“It’s a no Brainer’ & ‘we are on the Same page’
“It’s a no Brainer’ & ‘we are on the Same page’
Linda came to that conclusion some weeks after she wrote
‘ Hi John
I imagine you would have seen the paper yesterday where the lowest performing workplace super funds were listed. Surprise, surprise mine was on the list as the 2nd worst performer.
I have emailed payroll and I am able to have my super paid into a different fund. Do you think I should consider doing this?’
We summarise our conversation with Linda with
• You are now over 55, in fact our age.
• You could do what we have done ourselves , actually with 2 funds.
• You could reduce your largest fee which is taxx from 15% on earnings to ZERO.
• You could redesign your super allocation by tailoring it for you commencing from a model portfolio designed by asset allocation specialists.
• You don’t want the over flogged SMSF as you don’t want the responsibilities of a trustee especially when you are 70+.
• We will retain some funds in your existing super to fund your current life cover to age 75.
• When you have a choice of 300 funds & 300 direct Aussie shares why would you do a SMSF?
• As you are in fact over 60 your income from your redesigned super will be Taxx FREE.
• You can access your super as a lump sum after you retire.
• You can use the extra TAXX FREE income to
• fund more into personal super & maybe earn the government co-contribution.
• Or to subsidise the loan on a new car
• Or to use for your next cruise
• Or to use to buy gold when you are in Hong Kong.
• …
Do you understand that? Does that make sense.
Linda answered when completing the application.
‘It’s a no brainer’ & ‘We are on the same page’.
We also discussed with Linda that we had been invited to a Tapas cooking class by a global fund manager.
The analogy was simple. The starter or the introduction was ‘Who cooked or prepared the tapas better?’ –Phillip the fund manager or Greg & Jamie who are the chefs.
You are right.
So we demonstrated to Linda one component & a percentage of her asset allocation. I.e. her cash component & would she do better by using fixed term deposits only as the retirees & the SMSF trustees are generally doing?
You are right & Phillip presented this graph for ‘his’ fund to ‘out perform’ a TD only strategy by 5,500 over a 12 year period & starting with 10,000.
We could make this analogy over any component of her portfolio. Who is better to maximise her assets, Linda or the fund managers.
Yes they charge a fee which is all explained but the biggest fee is the difference between what Linda might achieve & what ‘Philip’ might achieve.
If you are similar to Linda then you might look at a similar solution to her problem.
You are welcome to call us on 07 3848 1088 or email or visit our websites.
You might also email us for the Tapas recipes. With WOW telling us its nearly Christmas & nearly then the end of the year lets maximise 2012 today.
John McAuliffe
A resident paid a 2.1 million bond. Is that fair?
Mark Butler the Federal Aged care minister this week stated that he knew of a resident in Sydney who paid a 2.1 million bond to an aged care facility.
He then asks ‘is that fair?
It certainly doesn’t sound fair -in fact it sounds usurious as it was meant to do.
What are these bonds that he is describing?
They are accommodation bonds that residents may have to pay when they move into an aged care facility.
We note from the 6 page document provided by the Department of Health & Aging that
‘ Residents requiring low care or entering an extra service place (at high or low level care) may be asked to pay an accommodation bond’
Yes Mark the bond as you know is a requirement and
‘ Whether a resident requires high care is determined at the time of entry to a permanent place by the evidence available at that time. Relevant evidence may include the assessment by an Aged Care Assessment Team, assessment by the aged care home if the person has been receiving respite care, and other evidence such as doctors' or hospital records.’
Yes. the government assesses the resident under ACAT.
So let’s from the document also add
An accommodation bond (bond) is an amount a resident may be asked to pay when they require low care or enter an extra service place. A bond is paid to an Australian Government subsidised aged care provider called an approved provider. The approved provider is the organisation that owns and operates an aged care home.
A bond is like an interest free loan to the approved provider and, for a bond charged on or after 1 October 2011, by law must only be used for permitted uses. These permitted uses include: capital expenditure, refunding bonds, refunding debt accrued for capital expenditure and refunds, investment in particular financial products and loans for capital works or investment in particular financial products.
A transition period to allow approved providers to prepare to comply with the permitted uses will operate until 30 September 2013. An approved provider may operate more than one aged care home and bonds can be used for capital works at any of their aged care homes.
A bond can only be charged for entry to an aged care home that is certified as meeting minimum building and care standards. Information on a home's certification status can be found on the Department of Health and Ageing's (the Department) website at www.health.gov.au or by calling 1800 200 422*.
