Catch up on Concessional Contributions

If you plan on retiring at 65 years old, chances are you’ll need your retirement savings to last you around 15 to 20 years – at least. Saving for retirement can be daunting whether you’re still in the middle of your working career, nearing the end or already retired. The good news is, however old you are, there are always ways to create a more comfortable retirement for yourself. When should you start planning for retirement? The earlier you start planning for retirement, the better. Even if you think retirement is a long way off, it’s important to think about how much money you will need, what kind of retirement lifestyle you want to lead and how you can give yourself a head start. 40s and early 50s When you are in your 40s and early 50s, it’s easy to push your retirement to the back of your mind. Things like paying off your mortgage, sending your kids to school and looking after elderly parents can seem like more pressing commitments. However, taking time to plan for your retirement will make it easier for you in the long term. Good steps to take in your 40s and early 50s include: Do the maths and figure out how much you will need to live comfortably in your retirement. Don’t forget to factor in bucket list goals and travel. Sort out your superannuation. Remember if you are a business owner, you are responsible for your own super. You may prefer a self-managed super fund (SMSF). Get on top of your debt. Seek advice about ways to reduce your debt. For example, making extra contributions toward your mortgage. Consider making additional contributions to superannuation to help boost your retirement savings and reduce your tax e.g. salary sacrifice or personal concessional contributions to super. Sort out your personal insurance cover to ensure you have a safety net if you are unable to work due to a disability Illness or death. 50s and early 60s If you’re in your late 50s or early 60s, it’s not too late to start making a positive move towards a more secure retirement. This is a great time to work out a retirement plan and figure out how you want to transition out of work. Steps to take as you move towards retirement include: Make non-concessional contributions to boost your super. Consider a self-managed super fund (SMSF) to have greater control over your super. Look into a Transition to Retirement (TTR) pension if you want to reduce work hours without losing your income. Review your personal insurance cover to ensure they reflect your financial position. Over 65 years If you are already in retirement or considering your options, there are still some things you can do to make your retirement more comfortable. Considering that your retirement may last 20 years or more, financial decisions you make now can still impact your future. Things to consider if you are over 65 years old include: Get advice about what to do with your super – whether to take it out as a lump sum, start a super income stream or leave it in there. Review your investment strategy to better suit your retirement needs. Plan your living situation. If you sell your home, you may be able to contribute up to $300,000 to your super. Make sure you have the proper estate planning and that you have the right people stepping in for you to make financial and personal decisions on your behalf if you are unable. Planning for your retirement can be daunting, whatever age you are. Make sure you seek professional guidance and financial advice when making decisions about your future. The team at Design Financial Advisory helps busy business owners, working professionals and couples approaching retirement work towards a comfortable retirement that aligns with their goals.

Directly held property makes up approximately 19% of all SMSF assets, indicating that many SMSF trustees consider it’s an important and significant part of a diversified portfolio. There are numerous strategies and ways for property to form part of an SMSF’s investments and each must be carefully considered. Investment strategy first! Before any investment decision, it is imperative and a legal requirement that you as an SMSF trustee must consider your investment strategy. Your strategy should detail such things as how much exposure you would like to the property market, the form of exposure and how appropriate it is for your current circumstances. A well-diversified portfolio is essential to provide income for retirement and spread investment risk so that any single asset class, such as property, does not dominate your SMSF risk and returns. Direct investment A common form of property exposure is direct investment into a property. This can be in the form of either a residential property or commercial property. When purchasing a property with an SMSF’s cash there are some important considerations that must be worked through including: Your asset allocation and diversification. Potential rental income and property expenses. How close you are to retirement and the need for liquid assets to pay pensions. Unless the property is a business real property (BRP) you or your related parties cannot use the property: If the property is BRP you may be able to work from the premises which is owned by your SMSF. You may also be able to utilise the small business CGT concessions and contribution limits. Limited Recourse Borrowing Arrangements (LRBA) SMSFs may also invest in property through an LRBA. These are complex borrowing structures which allows SMSF trustees to take out a loan from a third party lender. The SMSF trustee then uses these funds to purchase a property to be held on trust. The lender only has recourse to the property held in the trust – this is why the loan is “limited recourse”. An LRBA should only be utilised when it is the right structure for your SMSF on the basis of SMSF Specialist advice. Some very important considerations in addition to the ones above include: Can your SMSF maintain the loan repayments over a long period of time considering asset returns, interest rates, liquidity, and contributions caps? Evaluating set-up costs and structures. Is your property valuation accurate? You cannot use borrowed money to improve the asset or change the nature of the property at any time. Do you meet the strict bank lending requirements? Typically, lenders require the SMSF to have a minimum of net assets of $200,000 or more and for the loan to have a loan to value ratio below 70%. Indirect investment Another way to gain exposure to property for SMSFs is through indirect investment. This can include listed invested vehicles such as listed investment companies and exchange traded. Managed investment trusts are also a common investment for SMSFs to gain exposure to property. Investing indirectly may suit your SMSF needs more than a purchase of a property because it is relatively simple and most likely will not require a large amount of capital. It also allows your SMSFs to get exposure to large value properties such as office blocks, shopping centres and industrial properties that would otherwise be out of reach. Investing in these products should be accompanied by SMSF Specialist advice. How can we help? SMSF Specialist advisors can help you understand how the different forms of property investment may or may not be relevant for your SMSF portfolio and the impacts it may have on you and your fund. Please feel free to give us a call to arrange a time to meet so that we can discuss your particular requirements, especially in regards to what property investment would be most appropriate for your SMSF. For further information, visit the SMSF Association’s Trustee Knowledge Centre ( http://trustees.smsfassociation.com/ ) to keep up to date with different asset classes you can invest in within your SMSF, including property, and reach your financial goals. As always, the above information is general in nature and may not be suitable for your circumstances. If you require advice, give the team at Design Financial Advisory a call today on (08) 6263 9933 to discuss your needs.