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Pros and cons of home reversion

Super (AU): Pros and cons of home reversion

Home reversion is when you sell a share of the future value of your home whilst still living there. You receive a lump sum payment and continue to own the remaining share of your home equity. 

Pros

Cons

Posted on 25 February '21, under super. No Comments.

What is the transfer balance cap?

The transfer cap refers to the amount of money that can be transferred from your superannuation account to your tax-free ‘retirement phase’ account.  

At the moment, the transfer balance cap is $1.6 million and all individuals have a personal transfer balance cap of $1.6 million. 

Exceeding the personal transfer balance cap means that you have to:

The amount in your retirement phase account may grow over time, due to investment earnings. Although this may grow beyond the personal transfer cap, you will not exceed the cap. However, if you have already used all your personal cap, and then your retirement phase account goes down, you cannot ‘top it up’. 

The rules applied to capped defined benefit income streams are different from other income streams – this is because you can’t usually transfer or commute excess amounts from other streams. 

Posted on 18 February '21, under super. No Comments.

Choosing investment options in your super

Many Australians ignore the decision of choosing investments for their super and often end up in the ‘default’ option as they make no effort to choose otherwise. 

Default options that aim for ‘balanced’ or ‘growth’ investments tend to have 60-80% of funds invested in shares and property. This approach for investment is based on the best-suited strategy for a large number of members across the years they will be investing. 

However, the default options may not be the best for your financial circumstances and risk profile. Understanding different investment options and how risk assessments work will help you choose better investment options. 

Further, aim to change investment options over time rather than sticking to the same one. For example, you could consider changing options once you begin receiving a pension. 

Posted on 15 February '21, under super. No Comments.

SMSF Pensions

SMSF funds can provide pension or lump sum benefits during retirement. Retirement is a condition of super release if you have reached your preservation age. Depending on your date of birth, your preservation age will be between 55 and 60. The benefits from your super are tax-free once you are over the age of 60. 

If you plan to start a super pension income stream, then the funds from your accumulation account need to be transferred to your retirement account to fund your pension. Your retirement account has a cap of $1.6 million, so you can transfer that amount as a lump sum but no more. The earnings on these funds are tax-free. 

Each year, you need to withdraw a minimum percentage of your account balance from the retirement fund. This minimum percentage will depend on your age.

Alternatively, you can start your Transition-to-retirement pension if you have reached your preservation age but you are still working. However, unlike the funds that support your super pension once you begin retirement, these are taxed at 15%. 

Posted on 4 February '21, under super. No Comments.

Calculating how much super you will need when you retire

Calculating how much super you will need will help you decide whether you should be contributing more to your super. You can utilise salary sacrifice schemes to increase contributions, especially if you are not using your entire salary. 

There are two main factors that impact the amount of super you will need when you retire:

Costs in retirement

Consider the major costs that you will need to continue paying during retirement. Examples include:

Estimate how much money you will be needing for each of the aspects that apply to you. Make sure that your estimations are as realistic as possible. Some things, such as medical costs, may be difficult to accurately estimate, so try to keep a higher margin. 

The lifestyle you want

Think about what sort of lifestyle you want once you retire and consider how much money that will require. The Association of Superannuation Funds of Australia provides an estimation of how much money you will need depending on what sort of lifestyle you want:

These are estimations and the numbers may be different depending on your circumstances and lifestyle.

Posted on 28 January '21, under super. No Comments.

Basics of SMSF investing

Setting up an SMSF fund is the simplest step. Establishing a fund which delivers you consistent returns from your investments is much more difficult. 

Investing successfully involves determining precise goals and picking investments which will effectively achieve those goals. The advantage of SMSFs is that you can build a portfolio which reflects your short-term and long-term goals in response to changing market conditions.

In an SMSF fund, your investment options are:

Before you begin investing, consider what might be the best way to diversify your portfolio. How you portion your investments will depend on your funds, the market, and your goals. Regardless of what your plan is, diversification should be a priority. 

Choosing an SMSF as opposed to an industry or retail super fund provides you with more flexibility, but also with more responsibility. Researching before investing is key if you want the best out of your SMSF. 

Posted on 21 January '21, under super. No Comments.

Protecting yourself from super scams

Superannuation is an attractive target for scammers as a significant volume of funds are placed into super funds by Australians. 

There are some straightforward steps you can take to protect yourself from super scams. 

Know the rules

Check your balance and contact details

Stop identity theft

Posted on 14 January '21, under super. No Comments.

Finding your lost super

Changing of name, address or job can mean that you lose track of some of your super. This means that there is money that belongs to you that is not currently in your super fund. Finding your super will collate your previous lost funds with your current account.

It is likely that your lost super is held by the ATO. Create an account on myGov and link it to the ATO and select ‘Super’. 

Once you have done this, you will be able to see the details of all of your past and current super accounts including any lost or forgotten ones. You will also be able to find funds which have been held by the ATO on your behalf. Further, you will be able to consolidate your super funds into a single fund. 

Once you have found your lost super, remember to conduct research about which fund is providing you with the best returns before you choose which fund to consolidate with. 

Posted on 7 January '21, under super. No Comments.

Life insurance through your super

Over 70% of Australians have life insurance through their super fund. This acts as a financial safety net through your super if something unexpected happens. 

There are 3 main types of life insurance that super funds usually provide:  

Pros of life insurance through super

Cons of life insurance through super 

Posted on 17 December '20, under super. No Comments.

Conditions to accessing your super

You may find that accessing your super is the best way to meet your financial needs in a given situation, for example in the early stages of the pandemic. Individuals are able to legally access the funds in their super earlier but there are conditions of release. 

Common conditions of lease:

There are more conditions of release that allow individuals to access their super early:

Posted on 10 December '20, under super. No Comments.

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