Finance Quiz with Quizmaster Ash

 

Are you ready to put your financial knowledge to the test? Our office Quizmaster Ash has put together a set of questions designed to sharpen your skills and expand your money-minded prowess.

Here at Income Solutions we are all about empowering our clients with the tools and knowledge they need to make informed financial decisions. So buckle up, grab a pen and put your knowledge to the test! (answers at the bottom)

 

1.What is the primary purpose of the Super Guarantee (SG) in Australia?

a) To provide government welfare benefits

b) To mandate employer contributions to employees’ super funds

c) To offer tax breaks on personal savings

d) To subsidize healthcare expenses

 

2. What type of life insurance pays out a lump sum benefit to the policyholder’s beneficiaries upon their death?

a) Term life insurance

b) Whole life insurance

c) Trauma insurance

d) Income protection insurance

 

3. What is the term used to describe an investment strategy that aims to mimic the performance of a specific market index?

a) Active investing

b) Speculative investing

c) Passive investing

d) Growth investing

 

4. Which of the following documents allows individuals to specify their wishes regarding the distribution of their assets after death?

a) Superannuation beneficiary nomination form

b) Tax return

c) Last will and testament

d) Investment portfolio summary

 

5. What age are individuals in Australia typically eligible to access their superannuation funds?

a) 55 years old

b) 60 years old

c) 65 years old

d) Preservation age, which varies depending on date of birth

 

Thanks for playing along, stay tuned for more quizzes with Quizmaster Ash!

 

 

 

Answers:

  1. b) To mandate employer contributions to employees super funds
  2. a) Term life insurance
  3. c) Passive investing
  4. c) Last will and testament
  5. d) Preservation age, which varies depending on date of birth

 

Income Solutions Geelong No 2 Pty Ltd, ACN 644 550 078 T/A Income Solutions is a Corporate Authorised Representative of Personal Financial Services Limited ABN 26 098 725 145, AFSL 234459
The advice in this post is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.

June Newsletter 2023

 

As we welcome winter and approach the end of the financial year it is the perfect time to get your financial affairs in order. It is a great time to set yourself up for success in the new financial year and reassess your goals and budget.

In our June Newsletter you’ll find some strategies to get you started, along with some tips on transitioning into retirement and if a testamentary trust is right for you and your loved ones.

Read more

WHAT MATTERS TO YOU MOST?

~ A Financial Future that reflects what you value most ~

In reading a recent article on the founder of clothing giant ‘Patagonia,’ Yuon Chouinard, the central theme of being driven by your values and what matters to you most shines through. And while most of us are not multi billionaires running large companies, our own lives can reflect a commitment to what we too care most about. Further, a well-constructed financial plan can provide a road map to achieving a lifestyle the aligns with this objective.

Building a career, business or long-term financial plan should be far more than a process with an end goal to be achieved, Yuon Chouinard demonstrates in the above-mentioned article that it should be a living out everyday of who we are and what we believe in, reflecting how we want to live. At Income Solutions, the stated core of our ‘Four Step Process’:

An individual’s goals are personal. Sharing your goals with others is a crucial success principle. By sharing your aspirations with us, we can understand what it is that you want to achieve and assist you in achieving your goals.

Income Solutions, Our Process

Being driven by a purpose that we are passionate about, no matter what we are working towards, motivates us to achieve. Yuon Chouinard states Patagonia’s purpose as:

Patagonia’s purpose is: We’re in business to save our home planet.

This is straight forward and direct, highlighting that your own purpose and values that drive your own plans and goals can be simple when accurately articulated. Income Solutions process is designed to ensure your identified ‘purpose’ informs your stated individual goals! It will then follow that the ‘success’ we achieve together is the ‘success’ that you value most.

Further, the theme of succession planning is highlighted throughout the ‘Patagonia,’ Yuon Chouinard story, his individual and business succession planning once again mirrors his values and purpose. We do not need a net worth of Patagonia’s $1.7 billion to set up a legal structure that protects our assets. At Income Solutions we are passionate about working with our clients to set up a structure that transfers your assets in a way that best reflects your purpose and values.

A quote from this article can apply more broadly to all of us:

“Each year, the money we make after reinvesting in the business will be distributed as a dividend to help fight the crisis.”

While Patagonia’s decision is to reinvest in fighting issues that affect the planet, it is totally up to you what you would like to reinvest your investment earnings in, whether it be planning for a secure retirement, financially assisting family or having enough money to spend your time on causes and issues that you care most about. Of course, it does not have to be any single one, but a collection of all. Yuon Chouinard and his family have the financial security to live the life they choose, just as with the right planning, you and your family could too!

