CFP Issue 3

www.collinsco.com.au
Welcome to Collins Financial Planning Xpress
In this retirement issue, we look at some concerns that will need to be considered and some longer term
concerns which you may not have thought about.
ISSUE 3 | COLLINS FINANCIAL PLANNING XPRESS
In This Issue
 Comfortable vs Modest Retirement
 Turbo Boost Your Retirement Savings
 Retirement Living: Oh, So Many Choices
 A Guide For Planning For Aged care
 10 Retirement Commandments
COMFORTABLE VS MODEST RETIREMENT
One of the most obvious questions asked when planning for your retirement is what level of
comfort you want to enjoy in your golden years. To know what constitutes “comfortable”, the
Association of Super Funds in Australia (ASFA) publishes a quarterly survey as a guide to what the
average person spends per year.
The survey assumes home ownership and shows figures for a ‘modest’ and ‘comfortable’ lifestyle for singles
and couples. A modest lifestyle means better than just surviving on the age pension but still only being able
to afford fairly basic activities. Comfortable means being able to afford a broad range of leisure and
recreational activities, private health insurance, a reasonable car, good clothes, a range of electronic
equipment, with domestic and occasionally international travel.
The current figures for singles and couples living in Victoria are shown in the table.
MODEST COMFORTABLE
SINGLE MALE $ 23,811 $ 41,112
SINGLE FEMALE $ 23,974 $ 43,352
COUPLE $ 34,499 $ 59,495
With the current maximum annual age pension
for singles being just $22,721 and $34,252 for
couples, this is a powerful incentive to increase
your own savings.
It’s never too early to start planning for your
retirement. Speak to us about the options
available to ensure you don’t miss out.
Note: the pension figures quoted include the
Pension Supplement and Energy Supplement.

2www.collinsco.com.au
How much do I need to retire?
Most of us look forward to stopping work and living
the holiday lifestyle. “Retirement” gives us the
freedom to do the things we’ve always dreamed of
doing, but to achieve this goal will require a bit of
planning because, thanks to modern health care,
we’re living longer.
Statistics from the Government Actuary show that a
60-year-old woman can expect on average to live to
age 86 and a 60-year-old man to 83 years. Of
course, some people will die earlier and some will live
longer - but depending on when you stop work you
may have to support yourself for another 20 or more
years!
Your financial adviser can help you develop a
personal retirement plan, but here are some simple
rules of thumb to get you thinking.
How much capital will I need?
Let’s say you want to retire on $50,000 per annum
for the rest of your life. You want your income to
keep up with inflation and you want to pass your
capital on to your kids when you die.
Assume inflation will be about 2% pa and your
investments will earn 7% pa on average over the
long term. This means the “real” return is 5% pa.
Taking inflation into account means you will retain
the purchasing power of your dollar, ie. you will still
be able to buy a loaf of bread in 20 years!
To work out how much capital you need, divide
$50,000 by the real rate of return of 5%. On your
calculator this is $50,000 divided by .05 giving
$1,000,000. In short, this means you need one
million dollars. Obviously this quick calculation
doesn’t take income tax into account and there are
many strategies and entitlements to tax offsets that
can reduce the tax you pay on your $50,000pa.
What income can I get if I retire now?
Let’s try it the other way. Say you have accumulated
assets of $600,000 and you want to retire now.
This calculation is a bit harder because it depends on
when you retire and how long you will live, but the
following formula is a useful estimate. It takes into
account that if you retire earlier you will need to
spread your capital over a longer period.
So if you retired at age 60, your income would be
$600,000 times 0.06 (6%) giving $36,000.
Deferring your retirement obviously means you have
more time to earn an income, more time to let your
capital grow and a shorter period to spend it.
Again this doesn’t take tax into account and assumes
similar investment returns and inflation levels. It’s
rough and ready but will help you see where you
stand.
The next question is what to do if you need more
savings before you can retire. Before you start to
panic, talk to us, there are strategies that we can
employ to help.
AGE AT
RETIREMENT INCOME
55 Multiply your capital by 5%

