Aged care is not just selling a house

As I sit here and write this article, my 99 year old Grandfather is in hospital, and this time, it doesn't look good. "Oh, that doesn't mean that he won't rally again", the family say to each other, "after all, he has surprised us many times before". "No", says the hospital Physician, "this time he's not wearing out, he's worn out".

We are now at the pointy end of the stick. He is 99, and possibly (more than likely) won't make 100. For a lot of us, we assume that death will be sudden. It will be a car accident, terminal cancer, or a heart attack. We never think of actually just growing old, and our bodies just wearing out. It is almost as though we have a built in blind spot for our own future; we can imagine ourselves until about age 70, but then things start to get a bit hazy. We know that we will look "old", that we will probably even smell "old". We will have health issues, and will worry that the kids won't visit. Above all, we know that we shouldn't have a fall, because that will be the end of us.

Which leads me to point out that many of our Grandparents, and Parents, are leading a life of "non-living". We plan for so many areas of our lives, and yet when it comes to leading a fulfilling life in our twilight years, we leave it to chance. We rely on our family to provide much needed company and stimulation rather than seeking it out for ourselves. Is it a lack of confidence, or is just a lack of forethought? Or, sometimes, is it being told by our families that we shouldn't be doing things at our age?

My Grandfather has had a good life, but he has been lonely since my Grandmother died a few years back. On the other hand, my ex-husband's Grandmother is still going strong in her 90s, and when asked, she will say it was because she was widowed in her late 30s and so most of her life is outside of the home, rather than within it. I know this is true, because when I take my Daughter to visit I have to book in to make sure that it doesn't clash with her social calendar.

Aged care is not just about finding an "appropriate" facility when Mum gets too frail, and forcing the sale of the family home. It is about helping our elders, throughout their twilight years, to make decisions that will help them lead happy, and fulfilling lives. We should be encouraging more independence in thought, not just physical movement. We all have a different life expectancy. Our partners, our friends, our loved ones, they will either outlive us, or be outlived. Society needs to acknowledge this, and be more active in supporting each other through this life transition.

Planning ahead will help us for when we, ourselves, get there. Men's shed, the Red Hat Society, RSLs, all of these things are available to us as we age, and they are so important. Join clubs, together, or separate, maintain your interests outside of the home, and when things start to get physically tough, ask for help so that you too can continue to be the best (older) version of you.

Find Erin* at Achieveit Financial Planning, or call for an appointment on 07 4638 5011.

*Authorised Representative of Madison Financial Group Ltd ABN 36 002 459 001 AFSL 246679

This is general information only and does not consider your personal circumstances. You should not act on any recommendation without obtaining professional advice specific to your circumstances. We recommend you speak to a financial adviser before acting on any of the information you read on this website.

Do you have children under 25? Then you need to read this....

Just so we're clear, I am not a conspiracy theorist by nature, and I am definitely not an alarmist. What I am is pragmatic, and passionate about the difference that insurance can make to a family. On the occasions where public policy, such as the 2018 budget, ignores common sense, and disadvantages the vulnerable in our community, I go into full rant mode, soapbox and all. This is one of those times.

The 2018 budget has come out and said that they are going to change the current system of default insurance cover, to an "opt-in" system if you are under 25. This means that when your Son or Daughter get their first job, and start having superannuation paid, you are going to have to hound them to tick the little box, and send it back to their superannuation company so that they have cover. Now, my daughter is only 5, but I can't imagine that I will develop the nagging prowess needed to get her to do anything that is remotely boring by the time she is 16. And what happens when she turns 25? Will she automatically be awarded insurance, or only if she opens a superannuation account with another provider? And what about the pre-existing condition exclusion clause for that time where she went and spoke to a Psychologist after her friend/family member/dog died and she needed someone to talk to?

Did you know that nearly 20% of all car accident deaths are in the 17 to 25 year old age group and that over a quarter of hospital admissions due to land transport accidents were aged 15 - 24? According to TAL's comparison calculator, only 10.5% of their Total and Permanent Disablement claims for females under 35 were paid for Accidents and Injuries. So the tragic News story that you see on Facebook is only the tip of the iceberg. Young people die or become disabled every day, and for a variety of reasons. What you don't necessarily hear about are the financial ramifications, and the ripple effect of not being covered. I'm here to change that.

The argument quoted by the Government is that those under the age of 25 don't need cover because they don't have mortgages or dependents. Apart from being a gross generalisation, I think that the politician in charge of listening to whoever proposed this argument is missing the point. A Ratecity report showed that in 2014, 42% of Australians under the Age of 24 had personal debt of between $10,000 to $30,000, and yet according to the Australian Bureau of Statistics their average superannuation balance in 2017 is only $5,011.

