YOUR MONEY AND YOUTransition Seminar 2020

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DON’T TAKE IT PERSONALLY

This session is about independent financial education

This session is not about personal advice

None of this is rocket science

Simply to help you think and act

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Understanding superannuation

Insurances that you may want to replace

Setting new financial goals and revising your budget

Dealing with debt

Protecting your Assets

Getting professional advice

PROGRAM OUTLINE

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UNDERSTANDING YOUR SUPER

Understand your entitlements

Benefits will be based on your age and why you are leaving the service

Generally can’t access super unless retiring and have met a condition of release

Defined benefit - pension and/or lump sum on retirement or invalidity

Accumulation – if resigning, leave where it is or rollover to another fund

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YOUR POST-ADF PRIVATE SECTOR SUPER CHOICES

INDUSTRY RETAIL SELF-MANAGED

Profits Members Shareholders Members

Investment choices Limited High Unlimited

Need for advice Little Some Lots

Cost Low - mid Mid - high High - very high

Conclusion Simple, low cost More choice, higher cost

Greater control, more cost effective for larger balances

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ADF members have statutory death and invalidity cover through ADF Cover, MSBS or DFRDB; DVA rehabilitation and compensation schemes

This cover will cease when you leave the ADF

Personal insurance includes Death/Invalidity/Trauma/Income protection

May be able to get cover through civilian super fund

Most life insurance and personal accident insurance policies contain war, war-like activity and notice of deployment exclusions

Comparison websites can help you calculate your insurance needs and compare policies from different insurers

PERSONAL INSURANCE

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WHERE DO YOU WANT TO BE?REASSESS YOUR FINANCIAL GOALS

WRITE YOUR GOALS DOWN

EXAMPLES

Short-term Emergency fund Holiday

Medium-term Home deposit Starting a business

Long-term Investment portfolio Retirement

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WHAT ARE YOU WORKING WITH?BUDGETING

How will your income and expenses change?

Using a budgeting tool can help you plan

Allows you to decide what’s really important

ASIC’s MoneySmart Budget Planner

o Use onlineo Download Excel versiono moneysmart.gov.au

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If you are retiring, have you worked out how much income you will need?

Typically when you retire some expenses will decrease while others will increase, for example:

o Work related expenses

o Leisure activity expenses

Some experts suggest aiming for 2/3 of your pre-retirement income

Everyone’s different - you may need less or want a lot more

HOW MUCH WILL YOU NEED IN RETIREMENT?

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Three common investment classes:o Cash (including fixed income and bonds) o Property (real estate)o Shares (equities)

Investments should match your goals / timeframe

Consider how much time you have to monitor investments

Don’t invest in anything you don’t fully understand

Get help if you need it

SAVINGS & INVESTMENTS

AustralianShares

GlobalShares

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Not always low risk

Cash (e.g. bank accounts, term deposits) –Government guaranteed – apra.gov.au

Bondso Government – lower risk (depending on

which Government!)o Corporate – higher risk

Debentures, secured & unsecured notes –higher risk

INVESTMENT CLASSESCASH, BONDS & FIXED INCOME

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Buy for the investment potential, not for the tax breaks

Negative gearing means you are making a loss

Be wary of ‘guaranteed’ real estate rental deals– do your own research

You can lose money on real estate, especially if you borrow too much

Consider Australian Real Estate Investment Trusts (A-REITs) and Exchange Traded Funds (ETFs)

INVESTMENT CLASSESREAL ESTATE

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Buying a piece of the company

Diversification lowers risko Different companieso Across industrieso Across markets

Active v passive investment – extremely difficult to consistently pick shares

Consider a passive Exchange Traded Fund (ETF) or managed fund

SHARE MARKET

BANKS MINING CONSUMER UTILITIES

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INVESTMENT CLASSESSHARES

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Don’t go into any financial products or services with your eyes closed

Take your time, be comfortable with your decisions

You can’t control returns but you can control fees

1% differential – a huge difference to the outcome

Consider using diversification to manage risk

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CHOOSING ASSETSDOING YOUR HOMEWORK

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Too much debt causes of many financial problems

Our personal debt is among highest in the world

Financial institutions sell debt

Debt is not all bad, just too much of it (especially for high-risk ventures and depreciating assets)

Have a fall-back position

Consider holding 3 – 6 months worth of cash

DEALING WITH DEBT

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Legal document – dictates how your assets are distributed when you die

Update your will when things changeo Marriage, divorceo Become a parent

Never use a will kit – use a qualified legal professional

Wills can usually be prepared by ADF legal offices for free

Can operate anywhere in Australia

PROTECTING YOUR ASSETSWILLS

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Gives somebody power to act on your behalfo Make financial decisionso Buy or sell assetso Operate your bank account

You can limit the power given

Requirements vary by State and Territory

Always seek legal advice

Make sure you can trust your attorney!

PROTECTING YOUR ASSETSPOWERS OF ATTORNEY

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ADF Financial Advice Referral Programo Genuine fee-for-service, free from conflicts o Private relationship: you and the adviser (not Defence)o Watch our video: Financial Advisers: the Facts and the Fiction

Accountantso Registered tax agents can help with simple tax returnso Find university-trained CPAs at cpaaustralia.com.au or Chartered Accountants

at charteredaccountantsanz.com

Legal issueso First point of call on base ADF legal officer (may refer to Reserve Legal officer)

CHOOSING PROFESSIONAL ADVISERS

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