Consider this case study.
Michael is 45 and he and his wife Sarah have been working away at their mortgage for some time. Now they
are beginning to see light at the end of the tunnel.
Michael’s employer is currently contributing 10% of his $110,000 remuneration package to superannuation
(that is $11,000 per annum). Michael thinks that he may now be able to afford more, but he is not all that
happy with the employer’s fund investment options. He discusses the situation with Mark, his adviser.
Together they agree that Michael should increase his contribution to 15% of salary.
From the next fortnightly pay, Michael’s pre-tax salary is lower by $211.54 but the amount he actually
receives will be lower by only $129.04 (since he will pay $82.50 less personal income tax as well). The
$211.54 pre-tax amount was paid directly into Michael’s new super account. This means that his after-tax
super contributions for the next year will be $14,025 instead of $9,350 and he has been able to select a fund
that better meets his needs.
Salary sacrifice to super is just one way in which you can enhance your retirement provisions.
If you would like more information about the options, contact us.
TURBO BOOSTYOUR RETIREMENT SAVINGS
Once your mortgage and other financial commitments are manageable, it is usually time to put the pedal
down on your super. Those prime income years, between age 35 and 50 in particular, should be used
constructively. However, the task may not always be easy.
Many couples choose to have children later and as a result, parents’ financial responsibilities can now often
extend well into their 50s, even 60s. Furthermore, the earning opportunities for many people over age 50
often begin to decline.
Other factors can also disrupt retirement savings planning - time out of the workforce to raise a family,
periods of unemployment or extended illness are but a few.
Is there a logical solution?
Usually, the least painful (and most disciplined) option is to use a
superannuation salary sacrifice arrangement. For most employed
people this can represent a useful and straightforward method of
bolstering retirement provisions.
It works like this
You agree to forego a specified amount of future salary and in
return your employer makes additional future super contributions
for an equivalent amount. This means your extra long-term
saving starts to accrue faster, pay by pay.
“Sacrificing” salary to super is also a tax-effective form of remuneration because if the arrangement is put
together correctly, no personal income or fringe benefits tax is payable on the extra amount of contribution.
You do need to keep in mind the impact of superannuation contribution limits however we can provide
guidance on this issue.

LEASE FREEHOLD
Ownership Operator holds title Resident holds title
Stamp duty N/A Resident pays
Maintenance Operator
responsible
Residents are responsible for
maintenance / repairs to internal fixtures of
unit. Body corporate is responsible for roof,
walls, grounds and common areas.
Refurbishment Operator pays all or
some of the
refurbishment costs
Resident responsible
Title deeds N/A Under a strata title operator may retain
With any retirement village, standard costs apply. These include:
 Entry fee for lease/purchase price for freehold.
 Service/maintenance fee (variable depending on property type and facilities).
 Exit fee for lease – also known as a departure or deferred management fee.
Important: Retirement village contracts can be complex. It’s imperative that you speak to your financial
adviser and a solicitor before making any final decisions.
Approaching retirement? Perhaps you’re already there and it’s time to do something different –
maybe radical, like selling up and moving?
Older Australians are living healthier, more active lives. Choosing the most lifestyle-appropriate housing can be
a dilemma. Downsizing is emotional – family homes hold years of memories. Yet doing so may free up enough
capital to fulfil all of your lifestyle dreams.
According to a survey by Seniors Housing Online, 97% of retirees are keen on independent living (no surprise
there), 78% would like to live in a community environment with recreation facilities, and 60% want their pets
with them.
Before making the jump, let’s look at a few popular options.
Retirement villages / Lifestyle resorts / Over 50s villages:
Community living can provide on-site security, emergency systems and staff to meet residents’ every need.
Some villages include facilities such as cafes, pools, restaurants and cinemas. Style of housing varies from
high-rise apartments to single or multiple bedroom villas; the choices are becoming endless as demand
increases.
Units are sold by lease arrangement or freehold. What’s the difference?
RETIREMENTLIVING: OH, SO MANYCHOICES