So, if my Daughter dies in a car accident at the Age of 24, and hasn't opted in, who will pay for her personal debt ($30,000), her funeral expenses ($15,000), and her legal fees ($5,000). Me (it's going to be me, isn't it?)? Her live in boyfriend (unlikely)? The Government (and we laugh, and laugh)? Dying isn't cheap, and someone needs to pay. Looking at this, I will not only need to go through the heartache of losing and burying my Daughter, but I'll also need to pony up around $45,000 that her Estate can't cover. Sure, some of the debts will be absorbed by the creditors, but that will just increase costs for society as a whole as loan providers factor in the increase in bad debts.

Now, let's assume that she didn't die in the car accident, but she sure as the sky is blue won't be working again. Ever. All of that potential, gone. All of our hopes and dreams, shattered. Not just for her, but any future retirement that I may have entertained as well. Rather than being able to provide for herself with insurance funds, and having the dignity of some independence, she will be emotionally and financially reliant on me. I will need to support her, and myself, for the rest of my life. Rather than receiving a regular income, and paying tax, on an income protection claim, my Daughter will become a burden to me. Now as a Daughter myself, I would rather die than do that to my parents. And I can guarantee you, that is what will happen.

So, to those congratulating themselves over saving those young ones an "extra" $500 a year, you aren't actually saving anyone anything. What you are doing is transferring the risk. The insurance companies can afford to charge a pittance of a premium because currently the risk pool is so broad. They will need to increase their premiums to cope with less people paying. So the risk is transferred to the individual who can't afford the now increased premiums, or to the parents of the individual who will no longer be able to afford to retire.

Find Erin* at Achieveit Financial Planning, or call for an appointment on 07 4638 5011.

*Authorised Representative of Securitor Financial Group Ltd ABN 48 009 189 495 AFSL 240687

This is general information only and does not consider your personal circumstances. You should not act on any recommendation without obtaining professional advice specific to your circumstances. We recommend you speak to a financial adviser before acting on any of the information you read on this website.

Financial planning for the future generation

Most parents would like to provide their children with a life that they can enjoy. What that looks like can differ greatly from one family to another, and even from one parent to the other. Many parents would like to provide financially for their children into adulthood, and then there are others who prefer to focus on life skills, and have a sink or swim attitude (no prizes for guessing where I sit on the spectrum).

One of the things that we always ask at Achieveit Financial Planning is what your ambitions for your children are. Your answers can tell us a lot about where you sit, and what kind of allowances that will need to be made for your own personal financial plan. For instance, if you would like to help your children attend University, then we need to establish what that assistance will look like, and work that into your future cash flow considerations. Or perhaps University isn't a priority, but giving the children a leg up into the property market is? Others still may provide board-free accommodation until the children are in full time work, and then they're out on their own. There really is no right, or wrong choice, as long as the expectations between the child and the parents are communicated.

Having this conversation about your children, with your partner is essential. There is the chance that you may not be on the same page, in which case, you will need to negotiate to find some common ground. Once you have these goals in mind, then we can start planning for them. What is your timeline, and how can we best use your resources to accomplish your goals? As always, the earlier you start with these things, the better.

Find Erin* at Achieveit Financial Planning, or call for an appointment on 07 4638 5011.

*Authorised Representative of Securitor Financial Group Ltd ABN 48 009 189 495 AFSL 240687

This is general information only and does not consider your personal circumstances. You should not act on any recommendation without obtaining professional advice specific to your circumstances. We recommend you speak to a financial adviser before acting on any of the information you read on this website.

A lifetime of changing needs

If you speak to any financial planner, they will all agree that personal insurance is a cornerstone of financial security. What is not as widely pushed is that reviewing your insurance cover is just as important as reviewing your risk profile for your investments and superannuation. This is because, as your tolerance to volatility in the market changes over your life cycle, so do your insurance needs.

Now, as a disclaimer, I will put out there that I live in the camp of they are ALL important, and has been fully insured since the ripe old age of 21. However, not everyone is as risk conscious as myself when agreeing to cover, and not all budgets are able to stretch to cover every single base, so although I am not advocating turfing your other cover, I am saying that as a BARE minimum, you should be having a conversation with your financial planner around the following.

The glory years

You're young, and just starting out. You have finished the hard slog of education, and finally have some money to burn in your first job. Now, if you are 22, and your starting salary is $30,000, and there is an expectation that your final salary will be approximately $69,000 when you retire at the age of 65, then that is just over $2,000,000 of income. Wow! And you thought that insuring your car was important.

