If you are considering retiring or reducing your working hours in 2016 but are concerned about having enough money to retire on, it’s not too late to seek some professional advice to give you peace of mind.
Your financial circumstances change as your life changes, so getting some advice, whatever age you are, is always worthwhile.

We often find that it’s only as they near retirement people really start thinking about their finances. Especially when they start looking at everything that retirement offers, like making time for a hobby, more travel, volunteering projects or spending time with family.

At Cotter Financial Services we suggest that seeing a financial adviser well before you retire, rather than trying to do it all yourself or at the last minute, is the best option. Not only will this give you peace of mind but it will also give you options for when you do need to make financial decisions.

So even if you’ve never received any financial advice before, here are just some of the things a financial adviser could help you with that could make a real difference to the quality of your retirement.

Working out the best time to retire.

This depends on how much money you have in super and other investments to live on in your retirement.

• We often find there is a real difference between people’s expectations around the income they’d like to retire on and the investments they have that can actually generate this income.
• What we can show people is the positive impact that working another couple of years can have on their final super balance, and what this could mean for their retirement income.

Increasing your final retirement amount.

Are you feeling overwhelmed about how to increase your savings as retirement gets closer?

• We can suggest a number of tax-effective ways to fast-track your savings some of which may not impact your cashflow that much at all.
• Saving as much as you can in the last few years before retirement can make a significant difference in how much income you’ll have in retirement, and also how long this income will last.

Avoid making a rush decision.In an effort to increase your savings right before retirement, it can be very easy to make financial decisions that, at face value, look quite reasonable but may cost you a whole lot more.

• Rather than rushing in and making immediate decisions we encourage people to take their time and assess their whole situation before doing anything.
• When people approaching retirement come and see us, we always spend time upfront with them to understand their situation and their goals so that we get things right

Make sure you’re invested appropriately.Having the right investment mix for your age and risk profile will help build your funds and give you the opportunity to increase your savings ready for when you retire.

• We see some people that have been invested too conservatively for much of their life.  Often their super has been put into cash and fixed income investments at some point, and they’ve never actually changed it. So that’s something we would look at.
• And for those people that are closer to retirement, we’d look at whether or not they are over-exposed to growth assets, as the impact of negative returns can be felt more deeply when you have a limited amount that needs to last a long time.

Consider different types of income.Many people planning for retirement often see term deposits as the only way to generate a consistent, stable income.

• With interest rates already dropped, term deposits are less and less attractive especially when you take inflation into account, which make things even harder for people with fixed incomes.
• We can look at income options available, for example, transition-to-retirement pensions, annuities and credit funds, and structure things to make the most out of the amount of income each person receives in retirement.
• We can also look at whether they would be eligible for any Government entitlements, as these can make a big difference too.

To find out more about the benefits seeing a financial adviser before retirement, contact Cotter Financial Services on P: (07) 3333 2610

The information provided is general in nature and does not take into account your particular investment objectives, financial situation or insurance needs; we therefore recommend you seek advice tailored to your individual circumstances before making any specific decisions.

Cotter Financial Services and its advisers are Authorised Representatives of Fortnum Private Wealth Pty Ltd ABN 54 139 889 535 AFSL 357306 Australia Credit Licence No 357306 trading as Fortnum Financial Advisers.

• The more we are exposed to information about how our investments are performing, the greater the risk that we will be disappointed and at risk of making poor short term investment decisions.
  
• The greater access to information around short term investment performance and the ever present worry list around investing via traditional media and increasingly from apps on our phones is likely accentuating this risk.
• The key is to turn down the volume on financial news and find ways to filter it such that it doesn’t distort investment decisions.

Introduction

A decade or so ago a large Australian fund manager ran a campaign urging Australians’ to pay more attention to their superannuation (pension) savings. This initially struck me as good advice – after the family home for most of us it will end up being our biggest pot of savings so it makes sense to keep a close eye on it. And surely the closer we look at it the better the outcome? But over the years I have come to the view that we need to be careful here. In fact the avalanche of information around investing if not properly managed may be making us worse, not better, investors: more fearful, more jittery and more focussed on the short term than ever. I have looked at this theme before and the more I look into it the more convinced I have become that investors need to try and turn down the noise around investing. (See “The end is nigh, or is it? Try to turn down the noise,” Oliver’s Insights, November 2014.)

