This document lists a fund’s complete holdings – including the percentage and value of every single company stock held.</p> <p>Portfolio holdings disclosures are relatively new, being obligatory only since March 2022 under <a href="https://www.legislation.gov.au/Details/F2021L01531">legislation</a> meant to improve transparency in the sector.</p> <p>However, super funds aren’t obliged to provide this information in a consistent, easily understandable way. </p> <p>For a non-expert who doesn’t know what to look for, the level of detail can be mind-boggling. You may find yourself scrutinising a spreadsheet listing thousands of items.</p> <p>The Australian Retirement Trust’s Portfolio Holdings Disclosure for its “Lifecycle Balanced Pool”, for example, has more than <a href="https://www.australianretirementtrust.com.au/investments/what-we-invest-in/superannuation-investments">8,000</a> line items.</p> <p>Some super funds have made the effort to provide this information in a more user-friendly format. An example is Future Super, which allows you to <a href="https://www.futuresuper.com.au/everything-we-invest-in/?utm_source=google&amp;utm_medium=cpc&amp;utm_campaign=1757241588&amp;utm_content=68234193065&amp;utm_term=future%20super&amp;campaigntype=SearchNetwork-1757241588&amp;device=c&amp;campaignid=1757241588&amp;adgroup=68234193065&amp;keyword=future%20super&amp;matchtype=p&amp;placement=&amp;adposition=&amp;location=9069039&amp;gclid=CjwKCAjwmJeYBhAwEiwAXlg0AYOEe2tJViZiZBgUk3bt1h9LNuHx1jWnGy6VzqGaNjBzOEi60852JRoCel8QAvD_BwE">search and filter</a> portfolio holdings by asset class and country of origin. </p> <p>But if your concern is to avoid investing in some specific activity such as in mining fossil fuels or gambling, you’ll need to know the companies and other assets you want to avoid for this to be helpful.</p> <h2>Your best options</h2> <p>This is not to say portfolio holding disclosure obligations are useless. They are incredibly useful – a huge leap forward in the sector’s accountability. They just aren’t designed for consumers. </p> <p>So there is still much work to be done to make the sector truly transparent. </p> <p>What would really help is independent certification and ratings of super products, similar to government websites and programs that certify energy efficiency and allow comparison of electricity plans. </p> <p>In the meantime, I can offer you one big tip.</p> <p>Choose a specific superannuation product that markets itself on its environmental or social sustainability credentials. Most super funds now provide these choices alongside their more traditional investment options.</p> <p>There is a variety of “screening” approaches to ethical investments. Some exclude entire sectors. Others include the best environmental and social performers even among “sinful” industries such as tobacco or weapons.</p> <p>So just because a super product is marketed as “ethical” or “sustainable” doesn’t guarantee you will agree with all its investments. </p> <p>But there is a much higher likelihood of it living up to its claims due to greater scrutiny by third parties such as environmental groups as well as the financial regulator. </p> <p>The Australian Securities and Investments Commission put super funds on notice earlier this year with a “<a href="https://asic.gov.au/regulatory-resources/financial-services/how-to-avoid-greenwashing-when-offering-or-promoting-sustainability-related-products/">guidance note</a>” about the growing risk of greenwashing in sustainability-related financial products. </p> <p>It reminded funds that “making statements (or disseminating information) that are false or misleading, or engaging in dishonest, misleading or deceptive conduct in relation to a financial product or financial service” is against the law.</p> <p>So super funds know their portfolios are being scrutinised.</p> <p>Switching your investment option or fund is simpler than you think. You only need to fill out and lodge a form. Just be sure to compare fees and performance, and seek a second opinion from trustworthy adviser before “voting with your wallet”.</p> <p><em>Image credits: Getty Images</em></p> <p><em>This article originally appeared on <a href="https://theconversation.com/how-do-i-find-out-what-my-superannuation-fund-invests-in-a-finance-expert-explains-188802" target="_blank" rel="noopener">The Conversation</a>. </em></p>

Retirement Income

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5 mistakes to avoid when leaving an inheritance