Income Solutions purpose is to create Real Wealth https://www.incomesolutions.com.au/creating-real-wealth/ for our clients, planning for a life free from financial worry and allowing for the smooth transition of assets from generation to generation. Highlighting once again, that we do not have to establish a multibillion-dollar company to achieve according to our purpose and values.

Referenced for this article:

https://www.abc.net.au/news/2022-09-15/patagonia-gives-company-to-climate-change/101445138

Creating Real Wealth

A young redhead boy is apple picking with his family in an orchard in autumn. He is smiling and giving an apple to his mother.

Income Solutions mission is to create wealth for our clients.
Wealth is the absence of financial worry, an income you don’t outlive, and a meaningful legacy to those whom you love.

Income Solutions MISSION STATEMENT

If you are healthy…. You are wealthy! And while this is a great sentiment and for any of us who have been experiencing illness recently it will certainly resonate. However, today we know that it is not as simple as this, as in recently quoted studies our health and wellbeing can be, up to a point, directly linked to our income https://www.incomesolutions.com.au/creating-wealth-that-creates-wellbeing/

We need money for our essential needs, and to participate in a community we need access to resources to make this possible, hence the creation of wealth in financial terms is required to fully embrace life in all its stages.

As it is Income Solutions core ‘Mission’ to create wealth for our clients, it is worth exploring the actual concept of wealth and how it might differ to simply being rich or having access to a high Income. The creation of wealth is working towards a sustainable income, as opposed to being rich and having access to money. Robert Kiyosaki, the author of ‘Rich Dad Poor Dad’ has encapsulated this concept very succinctly in the following quote:

“The rich have lots of money, but wealthy don’t worry about money”

In our Mission Statement we make clear that we view wealth as being the ‘absence of financial worry’ and in the above statement by Kiyosaki he states that the ‘wealthy don’t worry about money’. Core to this is that fact that wealthy people work towards obtaining a long-term sustainable income, live within their means and save and invest money in income producing assets such as an investment portfolio.

Creating real wealth usually involves avoiding debt for discretionary spending and instead borrowing less than you can afford to buy income producing assets.

A formula for achieving an ‘income that you don’t outline’ is described in a video Titled ‘Your Tree’ presented by Income Solutions founding Adviser David Ramsay https://vimeo.com/460822636 Using the analogy of an apple tree to describe an asset, he explains that the income your asset produces, the ‘apples’ it grows that you have access to picking will serve you better than ‘lopping off a branch’, and thus decreasing the size of your principal asset. Having an asset that generates an income without eating away at the principal ‘the tree’ will ensure your asset stays in tack not only throughout your lifespan but also as an asset for future generations, thus creating a meaningful legacy for those you love.

At Income Solutions we believe achieving wealth is achieving peace of mind https://www.incomesolutions.com.au/avoid-shattering-financial-outcomes/ A mind free from financial worry provides real wealth for our clients as they can then focus on what they care about most.

Referenced for this article:

https://moneysmart.gov.au/grow-your-super/how-much-super-you-need

https://www.incomesolutions.com.au/family-tree-research-providing-lessons-of-the-past/

Create your own story in retirement


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Retirement means starting a new chapter of your life, one that gives you the freedom to create your own story, as you decide exactly how you want to spend your time. While retirement may not be part of your immediate plans, there are advantages to giving some thought as to what retirement looks like for you and how to best position yourself, well before you leave the workforce behind.

A time of profound change
Even setting aside the huge financial implications of leaving a regular salary behind, retiring from work represents one of the biggest life changes you can experience.

For most people, the freedom of being able to do whatever you want to do, whenever you want to do it, is pretty enticing. However, it is quite common to have mixed feelings about retiring, particularly as you get closer to retirement. What we do for a living often defines us to some extent and leaving your job can mean a struggle with how you perceive yourself as well as how others view you. Coupled with the desire for financial security in retirement and the need to make your retirement savings last the distance, you have a lot to be dealing with.

So, let’s look at the things you need to be thinking about sooner rather than later, from an emotional and practical perspective, to ensure your retirement is everything you want it to be.

Forge your own path
Don’t be tied to preconceptions of what retirement is all about. Retirement has evolved from making a grand departure from the workplace with the gift of a gold watch to a more flexible transition that may unfold over several years. Equally, if the idea of a clean break appeals to you then that’s okay too and you just need to plan accordingly.

The same applies for your timeframe for retirement. The idea that you ‘have’ to retire at a certain age is no longer relevant given advances in healthcare and longer lifespans. If work makes you happy and fulfilled, then it can make sense to delay your departure from the workforce.