The permanent worry listThe technology revolution has made it easier and easier to track our investments. And with this has come easier and easier access to information and views around the outlook for investment markets. Some of this is balanced, but a lot of it is not. For the last few years it seems there has been a constant worry list with a range of things about to drag us down into the next financial crisis: budget deficits, debt, money printing, the Euro, Greece (every six months!), hyperinflation, deflation, taxes, welfare spending, banks, retiring baby boomers, the government, peak oil, low oil, pollution, global warming, the Middle East, terrorism, Russia, a pandemic, China, the South China Sea, emerging markets and of course the current fascination being the Fed (will she or won’t she?). And of course the perennial worry in Australia relates to the residential property market.

Big picture macro concerns have always been around. And I find it very hard to believe that things are any worse today than they were 100 years ago (when Europe had entered World War 1, living standards and life expectancy were a fraction of today’s and pandemics were a regular phenomenon). But the communication revolution means that such concerns are now regularly in our face. I cannot google something without links popping up to new disasters. The fascination with financial news has exploded – with several financial TV channels with 24/7 finance updates interspersed with constant debate about what it all means. And this is now all accessible via apps we can have at our fingertips on smart phones.

Loss myopia

In a way this is all fun. But there are several risks. Human nature is naturally cautious because our brains evolved at a time when we had to be on the lookout for physical threats. As a result bad news always attracts more interest and so “bad news sells”. Of course, this also applies to financial news.

But it also feeds into a common behavioural trait called “myopic loss aversion.” And here lies the threat to our long term financial health. Oddly enough I was reminded of this by a great Wall Street Journal article I saw recently – “Keep Stock-Market Apps Off Your Phone”, by Dr Shlomo Benartzi – that I actually found on a stock market app on my phone! It’s long been observed that a loss in financial wealth is felt much more distastefully by investors than the beneficial impact of the same sized gain and in the world of behavioural economists – who study how people behave in relation to economic and finance considerations – this has come to be known as “myopic loss aversion”.

When the value of an investment falls it makes sense that unless something has fundamentally gone wrong investors should be thinking about increasing their allocation to it to take advantage of it now being cheaper and better value and therefore offering better return prospects. The reality though is that many are motivated to do the opposite as the distaste for loss combines with another well-known behavioural trait called “recency bias” that causes investors to give more weight to recent events than they should so they project recent news of falls in their investment into the future.

The information overload we are now seeing is likely to be reinforcing this because it is increasing our exposure to news about our investments. And this constant feedback is likely adding to “myopic loss aversion”. (Hopefully this is not getting too technical!)

The shorter the horizon the worse shares look

In a family discussion about shares versus bank term deposits a relative once observed to me that there is no point investing in shares as they just go down about as much as they go up. I thought this odd as my experience has been a lot more positive. But then it occurred to me that for many people their perception of what shares do likely comes from daily updates – from the media or increasingly via an app. And this can lead to a very jaundiced experience.

For example, if you track the daily movements in the Australian All Ordinaries share price index, measured over the last twenty years it has been down almost as much as it has been up with falls 47% of the time and gains 53% of the time. It’s little different for the US S&P 500 share index which has seen falls 46% of the time on a daily basis versus gains 54% of the time. So from day to day it’s pretty much a coin toss with bad news nearly half the time.

By contrast if you only look at how the share market has gone each month and allow for dividends the historical experience tells us you will only get bad news (ie a loss) 35% of the time in Australia and the US. Looking only on a calendar year basis, data back to 1900 indicates that the probability of bad news in the form of a loss slides further to just 19% for Australian shares and 27% for US shares. And if you can stretch it out to once a decade, again since 1900, positive returns have been seen 100% of the time for Australian shares and 82% of the time for US shares. See the next chart.

Daily and monthly data from 1995, data for years and decades from 1900. Source: Global Financial Data, AMP Capital

The point is that the less frequently you look the less you will be disappointed and so the lower the chance that a bout of “myopic loss aversion” will be triggered which causes you to adopt an investment strategy which is too cautious to meet your goals or leads you to sell at precisely the wrong time.

