Download - How To Create Secure Financial Future?
Are you ready
to take control
of your
financial
future?
Prepared by
Fortune Wealth Creation Group
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What is Financial Planning?
Financial planning is all about making sure that your current and long-term
financial needs are met in the best possible way.
1. Protecting what have you got - your income and assets 2. Creating a investment portfolio to create long term wealth 3. Maximising your investments 4. Minimising your tax 5. Maximising your superannuation & Retirement Planning 6. Estate planning
At its best, financial planning is a long-term partnership that begins and ends with your goals.
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Financial Planning Process:
Financial planning isn’t just about making money. It’s about creating new opportunities to reach your goals and dreams. Fortune Wealth Creation Group offers straightforward, professional advice so that you can get the most out of your money, finance your dreams and plan for your future.
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The benefits of financial planning It pays to have good advice
It gives you direction and control. Can you imagine jumping into the car to drive across town to a street and suburb you’ve never been to before without a street directory? How would you know if you were heading in the right direction? Financial advice provides you with a roadmap. Your financial adviser will prepare a personalised plan detailing your current position and recommend solutions to reach your destination (goals). Advice can help make your money work harder. Recommending solutions that take advantage of tax concessions or investment options that have a higher return potential for the same level of risk means that your money may grow more. You may avoid making expensive mistakes. People make investment decisions that are influenced by emotions. Let’s face it, money can be a very emotional issue. A financial adviser can provide impartial advice which focuses on and encourages successful investment behaviour without emotional ties. How to reduce debt and start a wealth creation plan. Planning for Retirement. The amount of money you need to have accumulated to provide for the standard of living you want in retirement. How to maximise your retirement savings with both social security and tax laws. Protecting your estate. How to plan and manage the transition of your estate should you die or become incapacitated to such an extent that you can no longer make the necessary decisions regarding your investments. Protection of your assets and goals for you and your dependants through the use of insurance can be a vital part of your financial plan.
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Protecting your income and assets A key component of your financial plan Insurance protects what you work hard to earn and save, and this is why it can be the critical component of any financial plan. To simplify things, it can help to look at insurance as falling into two broad categories – protection for the things you value and protection for the people you love.
Life insurance
Organising life insurance is important when planning for the future, as it can help your family carry on if an income earner is injured, ill or passes away.
Income protection
If you’re unable to work due to illness or injury, income protection can replace up to 75 per cent of your regular income and cover your regular super contributions.
An “average” individual age 25 years earning $51,235 p.a. will earn more than $3,863,184 in
his or her working life, assuming 3% inflation. To protect this amount it will cost them as little
as $40 per month, which would be tax deductible.
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Total and permanent disability cover
Provides a lump sum payout if you become totally and permanently disabled.
Trauma cover
Trauma cover provides peace of mind should you suffer a major illnesses or injuries, such as heart attack, stroke, cancer or blindness.
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Growing your wealth
Suited to your investment needs
Building an investment portfolio can help you create a more secure and sustainable financial future and give you the freedom to live life how you want to, not how your bank balance dictates. We give you professional advice about which investment option, or mix of investments, best suits your individual needs.
Managed funds
If you’re looking for access to a variety of sophisticated investment types, or asset classes, managed funds may be right for you. They’re an easy way to diversify your portfolio, and your money is managed by professionals.
Investment Growth Bond
Combining the benefits of a managed fund with the security of a life insurance policy in a simple, tax-effective investment vehicle, the Investment Growth Bond offers a range of investment options.
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Maximising your investments Investment strategies to get the most out of every dollar
Creating an investment portfolio is one thing. Managing it is quite another. There are a range of smart investment strategies and techniques you can use to supercharge your investments over time.
Diversification Risk is an intrinsic part of investing. One of the most effective ways of managing investment risk is through diversification, or by spreading your money across a range of different investments and investment types. Owning a diverse portfolio should help you achieve smoother, more consistent investment returns over time.
Think in years, not days Ups and downs are intrinsic to the markets, so it’s important to stay focused on your long-term goals. When markets fall in value, some people are tempted to sell their investments and buy back in later. This approach may initially seem sensible, but really it’s time in the market, not timing the market that determines your wealth.