Planning how to spend your time
It sounds obvious but you’ll have more time on your hands so it’s important to think about what you want to devote that time to. A study found that 97 per cent of retirees with a strong sense of purpose were generally happy and satisfied in retirement, compared with 76 per cent without that sense.i Think about what gives your life meaning and purpose and weave those elements into your plans.

If you are part of a couple, it’s critical to ensure that you are both on the same page about what retirement means to you. This calls for open and honest communication about what you both want and may also involve some degree of compromise as you work together to come up with a plan that meets both of your needs.

Practical considerations
There’s a myriad of practical considerations once you have started to plan how you’ll spend your time.

Here are a few things you may wish to consider:

Where do you want to live? Do you want to be close to a city or are you interested in living in a more coastal or rural area? Are you wanting to travel or live overseas for extended periods?

What infrastructure and health services might you need as you age? Are these services adequate and accessible in the area you are thinking of living in?

What hobbies and activities do you want to be involved in. Do you need to start developing networks for those activities in advance?

Who do you want to spend time with? If you have children and grandchildren, think about what role you’d like to play in their lives upon retirement.

The best laid plans…
Of course, with all this planning it’s also important to acknowledge that the best laid plans can go astray due to factors beyond your control. It’s important to keep an open mind and be adaptable. While redundancy or poor health can play havoc with retirement dreams, it’s still possible to make the best of what life throws at you.

And of course, Income Solutions is here to help you with the financial side of things to ensure that retirement is not only something to look forward to, but a wonderful chapter of your life once you start to live out your retirement dreams.

Referenced for this article:
https://www.inc.com/magazine/201804/kathy-kristof/happy-retirement-satisfaction-enjoy-life.html

Protecting Assets in a Discretionary Trust


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Trusts are a popular and effective investment structure to manage and protect your family’s assets, and you don’t have to be worth a fortune to benefit from having one.

Despite their appeal, they are not for everyone. Indeed, it is suggested that if your assets are less than $300,000, and that is not counting your super, then it may well not be worth your while.

But for those with sufficient assets, a family trust can be an effective way to protect your family’s assets and limit your tax liability at the same time. So how do they work?

What is a family trust?
A family trust is a discretionary trust, where assets are placed in the care of a third party, the trustee, who manages it on behalf of the beneficiaries.

Discretionary trusts are so named because the distribution each year of the income and capital gains earned by the trust to the beneficiaries is at the total discretion of the trustee.

Beneficiaries are members of the trust and might include parents, children, other close relatives, and their spouses. A beneficiary may also be a company.

Key benefits
As mentioned, the key benefits of a family trust are asset protection and tax minimisation. A trust provides protection from creditors in bankruptcy, but the contents of a trust can be included as part of the matrimonial pool when it comes to divorce.

All income of the trust, including realised capital gains, must be distributed each year. It is then included in the beneficiary’s assessable income and taxed at their personal tax rate.

As a result, a trust can work particularly well from a tax viewpoint, if you are on a high marginal tax rate but your beneficiaries are on low marginal rates. If all individual beneficiaries are on a marginal tax rate greater than the company tax rate, then a family trust may include a corporate beneficiary to reduce tax.

More flexibility
Another advantage of a family trust is that it offers a flexible, tax effective structure to accumulate wealth for retirement alongside superannuation.

Their flexibility also makes them particularly attractive for small business owners who may run the business through a company structure but hold shares in that company in a family trust. The trust can then direct different types of income such as rental income from your business premises, franked dividends from company profits or capital gains to different individuals.

A family trust can also help with succession, allowing you to pass control of the family trust to the next generation by changing the trustee, without triggering a tax event.

There are some disadvantages too. There is the loss of ownership as the trust now owns the asset, not you. Also, if the trust suffers an investment loss, those losses cannot be distributed to offset your personal tax liability but must remain inside the trust. And there are costs involved in setting up and managing the trust.

Setting up a trust
To set up a family trust you will need to consult a lawyer to create a trust deed. You will also need to do the following:

Appoint a trustee and determine your beneficiaries

Decide which assets to include in the trust (a wide range of assets including stocks, bonds, managed funds, cash, real estate, antiques and fine art can all be included)

Apply for an ABN and a Tax file number (TFN) and open a bank account in the name of the trust.
It can cost some $2500 to set up the trust and there will be annual fees as you have to file with the Australian Tax Office each year. Stamp duty applies in both NSW and Victoria on establishment but not in other states.