But is there any evidence backing this up? Yes there is. As the Wall Street Journal article sited above noted, a 1997 study by US behavioural economists Richard Thaler, Amos Tversky, Daniel Kahneman and Alan Schwartz showed that providing investors in an experiment “with frequent feedback about their [investment] outcome is likely to encourage their worst tendencies…More is not always better. The subjects with the most data did the worst in terms of money earned.” Basically what’s happening here is that investors tend to go for the safer lower returning investment options when more frequent feedback on their investment performance is provided.

Of course, the greater access to financial information we are now seeing in the media and via mobile devices is having the effect of encouraging us to look at our investments more frequently not less – via daily and even more frequent updates. And around this is an avalanche of news and other information that is often out of context, often irrelevant and often in the bad news category. This has the effect of exposing us to more frequent news of loss from our investments and reinforcing that news. Which in turn risks encouraging bad investment decisions. In particular a focus away from investments like shares that can grow wealth over time towards assets that may be safe in the short term but will lead to much lower wealth levels over the long term.

What can investors do to avoid this?

The key I think is to find ways to turn down the volume on financial news because if you are exposed to it less frequently you are less likely to make decisions that are contrary to your long term investment goals. Try to avoid looking at market updates so regularly and even consider removing related apps from your smart phones, tablets and watches. Or at the very least find a way to filter such news in a way that it doesn’t distort your investment decisions.

The traditional approach of adopting a long term investment strategy and sticking to it is arguably now more important than ever. Yes we are now in an environment of more constrained and volatile investment returns which has increased the importance of active asset allocation – but this is best left to experts who can put the time in to filter the noise from fundamental signals and avoid allowing “myopic loss aversion” from getting control.

The information provided is general in nature and does not take into account your particular investment objectives, financial situation or insurance needs; we therefore recommend you seek advice tailored to your individual circumstances before making any specific decisions.

Cotter Financial Services and its advisers are Authorised Representatives of Fortnum Private Wealth Pty Ltd ABN 54 139 889 535 AFSL 357306 Australia Credit Licence No 357306 trading as Fortnum Financial Advisers.Credit Original Source:  For author information and disclaimers:-
http://www.ampcapital.com.au/article-detail?alias=/olivers-insights/november-2015/the-perils-for-investors-of-too-much-information-i
Article Date November 2015

What is a scam?

A scam is a dishonest attempt to trick you into parting with your personal information and/or your money. Scammers are constantly coming up with new ways to trick people out of their money.

Often several scams operate at the same time, but the one that is catching the attention of the regulators is a series of fake lotteries and competitions that are distributed on social networking platforms.

The scam operates by advising that a lottery, a prize or a competition has been won. In order to claim the prize, recipients are required to enter personal information to collect the prize. In addition, recipients are often required to pay a tax, fee or other payment in order to collect the prize.

More recently scammers are using a new tactic, by messaging recipients that they are the winner of a prize or competition. A link is included in the message, however if you click on the link, you risk infecting your computer with malicious software or disabling your computers virus software.

If you receive a message that you have won a prize or competition you should exercise caution before opening the message. If you don’t recognise the sender then you should ignore the message and do not attempt to open it.

For more information on scams please refer to the Scamwatch website (www.scamwatch.gov.au) which is produced by ASIC.

The information provided is general in nature and does not take into account your particular investment objectives, financial situation or insurance needs; we therefore recommend you seek advice tailored to your individual circumstances before making any specific decisions.

Cotter Financial Services and its advisers are Authorised Representatives of Fortnum Private Wealth Pty Ltd ABN 54 139 889 535 AFSL 357306 Australia Credit Licence No 357306 trading as Fortnum Financial Advisers.

Ongoing economic uncertainty means that it’s still not uncommon to read a story about large or high profile businesses making staff redundant. The flow-on effects from tough economic times in the past are still being felt in many sectors of the economy. Redundancy remains an all-too-common possibility for employees of both large and small businesses.

For some, redundancy can be a real blow to self-esteem, especially if they have been happily settled in the same job for many years. Others may see it as an opportunity, and actively seek out redundancy as a springboard to a change of career or lifestyle, or a way to transition to retirement more rapidly.
Whatever your situation, there are ways to address the challenges that can make it easier to cope with and put you in a position to face the future with optimism.