Regular investing Making regular contributions to your investments is a great strategy for boosting your assets over time and enables you to take advantage of other investment strategies, such as dollar cost averaging. With as little as $1,000 to start, and by adding just $100 a month, you can start a regular investment plan into a managed fund or superannuation.
Compounding Compound interest is what happens when you earn interest on your interest. It’s one of the easiest and fastest investment strategies for boosting your portfolio balance. The longer your money is invested, the bigger the effect compounding can have, so to take full advantage of this strategy, think about starting early.
Growth investments Risk can be a good thing. Investing in slightly riskier options is a strategy that can deliver higher returns and help you to reach your goals faster. Your returns on growth investments, including property investing, Australian shares and international shares, may potentially be higher than those of traditionally defensive, or conservative, investments, such as cash.
Risk vs. return Different types of investments carry different levels of risk, and also different returns. As a general rule, the larger the potential return, the higher the investment risk. Before you create a portfolio, it’s important to understand your tolerance for risk, techniques for managing risk, the relationship between the risk you take and the return you may receive.
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What is super and why is it important? Why superannuation is super
Superannuation is a type of long-term investment designed specifically to help you accumulate the savings you need to live the life you want in retirement.
There are a few ways you can save money in super:
If you’re employed, your employer should be contributing a minimum of 9% of your salary into super on your behalf each year. These funds are known as ‘super guarantee’ contributions.
You can also choose to forgo some of your salary in exchange for your employer agreeing to make increased contributions into super. This is known as ‘salary sacrifice’.
You can make additional contributions to super from your after-tax salary. Just be sure not to exceed your annual contribution caps, as determined by the Australian Taxation Office.
To help ensure your superannuation savings are there for you in retirement, the government places restrictions on when and how you can access your super earnings. Generally you need to wait until you retire to withdraw these funds or until you reach your preservation age.
When you turn 60, provided you meet a condition of release, you can withdraw your super as a tax-free lump sum or convert it into a tax-free retirement income stream. If you start withdrawing your super before you turn 60, you will have to pay tax on it, although part of it may be tax free.
What are the benefits of saving through super?
Certain advantages make saving through superannuation more tax-effective than other investments, which means your savings could grow faster. For example, any contributions your
employer makes, as well as any returns you earn on your super, are taxed at a maximum of 15%, rather than at your marginal tax rate.
If you make super contributions on your own, you could also be eligible for special tax concessions.
Having your super locked away until you reach retirement ensures your savings will be used for one purpose only – to help you achieve your financial goals and secure the retirement you’re looking forward to.
Why is super so important?
As it’s unlikely that the government Age Pension alone will give you the financial independence you deserve for the 20 or more years you’re likely to spend in retirement, superannuation is key.
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How does it compare to other investments? The advantages of super
When it comes to saving for retirement, superannuation is specifically designed to help you accumulate funds in an easy, tax-effective way.
Investment earnings in super
The money you earn over time from superannuation is taxed at a maximum of 15%. In contrast, earnings on investments outside of super, such as managed funds or direct shares, are taxed at your marginal tax rate.
Contributions to super
If you contribute to super through salary sacrifice (that is, by forgoing pre-tax salary), the contributions will be taxed at 15% in the fund, which is likely to be lower than your marginal tax rate.
Any personal contributions you make to super from your after-tax salary are called ‘non-concessional contributions’. There is no contributions tax on these funds when you contribute, although earnings are still subject to 15% tax.
Withdrawing your super
If you meet a condition of release, you can withdraw all of your superannuation tax free if you are aged 60 or over, whether you take it as a lump sum or withdraw it gradually through a retirement income stream.
There are advantages to be gained from the latter. If you transfer your super to an allocated pension, annuity or similar product, rather than take it as a lump sum, you are not charged any tax, and you will not pay any tax on income received if you are 60 or over. If you are under 60, you may have to pay some tax on your super income, although tax offsets may be available.
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Retirement options Live the life you want
There are many options for accessing your retirement savings, both before you retire and once you’ve stopped working. Choosing the right retirement option can save you tax and give you more flexibility to achieve the lifestyle you’ve always dreamed about.