An approved provider is allowed to deduct monthly amounts, called retention amounts, from a bond for up to five years. The Australian Government sets the maximum retention amount. For the current maximum retention amount see the Department’s website at www.health.gov.au or call 1800 200 422*.
The bond balance (i.e. the bond minus retention amounts and any other allowable deductions) must be refunded to the resident or their estate within specified timeframes when they leave the aged care home.
Yes Mark the facility must refund the monies minus 19,380* generally to the estate within 14 days of probate.
Mark we would argue that this was as defined where you spoke as a ‘<b>sin of omission.’
It was mentioned more than once at the meeting that there would be ‘no scaremongering’.
What is it then when the intimation was there?
Mark also stated that an aged care facility asks all about your assets on application to a aged care facility.
He compared it to the shop keeper asking you ‘what is the credit card limit before you buy’.
Yes you have a choice to have the provider or the government ask you those questions.
Helen who was here on Saturday stated ‘they even want to know the colour of my underwear’when discussing filling out a Centrelink disability application.
She is so unhappy with the government that she even carries her passport in her handbag.
That is a new one for us.
Who would you prefer & just maybe it would be better for you to see us before you see either.
How much bond may a resident pay?
There is no fixed amount for a bond. The amount of the bond is to be agreed between a resident and the approved provider.
Bond sizes can vary widely between residents in an aged care home as well as between homes, even in the same locality. A resident cannot be charged a bond which would leave them with less than 2.25 times the basic aged pension amount. This is called the minimum permissible asset value.
This value is currently 41,500.
For the full 6 page document you can go to the Department of Health & Aging or email us for it as all government sites almost need a licence to navigate them.
Nikki wrote 3 weekends ago in the Week Australian ‘taking charge’ about her 99 ‘Nan’ who ‘did not go gentle’ into a nursing home. Nan says’ there’s no dignity in getting old ,Nik.’
Nikki summarises the event as ‘that extreme stress, at any age, is caused by a lack of control’.
It is very often the event is urgent & you need advice within 3 days & hence early advice means more control.
Who knows, Just maybe a 2.1million bond might be right for you.
We must also thank to local MP Graham for inviting us there. We wanted to ask Mark the question “is the accommodation bond paid to the estate ‘ or ‘What happens to the accommodation bond?’ but they both had to go as ‘the Boss’ [their words] was in town.
We thought ‘the Boss’ was the voter who turned up today to listen & heard everyone else. However, thanx Graham.
Also we must congratulate Jackie who works for some government department who spoke at the meeting of ‘for all the bad stories you hear of in aged care there are many more good & happy ones.’
Our tec. David wrote today ‘Thanks John, You’re a champion. Regarding Dad’s do you think we have done enough or the right thing placing him at Bulimba? Respect your thoughts & opinions, David
We replied ‘David its where we would go ourselves Well done’
Not that we are in a rush as we have to walk the daughter up the aisle first.
You may find you have some control when you know more & you are welcome to call us on 07 3848 1088 or email us or visit our websites.
>John McAuliffe
NRAS Opportunities in SE QLD
This is the latest Property Solutions Development and the only that contains NRAS.
It is a mixed use development with a village atmosphere and integrated with Rail and Bus and located close to the airport and linked to the CBD via the new M7 Tunnel.
We are running NRAS seminars and these are informative nights and we am certain you will enjoy the evening.
What is NRAS?
NRAS is a government initiative that over ten years will provide participating property investors with a subsidy of over $100k - tax free.
NRAS is an abbreviation of the National Rental Affordability Scheme, introduced by federal and state governments.
Essentially, investors that participate in the NRAS scheme, agree to rent their properties for 75-80% of market rent and, in return, receive tax-free government subsidies of about $10k per year for ten years - this far exceeds the extent of the rental discount.
With subsidies of around $100k+ (while the subsidy is currently a bit under $10k pa tax free, it will increase in line with market rents), there is understandably considerable comment, and this has grown in recent months.
Positive comment has (obviously) focused on how investors can benefit from the tax-free government grants. There is more on this below.
But there has also been some negative comment, as might be expected with any initiative, particularly ones that might seem "too good to be true".
For those concerned about the quality or price of NRAS properties, the recommended approach is the same as for any other property - obtain research.
Like any properties, some NRAS properties are better value than others.