Dealing with the emotional impacts

For those who take redundancy as a blow to their confidence and self-worth, it is important to start taking practical steps as soon as possible to build momentum and focus on the future, rather than dwelling on the past. It can be difficult not to take things personally, but the important fact to remember is that it is the job that has been made redundant, not the person.

Focussing on what you can control instead of what you can’t, and taking action on some practical steps can help activate the emotional recovery process. Updating and polishing up your resume is a great first step. Putting your skills, experience and interests down on paper encourages you to take a more objective look at the positives and what you have to offer prospective employers.

It is also important to seek help if you are struggling to come to terms with your situation. Keeping things bottled up can be very counterproductive, so professional counselling and being honest with friends and family about your feelings is critical.

Financial worries can be eased

Acting swiftly and planning properly for the financial issues surrounding redundancy are also integral to getting back on your feet. Dealing with financial obstacles early on will dramatically improve your situation down the track. In fact many people report an improvement in their quality of life and financial situation after a redundancy, but you need to have a plan to make the most of it.

For many people, redundancy could result in quite a significant windfall. The temptation, of course, is to use the money for a long holiday or a new car, but it is vital that you plan for both immediate income needs and your longer term investment situation, before making any rash decisions with your payout.

The first thing to get to grips with is the taxation situation. Making rash or poorly informed decisions on your payout may mean you end up paying more tax than you need to. If possible, it is better to get on the front foot, get some sound advice and take action before a you receive a redundancy payment, so that you can make the most of any tax saving opportunities.

The timing of your redundancy payout can be crucial to the tax outcomes and opportunities may be created by delaying payment. This may allow some funds to be directed toward a salary-sacrifice contribution to super, which effectively reduces tax payable to 15% rather than paying your full marginal tax rate.

Delaying a termination payment into a new tax year may allow you to take advantage of any increases in tax-free thresholds that apply to your payout. It may also help reduce your taxable income for the current year and thereby reduce the amount of tax payable. Of course, you will need to talk with your employer about whether these options exist so clarifying options early as you can is important Centrelink entitlements, such as Newstart allowances or age pension benefits, may also be available and should be investigated as soon as possible.

Depending on your leave entitlements and liquid assets, you may not be eligible for
benefits immediately, but knowing what you can expect later on will help you budget properly. Centrelink can also assist with employment opportunities and training.'

Once those initial issues are dealt with, you can then look at planning your budget and whether you need to use your payout to fund living expenses. Another possible use of payout funds is to reduce debts, but this needs to be considered in the broader context of your total financial situation. There is no one-size-fits-all answer to these questions, which is why it is so important to plan carefully and seek professional advice.

Considering all your options

There may be other possibilities to explore such as setting up a new business or taking early retirement. The latter option may be made more achievable by implementing what is known as a ‘transition to retirement strategy’. This basically allows you to draw an income from super without actually ceasing employment altogether. To take advantage of this strategy you must have reached your ‘preservation age’ (between 55 and 60 depending on your date of birth), and take your superannuation as a transition to retirement pension. If it turns out to be feasible for your situation then there may be substantial benefits to be gained.

Appropriate strategies for you will depend on your personal circumstances, so it makes a lot of sense to get help from a qualified financial adviser to help sift through the possibilities. They have the experience and tools to examine the options objectively, weigh up the pros and cons and help you implement a recovery plan that gives you the greatest benefit.

Of course everyone is different so it’s advisable to contact a financial adviser for personal advice based on your unique situation and objectives. Sorting out the financial aspects properly can lift a load off your mind and help you assess the possibilities available in the social security and superannuation systems. Professional help is readily available and it can make a real difference, not just to your finances, but to your whole attitude about your future after redundancy.

For more information on your options with redundancy matters contact Cotter Financial Services on P: (07) 3333 2610

The information provided is general in nature and does not take into account your particular investment objectives, financial situation or insurance needs; we therefore recommend you seek advice tailored to your individual circumstances before making any specific decisions.

Cotter Financial Services and its advisers are Authorised Representatives of Fortnum Private Wealth Pty Ltd ABN 54 139 889 535 AFSL 357306 Australia Credit Licence No 357306 trading as Fortnum Financial Advisers.