Allocated pensions An allocated pension gives you a regular income funded by your super savings. You have the option to choose how much income you wish to receive, as long as it’s above a minimum percentage of your account balance, or you can make lump sum withdrawals. There can be significant tax benefits to retirees who roll their super into this type of retirement option, and Fortune Wealth Creation Group can help you understand and take advantage of them.
Pre-retirement pensions (For People who are over age 55)
A pre-retirement pension lets you draw a regular income while you’re still working, offers tax advantages and gives you greater flexibility as you prepare for retirement. With this option, it may be possible to access your super once you reach your ‘preservation age’, and in most cases, you’ll pay less tax on your pension income than you would on equivalent salary or wages. The pre-retirement pension option is not for everyone, though, so it’s wise to seek professional financial advice before setting one up.
Annuities
Annuities provide a retirement income stream of regular payments over an agreed-upon period. Payments are guaranteed, and they can be linked to increases in living costs. Annuities are generally a far more tax-effective retirement option than cashing out your super.
Investment Growth Bond : Combining the benefits of a managed fund with the security
of a life insurance policy in a simple, tax-effective investment vehicle, the Investment Growth Bond offers a range of investment options.
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Will & Estate planning What you need to know
You’ve worked hard to build your wealth, so it’s important to consider what will happen to your money and assets when you or your partner passes away.
Estate planning involves much more than having an up-to-date will. A good estate plan will structure your estate so you can distribute your assets according to your wishes, protect your family’s interests and minimise tax.
As part of your estate plan, you’ll need to:
Ensure that your will is up to date (a solicitor can help you put one together) Have adequate life insurance Understand the tax consequences of how your assets are distributed Implement a binding death benefit nomination on your superannuation Put in place an enduring power of attorney Create a business succession plan, if necessary
Estate planning can be complex, with many different factors to take into account. For example, how your assets are distributed according to your will may have tax consequences. You need to consider these issues when drafting your will and creating your estate plan.
There are a number of strategies you can use to help make your estate plan as effective as possible, and this is an area where professional financial advice and your taxation adviser can make an enormous difference for you and your beneficiaries.
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Case Study 1: Transition to Retirement for people over age 55 and still working
Matthew is aged 55 and wants to cut back his working hours. While his pre-tax salary will reduce from $60,000 p.a. to $40,000 p.a., Matthew doesn’t want to compromise his lifestyle.
By commencing a transition to retirement pension and drawing a pension income of $15,820 p.a. from his super funds of $400,000, Matthew will meet his after-tax income goal of approximately $46,000 (see table below).
The reason that the $20,000 drop in employment income is replaced by only $15,820 in pension income (to get the same level of income net of tax) is due to the tax-effectiveness of the pension income.
Drawing the pension entitles Matthew to two tax offsets:
A 15% tax offset on the pension income and
the mature age worker tax offset.
Before After
Salary $60,000 $40,000
Non commutable allocated pension income Nil $15,820
Total pre-tax income $60,000 $55,820
Less tax payable ($13,500) ($9,310)
Net Income $46,500 $46,510
In addition to above tax savings on income tax, now he will pay 0% tax on income and
growth on $400,000 in pension fund rather than paying 15% on super fund which is approx.
savings of 15% of $28,000 which equals to $4,200 ($400,000*7% (average growth +
income))
Total savings of $4,190 (tax savings in Income tax) + $4,200 (tax savings on income and
growth in pension fund)
Total tax savings = $8,390 p.a. for next 10 years!
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Case Study 2: Insuring Your Greatest Asset
You’ve weighed up whether a plasma TV will fit in your bedroom, and pondered how good you’d look in a ‘67 Mustang. But isn’t it time you talked to an adviser about how you’d maintain your lifestyle if you couldn’t work?
Meet Jeremy
He’s just changed jobs and is getting serious about his finances and his future. And while he’s argued the benefits of a diversified portfolio and talked up his golf swing, he hasn’t spoken to anyone about securing his financial future if something happened to him.
And while he had some insurance in his super from his previous employer, he hasn’t checked whether he’s still covered.
There is a lot at stake.
If you added up his $80k salary, he’s looking at making $5 million before he retires!
He’s insured the car and contents of his apartment, but his biggest risk is losing his greatest asset – his income.
What’s more, if he’s serious about beginning to grow his wealth, he’ll need to make sure he’s protected his ability to continue generating an income.