What about testamentary trusts?
Another type of trust popular with families is a testamentary trust which is created within your Will and does not come into effect until your death. Similar to family trusts, they have the advantage in estate planning of providing tax and asset protection benefits for the future.

Family trusts are popular for good reason, but you need to make sure it is appropriate for your family’s circumstances.

At Income Solutions we support and advise our clients to seek specialised legal advice to ensure whether a discretionary trust may be appropriate to their individual circumstances.

An Income for Life


Building your capital base is important as this is what will provide you with a passive, worry free, consistent and tax effective increasing income ~ An Income that will provide you with choices and options into the future for you and your family.
In looking closely at what makes up your Capital Base it is worth noting that typically your Capital Base comprises of one or more of the following:
~ Superannuation
~ Rental Properties
~ Term Deposits
~ Shares
An important point to make is that most people are focused on the capital value of their assets and often ignore the assets Income capabilities, but it is imperative to remember that it is the income provided by the asset within the capital base that provides you with ongoing funds and an income that will assist you with creating the lifestyle you choose.
When investing to build your capital base that will provide you with an income stream it is vital to consider that into the future ‘How Much is it going to take to do everything I wish to plan for’? Further, remembering that there are only 3 real asset classes that will produce an income, consisting of.
~ Cash
~ Property
~ Shares
Income Solutions has a proven and focused investment strategy that clearly details how our clients can build their capital base to increase and maximize long term income capabilities.
Please click on to the following short video title: ‘Building Your Capital Base’ to hear from Income Solutions Principal, David Ramsay providing further details:

https://www.youtube.com/watch?v=5U7UlZ_j52s

FAMILY TREE RESEARCH PROVIDING LESSONS OF THE PAST

Today, researching our family tree has become a popular past time, especially in retirement powerful new software is allowing people to ‘dig for gold’ among the many branches of their past relations and tracking many untold stories that often commenced in far off places on the other side of the world. As new ‘branches’ of their tree are explored, and new stories reveal themselves it is not uncommon to discover that many families had wealth and assets that somehow failed to pass down to future generations. Individuals amid researching their family tree often wonder why? How did this happen? And while the reasons for this failure to transfer assets down the generations may be varied it can provide us today with the motivation to ensure that the lessons of the past are learnt, and that in many years to come our future relations are not left wondering why we did not correctly plan for the transfer of assets between generations.

In the past, the most common problem was that there was no clear financial structure in place for people to follow, it relied on those inheriting assets and wealth to apply their own, often ad-hoc investment strategy. Today we are fortunate that individuals have the power to correctly transfer asset and wealth through a number of legal vehicles, one of which is a Testamentary Discretionary Trust. Broadly speaking this structure allows for all wealth and assets to be held in a Trust which will provide your family members or nominated beneficiaries with an income stream from the assets that are held in the Trust. This structure not only provides an income stream for your nominated beneficiaries it provides a structure that can be kept in place for future generations too. You are not only providing a heritance you are providing a financial ‘road map’ your beneficiaries can choose to follow and pass on to their own beneficiaries.

The road map provided by the setting up of a Testamentary Trust can be an important tool that allows generations to navigate a financial pathway that leads to the transfer of wealth through generations. In fact, here at Income Solutions we are seen firsthand how people have benefited when their family members set up a sound financial structure that allows the beneficiaries to have peace of mind, knowing that while they are grieving the death of a parent and loved one they do not have the stress of trying to make often complex financial decisions during this time, the road map their parents have left behind for them to follow is sound and will serve them well into the future!

Obviously, there are a variety of different legal and financial structures to ensure the transfer of wealth between generations that may or may not suit you according to your own individual and unique circumstances, but what we can learn from previous generations and what those that research their family trees have had insight into, is that those who simply leave wealth through a standard will to individuals that provides no clear financial structure or pathway for beneficiaries risk that the wealth and asset ‘branch’ of their family tree will be lopped off.

At Income Solutions we are passionate and committed to ensuring your wealth and assets never go missing off your family tree and provide a continuous and worry-free income stream into the future for your beneficiaries. Please contact us at [email protected] to speak to an advisor and access the many tools and advice available to start planning for or reviewing intergeneration wealth creation.

LIFE INSURANCE TO PROTECT YOUR SPOUSE, CHILDREN……. and PARENTS

For over three decades, we have been providing advice about building and protecting the wealth of our clients.  One of our client service offerings is a “family tree” discussion.  On the surface, this discussion addresses the correct transfer of wealth to beneficiaries.  Following the tree imagery, this is the money transferring from the top of the tree down into the branches, or family members.

