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Posted November 5, 2018 by MoneyLink

Financial Planning for Later Years

Retirement means changing from relying on personal exertion for income to relying on cashflow from investments. For people who have guaranteed superannuation pensions with inflation indexing, the change isn’t huge but for those who must rely on wise investments it can be a worrying time.

Retirement options

The income needed for retirement can be arranged using account-based pensions that provide fixed regular payments even if the account value fluctuates. A similar result can be achieved using non-super investments with fixed monthly withdrawals. Part age pensions may also contribute to the income mix.

At retirement, the investments need to generate enough cashflow to enable retirees to travel, take on new hobbies and enjoy the activities they always wanted to while they are still able to do so.

In the next stage of retirement when the retirees’ health may not be so good and they aren’t as active any more, less income is usually needed. The caravan might get sold and even the golf clubs. Parties and social engagements happen at lunchtime rather than late. Living costs a little less.

Simplifying assets and investments

As time passes, people start to think of simplifying their financial affairs for their family, and age care costs. Some want to move all their money into bank accounts they see as simple and secure. This is often a mistake as returns are usually well below what is needed.

They start consuming their capital. Simplifying most investments isn’t necessary as executors and solicitors are well able to manage a wide range of investments. It is better to continue with investments that can provide adequate income.

However some investments should probably be simplified, such as self-managed super funds. There comes a time when the administration of an SMSF is a burden best removed. In most cases it is possible to close a fund down.

People who own a portfolio of shares also find keeping track of their holdings, especially the annual tax issues, is a challenge. This can be resolved by moving the shares into a wrap account that will do the administration and reporting. This is not a disposal and does not incur capital gains tax.

The wrap service tracks any changes with the shares and provides consolidated annual tax statements making life much simpler. There is a small fee but it is worth paying. Rental properties may also be better sold to simplify administration.

What about aged-care?

Age care costs are very complex. The rules have been changed to a more user-pays system. While a limited number of government funded places are available for people of low means it is best to have significant savings to secure the place you want.

This is general advice and should not be treated as personal advice. Russell Tym is an authorised representative of MoneyLink Financial Planning Pty Ltd ASFL No: 247360.

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