Granny flats
These structures can provide a nice opportunity to be closer to your family and have a role in the lives of your
grandkids.
With so many designs available they can be erected on most residential-zoned blocks. Costs start from
around $20,000 for flat-packs to designer units to match your budget. Additional costs include cement slabs,
site preparation and connections. Do your homework before making any decisions including contacting your
local council to check regulations.
Caravan/motor home
Are the wide open spaces calling and it’s time to hit the road? Living as a grey nomad sounds romantic, but
consider the following before trading your home for one with wheels:
 What if you become ill or need emergency medical attention? Make sure you have appropriate insurance
cover.
 Can you maintain the vehicle? What if it breaks down “out the back of Bourke”?
 What will you do with your furniture, belongings, etc? Factor in long-term storage.
 Motor homes and caravans, like cars, depreciate very quickly, especially if you’re planning to travel far and
wide. When you’ve gotten the road bug out of your system and want to return to a fixed address, be
aware that you may not sell your wheels for as much as you’d planned. This will have an impact on
affording your next home.
With so many options available (this article is just the tip of the iceberg), ask your financial adviser to help
you achieve the one that suits you best. After all, sixty is the new fifty and there’s living to be done!
W
e all have a tendency to concentrate on
the beginnings of retirement, the happy
times when we are free to pursue those
pursuits that in our busy working life we never
had the time to do—BUT—one aspect of retire-
ment which is often overlooked, or ignored, is
what happens towards the end of your retirement.
When your capabilities reduce and you need
assistance:
AGUIDE TO PLANNING FORAGED CARE
The latest Intergenerational Report tells us that Australians aged 65 years and over accounted for
14% of the population – and that figure is rising. Whether you’re concerned about your future self
or a loved one, aged care is an issue most of us will have to manage at some time in our lives.
At the time of Federation, Australians at birth had an average life expectancy of around 50 years. The most
common causes of death were infectious and parasitic diseases resulting from unsanitary sewerage and water
systems, poor quality food and limited health education.

Improvements in public sanitation, health and medicine have seen lower death rates and longer life
expectancies. As enhanced living standards meant we began living longer, cancer and heart disease became
our most common causes of death. The latter part of the 20th
century witnessed substantial advances in
medical treatment, which reduced the impact of these diseases and further increased Australians’ life
expectancy.
Given mounting pressures on governments to assist an aging population, more Australian families are taking
the support of elderly loved ones into their own hands – and this is where it pays to do early homework.
Assessment
Illness, disability or the passing of the years can make it difficult for you or your loved one to maintain an
independent lifestyle. The ideal is to remain in one’s own home for as long as is reasonable and safe, but
knowing when independence is no longer feasible is the difficulty.
Your first step is a visit to your doctor to discuss your or your loved one’s situation. If necessary, your doctor
can refer you to an Aged Care Assessment Team (ACAT). The ACAT consists of appropriately qualified people
usually based at a local hospital. They can visit the elderly person in their home and, following a government-
approved guideline, assess how much and what type of care may be required.
Levels of care
Prior to 1 July 2014 care options included in-home care, and low or high level residential care. Since then the
two levels of residential care have been replaced by a single level providing standard accommodation and
personal services. Residents pay for optional additional services.
TYPE OF
CARE
BEST SUITED FOR WHAT IT INCLUDES WHAT IT COSTS
In home
care
Elderly person
capable of living
safely and
independently in
their own home.
Personal care—showering,
dressing, grooming, etc.
Errands—grocery shopping, bill
paying, visiting friends, laundry,
washing and ironing, etc.
Meal preparation.
Companionship—outdoor
activities, reading, letter writing,
assisted exercise, etc.
The government provides subsidies for home care, but basic fees
apply in line with the age pension.
Those on income in excess of the age pension may be required
to pay more.
Maximum fees payable are determined by the level of care
required and other living expenses: rent, utilities,
pharmaceutical, etc.
Residential
care
Elderly person not
able to live safely in
their own home or
who, due to illness,
disability and / or
frailty needs
continuous care.
Accommodation services—
including bedding, laundry,
meals, cleaning and toiletries,
building maintenance and daily
activities.
Personal care assistance—
including bathing, eating,
dressing, moving,
communicating, administering
medicines and arranging health
care appointments.
Fees apply to all residents of care facilities, depending on level of
care and ability to pay.
Fees include:
 Basic daily fee—covers living expenses, meals, laundry, etc.
 Means tested care fee depending on income and assets.
 Accommodation cost— based on income and assets.
 Fees for extra or optional services.
Points to note are:
 Government assistance packages are available. New residents
undertake an assets test conducted by Centrelink or
Department of Veterans’ Affairs to determine eligibility.
 Accommodation costs can be paid as a lump sum refundable
deposit, a regular rent-type payment or a combination of both.