The responsible years

You are no longer quite so young, and your life is changing rapidly. You have a partner, debt, and perhaps a family. We need to ensure that your family is protected, and your responsibilities met, if you are no longer around to help them, or if you are still around, but incapable of helping them.

So, here are some brain teasers for you. You know that last blood test you went for? Well, the Doctor has made that dreaded personal call and you have cancer. How is that going to impact on your family? Will your partner need to take time off work to help you while you go through treatment? What does your private health cover you for? And how do you tell the kids? After work, or while you are planning a family recovery trip to the Coast? Trauma insurance can step in and help here, after all, we all know that as we get older, things just don't work as well as they they used to, and the chance of experiencing an adverse medical condition keeps on going up.

What about if you could no longer work? You've had an accident, and you are unable to continue in your current field. Brain injuries, bad back, shaky hands, arthritis, car accident, falling out of a window, you choose the scenario, because there are plenty out there. Yes, your income protection will kick in, but what about the additional expenses such as your partner's time off work, your rehabilitation, the extra medical equipment? This is where Total and Permanent Disablement (TPD) cover is important. If you could no longer work, wouldn't it be nice to know that your home loan was paid off?

And last but not least, the big kahuna, Life cover. The importance of this one is much easier to explain, but much harder to talk about. You are dead. This is no longer about you. This is about your family. What have you done to help them recover from their loss, emotionally as well as financially?

The cheese and wine years

The children have grown up, and you have more disposable income than ever. You can take the time to sit back, and focus on just the two of you, and what your plans are going forward. Life cover is still important, and so is income protection, because your household, even in its reduced number, is dependent on two incomes to make it's dreams come true. Trauma and TPD cover may still be important, depending on your individual circumstances, but with retirement just over the horizon, and your debt on the downward trend, it may be time to rationalise the amount of cover that you hold.

Find Erin* at Achieveit Financial Planning, or call for an appointment on 07 4638 5011.

*Authorised Representative of Securitor Financial Group Ltd ABN 48 009 189 495 AFSL 240687

This is general information only and does not consider your personal circumstances. You should not act on any recommendation without obtaining professional advice specific to your circumstances. We recommend you speak to a financial adviser before acting on any of the information you read on this website.

Negotiating between the future you, and the current you (using the past you)

Last year, I had the opportunity to listen to Dr. Jason Mitchell from Harvard University while at the AFA Conference on the Gold Coast. For those not in the know, he is the Principal Investigator at the Harvard Cognitive and Affective Neuroscience Lab, and therefore, is much more interesting than I can ever hope to be (no...seriously, this guy has the most amazing job).

I am a firm believer that there is always room for improvement, whether personally or professionally, and two things that Dr. Mitchell spoke about really resonated with me. I would like to share this with you, because it will help us understand how our brains work, and therefore be able to assist ourselves, and our client's to overcome behaviour that may not be in our best interests.

The first concept is that your brain doesn't "see" your future self as an extension of you. It sees the future you as a third person, which is why many of us struggle to feel urgency about preparing for the future, and/or, controlling your instant gratification impulse. There is a disconnect between doing something positive, such as saving for retirement, and the end result, because according to your brain, that end result is happening to someone else. I know that this is probably an "Ah ha!" moment to many financial planners, especially when it comes to the push back with insurance. I know that I have had clients who acknowledge the benefits of personal insurance cover, but in the same breath say "just not for me". When quizzed further, these clients invariably say that it's not for them because they just don't see themselves ever needing it - it happens to other people.

The second interesting thing that Dr Mitchell brought up is that we, as a species, like to have consistent behaviour. We think of our past, and future selves as a third person, but we "like to keep consistent what we think, say and do, and will change to ensure this is so" (Mitchell, 2017). When you start to reflect, you will probably find dozens of examples where you have changed what you were going to say, or do, in order to display behaviour consistent with your audience's expectations. This is a problem when you are trying to break bad habits. An easy example is a spouse who hesitates over a purchase, knowing that things are tight, but might overspend on an item because the other spouse would be "disappointed" if they didn't.

So, how to we go about changing this? The first point is the way the brain is wired. So, in order to work with biology, we must bring our future self to our present self. In my opinion, the ability to do this is what separates a really good Financial Planner from the rest of the pack. Turn your empathy towards yourself, and imagine if your future self was your right now? What would you do, right now, if you had been diagnosed with cancer? What would you do, right now, if you had to retire? What would you do, right now, if that school fee bill turned up in the mail? Bringing the future problem to the present moment will hopefully create the feeling of urgency (and light up the right areas of the brain) so that changes can be made.

