Jim’s Pool Care: Central Coast & Newcastle
Thank you for your time this afternoon.
Please find below a summary of what we discussed:
What is a financial planner?
A financial planner will help you determine the steps necessary to reach your goals.
We act as your personalised GPS. Guiding you from where you are now to your destination (your goals & dreams)
We understand that talking about finance, money, debt and superannuation can be boring, daunting and sometimes overwhelming.
That is why our team partners with you, using all of our knowledge, skills and experience to make the complex simple.
We do all the heavy lifting to ensure you have the time to build and create the life you have always wanted.
Income Protection Insurance
If you fall through a skimmer box – break your ankle, or lift a bag of salt & put your back out requiring surgery, what happens when you get injured?
Who services your regulars?
What happens to your income & business?
- income protection can support you in this instance.
- generally income protection covers up to 75% of your regular income (plus 9.5% superannuation), paying you a monthly income to substitute your income.
- as discussed, there are different waiting periods that range from 7 days up to 2 years. A waiting period is how long you have to wait before the insurance policy will pay out. Generally the longer the waiting period, the cheaper the insurance premium.
- in addition, we mentioned the different factors that can affect your premiums, height, weight, age, smoking status, medical history & family medical history.
What if you were to pass? What would happen to your family? Would they need to sell the home? Move schools? Does your spouse get to retire?
Life insurance can support in ensuring your family is looked after. Generally life insurance will look to repay your mortgage & cover any lost income that you may have generated for the family.
Insurance policies can be owned personally & paid from your after tax income or via your superannuation fund. There are advantages & disadvantages to each scenario & not everyone will have the same solution.
There are a few important factors when considering personal insurance policies;
- make sure you use a reputable company that has history of paying claims.
- ensure that underwriting is undertaken at application not at time of claim.
e.g. medical tests, personal medical history, family medical history etc. rather then the insurance company looking at your medical history & looking for reasons not to pay out at time of claim.
Investment
As you guys come into your busy season, there is generally more income & cashflow available to you.
There are a number of options for you to consider:
- save to help you get through next winter
- repay debt – whether that is business debt or your home loan
- invest in your business (more staff/more vans)
- or even start an investment portfolio for your future
Many of our clients have the home loan rates at low 2% so they are looking at alternative options for their surplus cash.
Debt Repayment Strategy
Talking of home loans – we find many of our clients who have a plan with our & when they are repaying their mortgage, tend to repay their mortgage sooner.
Recently we helped a 57 year old tradie who had $300,000 mortgage.
He was pulling more money out of his business, paying higher amounts of tax to repay his mortgage sooner.
We worked on a plan, where he saved $20,000 per annum in tax and repaid his mortgage 2 years quicker.
Superannuation
The following stats outline the gap many self employed people face:
25% of self-employed workers don’t have any super
The average super balance of a 60 year old self employed worker is $129,000, whilst for someone who is employed the balance is much higher at $288,000.
We have found that many self employed workers run the risk of not having enough savings to enjoy a comfortable lifestyle in retirement. Many are so involved with their business, that they have little to no time to focus on themselves & their financial future. They understand their profession & are experts in their fields, yet do not know where to start when it comes to planning their retirement.
We have seen many people that don’t believe in the superannuation system or state that their business is their super & they will sell it when they retire. However, succession planning can come with it’s own complications.
‘Super’ is money set aside while you’re working, so you’ll have money to live off when you retire.
You direct a percentage of your salary to your nominated super account. This money is invested by your super fund and earns returns, which will help grow your retirement savings.
The Government’s ultimate goal is to produce generations of self funded retirees that do not rely on the Government during retirement.
However, an alternative way to view superannuation is to think of it as another tax savings vehicle or entity.
Within your personal name, you can pay tax up to 45% (marginal tax rate), companies can be taxed up to 30%. Whereas, superannuation is taxed at 15% during your working life (accumulation), with taxed reduced to 0% during retirement (pension phased).
In each entity (whether it be your personal name, company or super fund) you can invest in cash, term deposits, shares, managed funds, property/real estate & art. We have even seen many trade service business that have even purchased storage units using their superannuation assets.
The question then for many Australians is where do you want to be holding your retirement assets?
Do you want to be holding them in your personal name, where you may be subject to 45% tax plus capital gains tax (should your investments grow over the years) or alternatively would you prefer to hold your retirement investments within superannuation, being taxed at a maximum of 15% with potential 0% capital gains when you sell your assets in retirement (pension phase)?
Should you have any questions about any of the topics we discussed, whether it is just reviewing your super or insurance policies or something else to do with finance,
please feel free to reach out to Matthew McCabe directly on 0410 581 424 or via email on mmccabe@newcastleadvisor.com
Contact our Newcastle Financial Planners to see how they can significantly add value to your situation.