Planning and preparation
Statistics forecast an increasingly aging population, according to the Australian Institute of Health and
Welfare, a man now aged 65 could live to be 84 years old – a woman could see 87. A challenge for any
government. Consequently, future generations may not have access to current levels of government
subsidies.
While Australians have embraced the concept of self-funded retirement, we evidently need to start
considering those decades beyond.
Could your superannuation support you for twenty plus years – including funding the level of aged care you
might need? Could you afford the additional expenses if your partner remained in the family home while you
moved into aged care facilities?
We can assist you to prepare a strategy that helps you afford the care you or your loved one might need,
from help around the home to more substantial care. As well as pre-retirement planning so that Refundable
Accommodation Deposits are available when needed.
Living long enough to receive a letter from the Queen is one thing – affording it is another!
It’s all in the planning.
You may not be aware:
At Collins Financial Planning we have a number of Accredited Aged
Care Advisors w ho can assist you to plan for the financial
effects of going into Home Care or Residential Care.
1. Prepare—financially what do
to do and
to front of is a
you are not be
incredibly and I short.
2. Understand— finances how
and what to any
on 'expert'
to be talk to
is you can be
correct information.
3. Plan— at Powers of
and financial
is and
and of costs for
not become a
the of
not your children.
4. Active— and
or to buy book
a walking back by
a for the
books you would
but
10 RETIREMENT COMMANDMENTS
With 40 years’ experience in financial services, I have learnt
a thing or two about retirement in my time. These are the 10
commandments that I will use to guide my life into
retirement. Are they yours?

5. too old to learn a
instrument, me
to a
the guitar, and
is I sit a and understand
about me while I drink my
at time f the day!
6. Work— may be but it not
if do of
to your
lawns,
sit a totally
by the mow
of hectares-should I or anti-clockwise?
7. No on past. not to
you should or
or what other people have.
activities and you
you have now always remember
an of people who
you.
8. don't Welcome
time of you
day and of just
don't let other
9. Use your assets—remember you
to the funds and
to assets to
children to
them. At of the it do them
favours, and it and what
to achieve.
10.Ignore convention—retirement is not a time to
sit on your bum and watch the world go by. As I
have said before, don’t let people tell you are too
old to try, or do something new.
I am not saying that everyone should follow my set of
rules, but we all should have a set of rules by which
we live our lives, and our retirement should not be
different.
With thanks from
Mark Teale, Centerpoint Alliance
Retirement is not just for the old to worry about, at all stages of
life you should plan and think about it. In the ups and downs of life
place money away in good times and attempt to preserve it in bad.
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The material contained in this publication is intended to provide a general summary only
and should not be relied on as a substitute for professional advice.
This document contains general information only. In preparing this information, we have not taken into account your investment objectives,
financial situation or needs. Before making an investment decision, you need to consider whether this information is appropriate to your
needs, objectives and circumstances. You may need to obtain professional advice to help you make an investment decision on whether this
information is appropriate to your needs, objectives and circumstance. Collins Financial Planning does not give any warranty as to accuracy,
reliability or completeness of information contained in this document.
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Collins Financial Planning Pty Ltd
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Contact Us
Give us a call for more information
about our services.
Collins Financial Planning Pty Ltd
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T: (03) 9680 1000
F: (03) 9689 6605
E: financialplanning@collinsco.com.au
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