MONEY WITH JASON CUNNINGHAM

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1 MONEY WITH JASON CUNNINGHAM RETIREMENT It s something that most of us don t like to think about - but we will all be there one day: retired. We might have an idea of the retired lifestyle we would like to have, but the big question is, will we have enough money to make that happen? Money man Jason Cunningham hunts down a typical Australian couple and shakes them into planning a good healthy retirement. Much to their surprise they discover that they can have a good retirement if they make some changes to their finances now and they don t have to be big ones either!

2 FAST FACTS Around 60% Australians admit to being unprepared to stop working and expect to run-out of superannuation and cash savings half-way through their retirement 56 % of Australians have never saved for their retirement outside of their superannuation A survey of 1000 Australians, conducted by banking giant HSBC, found workers expect to be forced to rely on the government pension when their retirement savings run dry after an average of just 11 years. The pension is $ / fortnight* The average super balance on retirement is $280k ** $20 billion a year is paid by Australians in Superannuation fees RETIREMENT GENERAL INFORMATION THE PENSION In Australia by age 65 each one of us is entitled to a pension amount from the Australian Government. The pension amount is $ a fortnight. *This amount alters according to how much savings and assets you have when you retire. SUPERANNUATION Each of us has superannuation an amount put aside for when you reach retirement age. At time of filming, employers must pay into your super account a minimum of 9% of your earnings*subject to change depending on government policy, which is in addition to your salary or wages. Generally you are entitled to super contributions if you re between years old and paid $450 or more in a month. When can you access the fund? You can access it from age 65 even if you are still working.

3 Who looks after your money? Companies full of financial planners invest it and manage it. Fees are debited so make sure you roll all your super accounts into one to avoid losing money in fees. WILL YOU HAVE ENOUGH? The big question on everyone s lips: will you have enough to live off when you retire? To afford the same things you have and do now. When we retire, our weekly amount will consist of our super and pension entitlements. Jason Cunningham has tips that will help you reach your annual income goal when you retire. JASON S TIPS 1. Take Money From Yourself Most mortgages start off on a year plan. By increasing your mortgage payments, your loan can be paid off much quicker. For example on a $300,000 loan at 6% PA on a 30 year plan, by paying an extra weekly amount of $100, the loan can be reduced by 9 years. That s a saving of $165,000 in interest payments. There are plenty of iphone Apps around which can do a quick calculation for you on the spot such as Loan-What If or online such as: 2. Invest in Superannuation Add any extra savings into your super and benefit from the smaller tax figure. Depending on income, some tax payers tax rate can be up to 45%, yet the super tax rate is a flat 15%. Furthermore, extra pay into your super could lower your assessable income which may move you into a different tax bracket and lower your income tax. 3. Make Your Money Work For You Put some money into some long term investments such as the share market. Although the market has the potential to fluctuate, when you leave your money in for

4 a good amount of time, ten years or more, then there are real benefits and more so if you make a regular weekly or monthly contribution. Over a twenty year average the market has shown a consistent growth. The tip is not to buy reactively. Ignore the hot tips and fast money, and see it as a long term investment. CASE STUDY: LISA AND TIM Meet Lisa and Tim. Lisa works as a graphic designer and runs her own small business. Her hubby Tim is a scientist. They would like to have around 70 - $80,000 per year in retirement so that they can live a good life overseas holidays, buy a new motorbike and dine out regularly. Yet based on their current financial state of play, they will only have $58,252 a year. As may be the case for most of us, Lisa and Tim actually spend more than they realize. After evaluating their income and outgoings, Jason calculates they should have $20,000 a year to put into savings. Jason s tips however will get them back on track. 1. By paying off an extra $100 / week on their mortgage ($5,200), their home will be paid off in 4 years. 2. By salary sacrificing into their super accounts they can take advantage of a smaller tax percentage. Tim $6,000 and Lisa $3,600 per year 3. By making a monthly contribution ($500/month or $6,000 annually) into shares they will reap the benefits even more so on their long term investments Jason reveals that by following his 3 steps above, Lisa and Tim will have $94,040 per year. That's a difference of $35,788 a year. POINTERS TO BE AWARE OF Making extra payments into your mortgage Check if your loan allows you to make extra payments and if there are any: fees for making extra payments limits on how much you can repay over the life of the loan fees or penalties if you pay off the loan early.

5 Some home loans with fixed rates may not allow extra payments. Overall, making extra repayments can cut your loan by years and can save you thousands. Extra Contributions into Super You can enter an agreement with your employer to have some of your salary or wages paid into your super fund instead of to you. This is called making Salary Sacrifice Contributions. This may have tax advantages for you because the standard 15% tax on super is probably less than the tax you would have paid if you had taken the money as salary. Concessional contributions are taxed 15% in the super fund, but if you exceed your concessional contributions cap, an extra tax of 31.5% applies to the excess. Read up on this at: Buying Shares There are different ways you can buy shares on the stock market. The most common is on the share market using a broker or broking service where, for a fee, you will receive advice and recommendations on which share to purchase. Other ways include buying them via an employee share scheme (where you are able to purchase shares in the company in which work often offered minus brokerage or at a discount price to market price) via a managed fund, or in a float (when a company offers shares to the market to raise capital usually requires you sending in an application form in the prospectus and your cheque to the company.) Whichever way you choose, make sure you are happy with your understanding of the stock market and seek financial advice if you are ever unsure about anything. Visit ASICs website for details on buying shares: Seek Professional Advice Seek trustworthy advice from an established and experienced financial planner before embarking on any new plans.

6 SOURCES **ABC April 2013: The Great Unknowns of Australian Super News. Com. Au February 2013 Australians Short on Retirement Funds Read more: Tables of Average Super Amounts According to Age _Aussies_have_Apr12.pdf WEBLINKS Super Salary Sacrificing Super super/setting- up- super- for- a- worker/salary- sacrificing- super/ The Pension pension NB: Figures shown throughout this document are estimates and may not reflect your situation. Consult a professional before making any financial decisions.