Now that we acknowledge that the change needs to be made, we need to have a solution to the problem of overcoming our need for consistent behaviour. The solution seems to be all about incremental change. Rather than trying to make a big change, you make seemingly small, and inconsequential changes. Then you build on that change. For example, rather than buying that coffee on your morning commute, you put the money in a tin. Such a small thing, but if a coffee is $5, then at the end of the week you have $25, by the end of the month, you are on a roll, have saved an extra 20 minutes per day, and have an extra $100 put aside. From that 20 minute time saving, you could possibly make your lunch in the morning. This might save you a further $10 per day. So now, you are saving $300 per month, which is $3,600 a year. All of this from such a little change.

Of course, in order for this to be of any value, you need to actually do it. Dr. Mitchell suggested changing your mindset by using your brain's idiosyncrasies to benefit your future self. You can cut the tie by acknowledging that your "third person" past self is a different person to your present self, and therefore your present self can have different behaviours than this past self stranger.

Wordy, I know, but so very, very interesting. If you ever get a chance to see Dr. Mitchell speak, or come across his work, then jump at it. It really is an experience.

Find Erin* at Achieveit Financial Planning, or call for an appointment on 07 4638 5011.

*Authorised Representative of Securitor Financial Group Ltd ABN 48 009 189 495 AFSL 240687

This is general information only and does not consider your personal circumstances. You should not act on any recommendation without obtaining professional advice specific to your circumstances. We recommend you speak to a financial adviser before acting on any of the information you read on this website.

Mitchell, J. (2017) 'Building consumer trust through higher professional standards' [PowerPoint Presentation]. (Accessed 12 October 2017).

Explaining Aged Care Fees

Considering a Permanent Aged Care Residential Facility is a very stressful time, and although the Government has launched the My Aged Care site, there is still a lot of confusion around what gets paid, and then what goes to the Estate. 

Basically, a resident may pay the following fees:

A Basic Daily Care Fee

This covers the day to day living costs such as meals, laundry, cleaning, and utilities. The Basic Daily Care Fee is set by the Department of Human Services, at 85% of the single Age Pension. It is not set by the Residential Facility. Every resident with pay this, and it is not refundable.

Means Tested Care Fee

This fee is determined by the Department of Human Services when you complete the Permanent Residential Aged Care – Request for a Combined Assets and Income Assessment form (SA457). Aged Care Residential Facilities are subsidised by the Government, and this form helps the Department of Human Services decide how much of that subsidy the resident needs to contribute to. If you don’t complete the form, then you will received no Government assistance. This is not refundable, however there are annual and lifetime caps in place to limit the amount of the means-tested care fee that you are required to pay, and once these caps are reached, you cannot be asked to pay more towards the Means Tested Care Fee. Some residents are not required to pay this fee because they are fully subsidised with very little in assets.

Refundable Accommodation Deposit (RAD) or Daily Accommodation Payment (DAP)

This is set by the Permanent Aged Care Residential Facility based on the costs associated on running the facility, market conditions, and the quality of the establishment. This fee can be paid by a lump sum, which is the RAD, and will return to the resident when they leave the facility (either by transfer, or death). Most residents will use the sale of their home to fund this, and the Facility will use the interest earned off the capital to fund the resident’s stay. The capital is Government Guaranteed, and is heavily regulated. If the resident cannot afford to pay the full lump sum, then they can both pay a partial RAD, and make the rest up with the DAP, or pay a full DAP. The DAP (Daily Accommodation Payment) is the equivalent of what the Facility is forgoing in interest earned. This is not refundable, and the Government sets the interest rate used for these calculation. It is currently 5.76%.

Extra Service Fee

Some, not all, Permanent Residential Aged Care Facilities will charge an Extra Service Fee, which is set by the Facility itself. This is to cover the little extras that they provide, such as wine with meals, activities, nicer furnishing, bigger rooms etc. In some Facilities these are optional, in some they are part of the standard package, and some do not offer them at all. These are not refundable, and the Resident will need to check to see if they are included in their charges.

Now, a word of caution for those who have ageing parents. Choose wisely as your parents are only going to get frailer, and keep in mind that the Power of Attorney will need to offer a personal guarantee to pay these fees in the case that the Resident cannot.

Find Erin* at Achieveit Financial Planning, or call for an appointment on 07 4638 5011.