The best are very good value (and they should be the same price as otherwise identical non-NRAS properties in the same development).
Attributes of NRAS Properties
NRAS will not appeal to those seeking the "cheapest" property in an area.
This is because:
- the government will not provide the NRAS accreditation unless the properties meet or exceed specified minimum quality standards, so there will typically be properties of lower quality that are cheaper.
- the properties must be new, so they will naturally be more expensive than older properties
- there is an additional (modest) cost to developers in going through the government approval process, which developers can reasonably expect to recover.
- the properties will not be discounted, because they are in high demand from investors, and supply is limited (only 50,000 NRAS subsidies have been budgeted for nationally, and the rental demand is estimated by government at 1.6m)
While investors should be prepared to pay a fair price for an NRAS property, they certainly should not expect to pay an unreasonable price, and do not need to.
Comfort with NRAS can be found from reading the government-issued NRAS Policy Guidelines (over 40 pages) - for a copy email us
Financial Implications.
For those that are comfortable with the NRAS concept of $100k tax free over ten years, we have some of the strategies that we have been working with over the last year or so.
The strategies revolve around how the NRAS subsidy can most effectively be utilised to benefit clients. The subsidy started at $8k pa and has increased in line with market rents.
These differ across states, but in recent years the increase has been almost 6% per annum in most regions and the NRAS subsidy has now risen to a bit below $10k pa.
You might therefore reasonably expect the total NRAS subsidy to be in the vicinity of $120k over the ten year life of the scheme, tax free.
Not only is this additional income stream tax free, but it is also guaranteed, even if the property is vacant, thus reducing cash flow risk should the income stream be intended for other purposes.
{Note that the subsidy will not apply if the property is vacant for more than 13 weeks of the year - however, this possibility is extremely remote because there are only 50k NRAS allocations budgeted for, they are not allocated unless they are in locations of excess rental demand, and the properties are in high demand as they are rented for 75-80% of market rent;
in practice, the government-approved NRAS rental managers have a queue of eligible tenants waiting for a property to become available, so not only do the properties have very low vacancies, but the property managers can select the best quality tenants from an extensive list}
In some cases on the property can be cash flow positive even before the NRAS subsidy is received (depending on the marginal tax rate of the investor, and the location of the NRAS property).
We will discuss what is available at the seminar.
This means the investor would have the full $10k per annum to use for other purposes.
In other cases, while the pre-NRAS returns involve a cash outflow, after the NRAS subsidy is received there will still be surplus funds available.
The Seminars on NRAS properties available will be held at Nundah on
• Thursday 8th November @ 6.30pm
• Wednesday 14th November @ 6.30pm
• Thursday 22nd November 6.30pm
• Sunday 25th November @10.30am
•
• and on the Gold Coast at Broadbeach
• Wednesday 28th November @6.30pm
You are welcome to call John McAuliffe on 07 3848 1088 or email or contact us through our websites.
5 expensive mistakes of the unadvised
5 expensive mistakes of the unadvised
Sometimes
helping people avoid expensive mistakes can be as valuable as setting you on
the right path to achieving your goals.
People will sometimes say they can’t afford financial advice. But for many, not having advice can be twice as expensive.
Not
only can we guide you along the road to achieving your financial goals but we
can also help you avoid the potholes on the way.
Some
common mistakes made by clients who haven’t received financial advice and ways
on how we demonstrate our value in our conversations with you.
1. Too little too late
Most people only go through retirement once in your lives. Many financial planners go through it on a weekly basis. Too often, planners see what happens when people face retirement with too little money to sustain a comfortable retirement and too little time to make up the deficit.
Even
clients that have sought advice earlier in life are sometimes reluctant to
commit to a plan to reach your retirement goals. They cite mortgages,
renovations, overseas travel, school fees and not planning to stop working as
reasons to put off seriously investing in your long-term future.
A
nest egg will give you the freedom to choose to stop working or slow down when
they choose.
The
government has deliberately set up a system that favours those who start early
and stay on track.
The
combination of compound interest and Government incentives favour the tortoise
over the hare.
2. Pay unnecessary taxes and fees
People generally don’t want to pay more tax than they need to. But they quite often do.
Taxes
can act as a drag on our clients’ efforts to achieve your financial goals. This
is where our technical expertise and relationships with specialist tax
accountant can make a huge difference to clients. Working with the accountant, we
can help clients to identify taxes and understand your options.
