If you’ve got super, chances are you’ll have some default insurance included and the option to buy more at an attractive price. It’s a cost effective way to get a basic level of cover, but holding insurance inside super does have some downsides.
Forms of super insurance
There are three types of insurance you can hold inside super: life, total and permanent disability (TPD) and income protection insurance. Many super funds automatically insure their members and will provide a (relatively small) payout if, for example, they die or suffer a debilitating accident. But the level of default cover is likely to fall short of your needs.
Canstar found that while young families typically need around $680,000 of life cover, the average default life policy is only $200,000.
Nevertheless, you can pay a little extra to top up your insurance through your super fund if you want more cover. There are three big advantages to doing this:
Changes to the pension assets test that came into force on January 1 have resulted in some retirees losing some, or all, of their pension entitlements.
The big question now is whether the tighter assets test will encourage people to change the way they plan and behave in the years leading up to retirement to qualify for the age pension.
Human nature being what it is, people tend to worry more about a financial loss than they do about missing out on a potential financial gain. This is a common decision-making error described by behavioural experts in prospect theory. When you apply this fear of loss to the tightening of the pension assets test, there is a danger that people could become so worried about losing even a few dollars of age pension that they make knee-jerk financial decisions that leave them worse off in the long run.
The short answer is “maybe” but it is more likely to be “no”. The real answer is “It depends……”
There is usually a lump sum payment required when entering an aged care facility. It is called a Refundable Accommodation Deposit (RAD). This lump sum payment can be up to $550,000 for Government approved facilities.
You can search for a preferred facility from http://www.myagedcare.gov.au website to determine the possible lump sum payment amount.
But before you panic and wonder how you are going to possibly put your parents in care when they need it, consider the following:
Decisions around aged care are always difficult and emotional. From the start of next year they are likely to get even more complex, with both the Age Pension and aged care sectors set for another shake-up.
Currently, many people entering aged care choose to keep their former home and rent it out to help supplement their accommodation payments. From a financial planning perspective this strategy is attractive, as your former home and any rental income are exempt from assessment for the Age Pension. But this could change from 1 January 2017.
The financial aspects of aged care are confusing and overwhelming. Aged care is a complex area, and poor decisions could cost thousands or even tens of thousands of dollars. If you get the structuring of fee payments and assets wrong, your loved ones could lose their age pension, increase aged care costs and leave reduced assets for the Estate that could affect your whole family. They have worked hard their whole life and taken care of you, now it is your turn to take care of them.
The rules governing Australia’s super system are complex and with the many changes being passed through legislation it’s challenging to stay up to date and ensure that your retirement planning takes into account these changes."
Just when those saving for retirement thought the rules couldn’t get any more complex, the Turnbull Government has revised some of the key elements of the controversial superannuation reforms it announced in the May 2016 Federal Budget.
Budget 2016: Blueprint for an election
Treasurer Scott Morrison promised it would be no ordinary budget but instead an ‘economic plan for jobs and growth’.
With the federal election to be called as early as this week, the focus has shifted from an earlier emphasis on debt and deficit under Prime Minister Tony Abbott to a more upbeat message promising a new era of nation-building under new Prime Minister Malcolm Turnbull.
Increased infrastructure spending and tax cuts for small to medium enterprises are positioned as the main drivers of growth and jobs.
Personal tax cuts have been restricted to higher wage earners but, in a bid to ward off criticism of a lack of fairness that tarnished the Coalition’s first budget, high income earners face a significant winding back of superannuation tax concessions.
From the 7th of March 2016 the Australian Securities Exchange will shorten the settlement time for transactions from 3 days to 2 days. This means that shares purchased on a Monday would need to be paid for on Wednesday. This will give you faster access to funds and shares and bring the Australian market into line with many other market around the world.
Market volatility continues
From Russell Investments
The global market drop on Friday, 15 January 2016 looks to be an extension of the stock market weakness we have seen since 2016 began. We believe, at its core, this weakness is a reprise of the weakness we saw last August and we expect much the same result.