<p>Unlike virtually everything else in life, inheritance mistakes aren’t felt by the person who makes them. It’s those left behind who must deal with the fallout. What will your loved ones ultimately inherit? Estate planning. Wills. Inheritance. </p> <p>Nobody enjoys talking about these because they reflect our own mortality. Yet they have major ramifications for the loved ones we leave behind. Mistakes can be devastating. Thankfully, though, the most common inheritance mistakes are easily avoided. </p> <p><strong>Mistake #1: Failing to plan</strong></p> <p>A simple equation governs legal and money matters: failing to plan = planning to fail. Inheritances left to chance risk your wishes not being carried out. Disagreements between siblings and/or other benefactors become more likely – particularly if you are divorced/separated or have a blended family. </p> <p>Additionally, the government could wind up the biggest winner, with unclaimed assets seized by the state. The result? Benefits are wasted and relationships damaged – perhaps permanently.</p> <p><strong>Mistake #2: Set-and-forget</strong></p> <p>Sadly, I have seen this many times – someone’s ‘set-and-forget’ mindset meant their estate plans were outdated on their death, leaving behind significant question marks. Who inherits assets not covered in the will? What happens to assets left to someone who has already died? Do children born after the plans were drafted inherit at all? If you’ve been separated, outdated plans could see your ex become your primary beneficiary. </p> <p>Your grieving current partner could be forced to contest in court – and risk losing even more in legal fees – or miss out altogether. The same goes for divorced children and their ex. Treat your will like your garden – it should be tended regularly to be its best and allowed to grow and adapt to suit your changing circumstances.</p> <p><strong>Mistake #3: When a will won’t do</strong></p> <p>Wills cover many aspects – dividing money and assets; delegating custodianship of any children under 18 and how they will be provided for; and nominating the executor(s) of your estate. However, contrary to popular belief, a will is not the be all and end all.  Separate legal entities and certain financial assets are not covered by a will, including businesses, trusts and similar structures, and – crucially – superannuation. These require you to nominate your beneficiaries within those entities. Property can also be treated outside of a will, as joint tenants have an automatic right of survivorship. </p> <p>As tenants in common, you can gift your share to someone else, such as children. Remember though, if your partner still lives in the property but someone else inherits your share (especially if the two don’t get along), your partner could be pressured to move or sell – even if they have nowhere else to go.</p> <p><strong>Mistake #4: Hindering, not helping</strong></p> <p>While your intention may be to support family, you may inadvertently leave them worse off or see their benefits squandered if inheritances are poorly planned. For example, leaving property to someone who cannot afford the upkeep could be counterproductive. What if it can’t be sold? If they live in it and must sell, where will they go? Can they afford the same location?</p> <p>With taxes, will Capital Gains Tax be better managed if assets are sold from within your estate or once ownership is transferred? Will dividends/rental income push up their income tax? Will a super death benefit be taxable? Plus, many people don’t realise that under 18s income tax rates are higher than most adult tax rates.</p> <p><strong>Mistake #5: Failing your partner</strong></p> <p>Death inflicts enormous and often sudden change onto a surviving spouse or partner, if you have one. If not retired, they may need time off work to grieve and manage affairs. Funeral costs accumulate. Your income stops. Economies of scale (living costs are less per person for couples than for singles) disappear. They may be unable to look after themselves.</p> <p>Ask yourself:</p> <ul> <li>Do you have life insurance? Funeral cover?</li> <li>Is cash readily available for them to live on while your affairs are settled? </li> <li>What provisions are made for meeting mortgage repayments without your income?</li> <li>How much superannuation is left for their twilight years? </li> <li>Can they operate/sell the business if you’re self-employed?</li> <li>Do they need paid-for care?</li> </ul> <p>Inheritance is a complex business and that complexity compounds with the number of assets and beneficiaries. To ensure your wishes are implemented and your legacy is a positive one, I implore you – get good professional advice and make a thorough, up-to-date plan, one which works for both yourself and everyone set to inherit from it.</p> <p><strong><em>Helen Baker is a licensed Australian financial adviser and author of the new book, On Your Two Feet: The Essential Guide to Financial Independence for all Women (Ventura Press, $32.99). Helen is among the 1% of financial planners who hold a master's degree in the field. Proceeds from book sales are donated to charities supporting disadvantaged women and children. Find out more at <a href="https://onyourowntwofeet.com.au" target="_blank" rel="noopener">www.onyourowntwofeet.com.au</a></em></strong></p> <p><em>Image credits: Getty Images</em></p>

Retirement Income