Here
are three taxes we speak to our clients about:
- 15% tax on
earnings in super for clients over 55
- Excess
contributions tax for superannuation payments
- Potential salary
sacrifice contributions taken as income
- Capital gains tax
on short-term investments
Paying
more fees than is necessary can have a similar effect to the above taxes. Some
examples to speak to clients about include:
- administration
fees on multiple super funds
- self managed
super funds with low balances
- older-style
“fee-guzzling” investment products
- complex
investment schemes that add little value and are not understood by the
client
3. Fall for investment fads
Investing can be very emotional. Envy and greed often tempt clients to chase hot asset classes, sharemarket sectors, managed funds or property schemes.
History shows that this rarely pays over the
long term. Tech stocks, speculative mining stocks and highly leveraged property
investments have all caused financial hardship for a large number of retail
investors.
As
a financial adviser, we can provide discipline for our clients to take the
emotion out of investing by helping you understand your attitude to risk and
educating you on a strategic investment framework that is appropriately
diversified and tailored to your individual risk appetite.
4. It won’t happen to me
Clients are often either unaware or unwilling to admit that risk exists in your lives. We can help you articulate by developing a contingency plan (sometime called a “plan B”).
The
contingency plan includes an inventory of the risks faced by clients and the
way they are currently managed.
5. Fail to plan
As the old saying goes, “if we fail to plan, we plan to fail”.
This
is where we step in. Goals often lie under the surface in a person’s
sub-conscious.
Our value is helping people to identify and
articulate these goals and then to help you visualise what success looks like.
If
your goal is to see the world, ask you to visualise stepping on the plane.
Once
our client’s have the vision, they will be far more motivated to achieve those
goals.
John McAuliffe
Are you having fun & Super is a con.
Pauline
asked us that question whilst enjoying great hospitality with Steve on Saturday
night.
Are you reluctant to say ‘no we are not having fun’ as that would
be an admission of failure. But can we say ‘yes
we are having fun’.
We suggest at
the school drop off to ‘have fun’ at school when we drop them off. We hope they
do.
We suspect however that most families don’t. Australians on average have as much wealth as anyone who has lived before . There are 132,000 millionaire families here
& surely they are having some fun.
We would
suggest that they are having fun because they
have no debt & are working for
themselves.
This week
Porter S who writes a global wealth newsletter says that is exactly what to tell
your kids.
1.
to not have debt
2. to be self employed. [Steve is self employed & having fun as he has a passion for his
work]
You are
welcome to email us for that advice that Porter provided. He
argues ‘they could be a millionaire by
the age of 40’.
When we
meet our PCMS* clients for the first time & every subsequent meeting we
remind them that ‘they will pay back to the bank 3 times ‘at least what they borrowed.
If the average Australian debt is say $400,000 then no wonder the banks are
profitable. No wonder Australians have little else.
Terry aged
68 was only too happy this morning with the CBA dividends that he received
& he will claim back the franking credits on the taxx that the CBA has paid
next taxx return.
However too
many listen to their Mums & must buy a house as they always go up.
Professor Steve on Business TV this week was saying & has been for some
years that ‘house prices will deflate over the next 10 years by 40%’.
Another
very good reason for your kids to wait .
We have always suggested that if you are to buy a
house & yes families need & deserve a home
That
1. Will you have 30% deposit so as you
have the better bank loan & maybe the mortgage is cheaper than the rent.
2. is this your last home as costs such
as stamp duty & commissions are a year’s savings?.
3. Where are you sending the children
to school?
If not then
your kids should wait. Porter suggested & we have previously harped on it
that there are too many who marry then buy a house on too little, then have a
family which means 1 income with many mouths & then divorce. Great for the Bottom Feeders.
No wonder no fun.
On Sunday
we were discussing Harry Potter with another Mum who wanted a pool. Another pet hate when there is a
council pool which produces Olympians only 1 K away. $30,000 which would be better off in the debt
& not paying back 90,000+.
When we
commented that we don’t expect the
government to allow lump sums to pay off the mortgage on retirement this
Mum she articulated ‘Super is a con’.
We are in
agreement with her when we all feel that Bill Moth & Precious Penny & Co
can’t keep their hands out of your 1 trillion cookie jar. All governments &
they are all the same must change this age of entitlement & reduce their
footprint over us.
We are also
in agreement with the CPA, the government’s other compliance officers, who
similarly suggest ‘the nation is
headed for a retirement savings "disaster" and calls on the government to examine placing limits on access
to lump-sum payments upon retirement.’