In this article we want to explore what happens when money flows in the opposite direction, from the bottom branches and works it’s way up to the top of the tree.  This can be a devastating destroyer of wealth that is often triggered by sudden events that are full of emotion.  It can have as much impact upon a client’s retirement as a bad investment decision or an economic downturn.

We often hear of situations where one child suffers from an addiction or illness and grandparents suddenly becoming full time carers for their grandchildren.  Other times, it will be providing financial support for one child who repeatedly makes bad financial decisions and always needs to be bailed out.  Sometimes it might be a child applying emotional pressure on a parent to become guarantor on a home loan or to supply a lump sum for a home loan deposit.    Some of these situations can be avoided others cannot, but they are obvious examples of people placing financial strain on their extended family members and parents.

However, what we often do not hear about is the less obvious which was highlighted when a client contacted Income Solutions to make a withdrawal from their retirement savings.  Their son’s wife had died unexpectedly.  The son and his wife had a mortgage and three small children.  Their son was a stay at home father and as a result, there was no income coming into the family now.  Upon investigation, it was discovered that the son had a medical condition making it unlikely he would be able to secure work.  The son’s income needs therefore extend beyond the time frame of caring for young children and expanded to the full term of his working life.  The daughter in law had earnt an above average salary and was on a steady career projectory, allowing the family to enjoy a comfortable lifestyle.  This had provided our clients with the illusion that their son and his family were financially secure.  As it turns out, the son did not have any significant savings and as a family they had never put in place any additional protection cover.  Their theory was that they would put every spare cent they had into reducing their mortgage and they did not want to be paying money on insurance premiums they’d likely never need.  The wife had a small amount of life insurance held within her employer super fund, based at the default amount of cover for her age, and a modest account balance held within the employer super account.  This was enough to partially pay down the mortgage, leaving a much smaller debt but no ongoing income support for the surviving husband to pay down the remaining balance, let alone cover the family living costs. 

Retired parents should consider asking about the financial protections adult children have put in place for themselves.  This is especially relevant when they have a young family of their own.  Often pride dictates an answer “my son is doing really well, he’ll have that sorted”.  Other times, our clients don’t know, haven’t thought to have the conversation with their children or feel they are over-stepping the mark if they ask their children about their finances.   Our client in this example fell into the “doing well and will have that sorted” category when we asked about their children’s personal protections.  It is not our place to take things further and that’s where it lay. 

The one thing that is commonplace amongst all parents we see is that they love their children and grandchildren.   Of course, our client stepped up to help their child in need.  The result is that our client has steadily withdrawn funds to improve their son’s situation.  The issues that stem from this one, unexpected event are many:

  • Our clients were just on target to meet their financial retirement goals.  They no longer are on target and needed to reduce their personal spending accordingly.  Their living costs have risen however, because they are no longer just supporting themselves but are also buying necessities for their grandchildren, such as new clothes and covering costs for school excursions. 
  • Our client’s lifestyle goals in retirement are now changed because they need to provide additional help to their son and his young children.  They love all of their grandchildren equally and it ways heavily upon them that they have limited time available to spend with their grandchildren from their other children. 
  • Our clients have 5 children in total and always intended to distribute their estate equally between all 5.  However, now they know they have provided a large benefit to one child, which is to the financial detriment of their remaining children.  They are retired and they have no way of replenishing these funds to compensate their remaining children.  They are fearful that this will cause resentment amongst their other children.

Ensuring that you have invested in adequate Life Insurance in its many forms does not just protect yourself, your children and spouse, it protects your extended family members too.   It is important as adults with dependants and financial responsibilities that we do everything within our power to ensure we do not place an unfair financial burden on our older parents or family members.   Taking out comprehensive life cover according to our individual needs is core to achieving we never place our wider family members or parents in a financially precarious position.

Income Solutions offers a 4 step process that is free of charge and allows us to demonstrate the advantages of obtaining financial advice.  If you or a family member would like to find out more, please contact Income Solutions at www.incomesolutions.com.au  

A Family Tree to grow and build a Legacy of Love

https://vimeo.com/250548694

Leaving our wealth to the people we love the most can reflect the thoughts and feelings of our lifetime.

These thoughts and feelings maybe invoked by the arrival of a new child or grandchild? or maybe just a glimmer of intuition on a lovely sunny day that we might not always be around to offer support to the people we love the most?

Putting in place a multi-generational financial plan that equates with generational wealth creation may not only provide for your children and grandchildren, but has the potential to provide life changing opportunities for those family members into the future that you might never actually get to meet!

To provide the people you love the most with the opportunity of continuing their own Legacy of Love use the following video to revise your Family Tree: https://vimeo.com/250548694

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