*Authorised Representative of Securitor Financial Group Ltd ABN 48 009 189 495 AFSL 240687

This is general information only and does not consider your personal circumstances. You should not act on any recommendation without obtaining professional advice specific to your circumstances. We recommend you speak to a financial adviser before acting on any of the information you read on this website.

Red flags with the First Home Super Saver Scheme

One of the stand out, under-whelming pieces of legislation to come out of the last budget was the First Home Super Saver Scheme (FHSSS), which was voted into law in December 2017. In my humble, and cynical, opinion it a political ploy to appeal to those who are hit hardest by the lack of housing affordability, but I wouldn't even give it band-aid status. It is a smoke screen at best, and I suspect that the reason that it hasn't received the fanfare of the First Home Saver Account Scheme (pulled by the Abbott Government for "poor uptake") is that the current Government knows the FHSSS's shortcomings and doesn't want egg on it's face.

So, let's get to it. Here are the rules:

1.   You must be 18 years old, and never held an interest in any real property in Australia (including investment property, commercial property, lease of land, and certain mining rights). This is an individual test, meaning if your partner has previously held an interest, it won't have any effect on your eligibility.

2.   Eligible Contributions made from the 2017/2018 financial year, plus any associated earnings (equal to the shortfall interest charge - currently 4.72%) can be released under the FHSSS, and cannot be released until 1 July 2018.

3.   Released eligible contributions are limited to a maximum of $15,000 in any one financial year, and $30,000 total limit.

4.   Eligible voluntary contributions that can be released include 100% of voluntary non-concessional contributions (post-tax), and 85% of voluntary concessional contributions (salary sacrifice).

5.   You must enter a contract to purchase an existing dwelling, or construct a new home within 12 months, with a further 12 month extension available on application.

So far it sounds fairly straightforward, right? "Ah ha!" she says, with a self-satisfied gleam in her eye, "the devil, as they say, is in the detail." Here are the red flags that so many of the general populace are not aware of, and may not consider before using the FHSSS:

• Eligible contributions do not include; mandated contributions, which are your Superannuation Guarantee, as well as those covered by an award or industrial agreement (sorry, State Employees - this means you) or superannuation fund rules, spouse contributions, Government co-contributions and low income super offsets, CGT cap contributions, personal injury contributions, excess non-concessional and concessional contributions, child contributions.
• Contributions cannot be released if they are made to a defined benefit, or constitutionally protected fund.
• How will the lenders view the FHSSS - do they consider it genuine savings?
• What is your current marginal tax rate? Is it appropriate to salary sacrifice and pay the 15% contributions tax, or is your marginal tax rate less than that?
• Can you afford to do this? If you are not already saving for a house deposit on a regular basis, then this scheme is not going to help you as you can only get out the extra that you put in.
• Is this appropriate? Once the funds are in the Super system you cannot get them out. This means that if you have been putting extra voluntary contributions into your superannuation, instead of a savings account, and you lose your job, or you crash your car, or life just happens, you cannot access those funds.
• Will the Government change it's mind? After all, there is a significant administrative burden on the ATO to administer this Scheme, and the last Scheme was axed in response to budget pressure.

So, how is the average person going to tackle sourcing all of this information to make an informed decision about whether or not this will work for them? They will need to check affordability with a mortgage broker as well as identify potential lender requirements. Then they will need to see a financial planner to work out the concessional vs. non-concessional contributions, investigate the current award and superannuation fund rules to identify the mandated contributions, work out cash flow, as well as the contingency plans if life happens and the client cannot access their savings. This all costs money of course, so I predict that there will be a lot of do-it-yourselfers who will lean on other professionals in the house purchasing industry for guidance.

And what of these professionals involved in the house purchasing industry? If I were a Real Estate Agent, or a Conveyancer, or even a Mortgage Broker, I would be incredibly cautious about entering into conversations with First Home Buyers in regards to this Scheme. Identifying what does not constitute a mandated contribution is complex, but if you send the First Home Buyer to get a FHSS determination by the ATO, this could backfire because once the determination is issued, the First Home Buyer will lose their tax deduction if they haven't already submitted their Notice of Intent to Claim a Tax Deduction for their contributions. Be wary, and don't get caught out inadvertently giving unlicensed financial advice, because this area is a lawsuit waiting to happen.

Find Erin* at Achieveit Financial Planning, or call for an appointment on 07 4638 5011.

*Authorised Representative of Securitor Financial Group Ltd ABN 48 009 189 495 AFSL 240687

This is general information only and does not consider your personal circumstances. You should not act on any recommendation without obtaining professional advice specific to your circumstances. We recommend you speak to a financial adviser before acting on any of the information you read on this website.