You may not be able to pay off the mortgage, buy the new
car, take that canal trip or the cruise.
It is all of these factors which are out of one’s control
which provide that feeling of no fun.
There is fun when
you feel more in control. You are more in control when the what ifs can be answered.
As we discussed with Archie recently ‘what if the banking system goes or your are
redundant today’. Do you have cash under the mattress for that?
You are more in control when you have no debt but that takes
a desire & taxx minimising & discipline to achieve that.
Our PCMS* & Debt Zapper work if you want them to.
Mark is happier today
when he knows that if he comes off his bike that the family is cared for &
the family doesn’t have to rely on the widow’s pension which is only for 14
weeks.
Check out our website for your
own estimate of your needs. Your super
won’t have a million cover & last after retirement.
You may have more fun when you have a little nest egg outside the super & the house as both are illiquid
& can’t be accessed. We have some ideas on that portfolio which might
include ‘fondling gold’ this
year. We have model portfolios for your
attitude to risk.
What if as is forecast that
interest rates drop to 2%. Yes great for those with a mortgage but poor for
Terry who is living off his savings income. However as a retired adviser he
bought in to CBA @ $25. You may not want to do so at the current CBA $57.
As we suggested to Cheryl yesterday everyone has their own
financial problem & hence they require their tailored solution . This can mean more fun for you. We await
postcards from Cheryl who is off to China & Thomas & Allison who are
doing a 49 day cruise around South America. They are having fun as no debt
& income from investments. Neither are relying on Big government.
John McAuliffe
Suppose your granny is in the 1%
Suppose your granny is
in the 1%
What occurs
on Boxing day every year is what is known in the aged care industry as ‘Granny
Dumping’ when the family realises that Granny is no longer independent.
Yep there
are about 221,000 residents in aged care & of those about a quarter are
aged under 65.
I.e. It might
not be Granny or Pop but maybe Molly
falling of a ladder or your son king hit from behind or a car accident or a birth
incident.
As the
family has gathered over Christmas there is the realization that something needs to be
actioned. However dropping her off at the closest aged care place is not as
simple as maybe dropping of the family poodle at the RSPCA before going away on
holiday.
As government
is nearly always involved then there are usually four steps & a system to follow
& paperwork at each step. Then there are technical terms that you need to
comprehend.
1.
Before entering an aged care
facility your health must be assessed to decide which level of care is appropriate.
The assessment can be performed by any doctor, nurse or social worker who is a
member of an Aged Care Assessment Team (ACAT).
1: A2. There are
two types of residential aged care facility – hostels (‘low level care’) and
nursing homes (‘high level care’) which is why the health assessment.
The
main difference between hostels and nursing homes is the level of care provided. Hostels provide personal
care, accommodation and some level of nursing care, whilst nursing homes
provide 24-hour nursing care and accommodation.
a.
an accommodation bond (a once only
lump sum) or
b.
a daily accommodation charge (ongoing).
a.
a basic daily fee to pay and
b.
there may be a ‘daily income-tested
fee’.
c.
An ‘extra service’ fees payable.
·
which facility does she want to go
to.
·
What upfront payment will she need
to pay?
·
How much will we pay for ongoing
care?
·
What happens to the pension?
[This is particularly relevant if the house is sold as
it could be an asset that pays an income.]
·
Do we keep the home or should we
sell it.
[there are conditions
& exemptions as you would expect]
·
What does Granny leave in her
estate?
·
Do we pass the hat around for her in
the meantime?
·
And plenty more.
·
Do you want to pay the minimum
daily fees or do you want the maximum care?
[ be warned as the facility does NOT need to accept
you]
If Granny is in the top 1%
financially then she most likely have
done her estate planning. However 60% haven’t made wills & Enduring Powers
of Attorney & other powers are usually sensible.
As there are many
variables then there is no single solution for each Granny or Pop.
The easiest solution may
not be the ideal as there are consequences affecting the pension & the
costs vary accordingly.
We also comment on those unfortunate
25% many who have an accident that it can take years to move through the court
system & then the solicitor might take 30% of the lump sum awarded.
Hence some tailored income
protection up to 75% of your income is preferable to what the government offers
in the meantime.
Welcome to call on 07 3848 1088 or email or visit our websites & be warned over
Christmas there is up to a 3 month wait
for ACAT.
John McAuliffe