By giving an adviser a call and talking about insurance, it’ll help him to stop worrying about what’s around the corner. And it may be cheaper than he thinks, because if he gets serious about his finances while he’s young, it’s possible to lock in a lower rate of insurance until he retires.
Have you considered…
How much you will earn in your lifetime?
That insurance in corporate super usually provides limited cover.
What would happen to your lifestyle without your income?
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Is financial planning for you? Opportunity at any age or stage
There’s really never a bad time to organise your finances and start planning for the future. At certain points in life, it may make sense to focus on savings and debt management. However, over the long term, professional and straightforward financial advice can help you maintain the lifestyle you prefer and achieve your goals.
Don’t be put off by the myths and misinformation surrounding financial planning. Following are just some of the reasons you might think it’s not right for you, when the reality is that right now may be the perfect time to schedule a complimentary consultation and speak with our qualified financial planner.
I’m too young
Actually, the sooner you develop a financial plan, the more opportunities may become available to you and the more you can achieve. Even if you’re just starting out in the workforce and don’t have significant disposable income to invest, we can help you ensure that your income is protected while you’re saving, or put in place a small investment portfolio to help your money grow.
I’m too old
Even if your retirement begins tomorrow, or has already begun, it’s not too late to benefit from gaining financial advice. We can work with you to set up income stream options (like annuities and allocated pensions), establish a regular income in retirement, get your estate plans in order or adjust your investment portfolio to suit your new situation or even a new hobby.
I’ve always managed my own finances
If you’ve done this well on your own so far, imagine what you could achieve with a fresh perspective and professional advice. We won’t tell you how you should be running your life, but we will offer you insights into how to make your money work harder for you, and any opportunities that you may be missing out on.
I don’t have enough money
While it’s true that you’ll get more out of seeing a financial planner if you have disposable income to invest, we can also help you protect your income and savings while you’re raising money to invest or identify ways to maximise your super.
Financial planners are just trying to sell their own products
At Fortune Wealth Creation Group, we talk goals first and money second. We recommend investment and insurance options as appropriate in developing a financial plan to reach your specific goals, potentially including a range of options and products offered by other financial institutions in Australia and around the world – whichever is the best option for you.
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What you will achieve from our advice:
1. Your income will be secured. If you cannot go to work due to accident or illness, you will get up to 75% of your current income monthly basis up to age 65. It means you will have unlimited sick leaves up to age 65!
2. Invest for your future: If you have an existing savings or surplus cash flow then we will show you how to invest to create sustainable wealth.
3. You and Your family will have total peace of mind. In case of your premature death or total & permanent disability, your mortgage, your personal debt will be paid out. You will also choose to have an ongoing income for life for your family.
4. Free Insurance if you are eligible: You do not need to pay from your own pocket. Better still let government pay partially or fully fund this cost for you if you are eligible. This is our top strategy for our eligible clients.
5. Save fees and costs: We will minimise your fees on your existing super and insurance or offer better value.
6. Save tax: If you are paying too much tax then we will show you the ways to minimise your tax.
7. Invest for your child/children: If you have any child/children, we will show you how to invest for your child/children most effective way.
8. If you are over 55: If you are over 55 years and still working, we will show you how to save THOUSANDS of dollars every year.
9. Cut 5-10 years terms of your loan: If you have a mortgage, we will show you how to pay off your loan faster (taking off 5-10 years from your term) without making any extra repayments.
10. Protecting your estate: We will also make sure that your money goes to right hands according your wish in case of your death. We will check all your nominations on your super and insurance are up to date.
11. Ongoing review: We will review your situation regularly to make sure you get most benefits from new changes in tax & superannuation laws and new products in the market.
12. Your family financial adviser who is committed for your success: Finally, you will have a friend just phone call away to answer all your questions regarding your financial affairs.
Regards,
Rashesh Bhavsar, (ADFS (Financial Planning), B.Buss, M.Eng(IT))
Financial Planner (Specialising in Superannuation, Investments and Insurance)
Fortune Wealth Creation Group
Suite G17E, Ground Floor, 566 St Kilda Road, Melbourne, VIC 3004
Phone no: 03 9018 5534 / 0404 000 668
Email: [email protected]
