Ask an Adviser: The lowdown on Superannuation with Michael Osbourne
December 19th 2023 | Categories: Superannuation & SMSF | Ask An Adviser |
Michael Osbourne is a financial adviser based in our Cooranbong office. With over 18 years’ experience within the financial industry, Michael answers why we all should be thinking about our superannuation before the time comes to use it.
Q. What’s the one thing we can all do better when it comes to our superannuation?
We can all understand it better. We should care about how our funds are invested. After all, it’s our money and we should take responsibility for it. Advisers have an opportunity to educate their clients and inform them that they can make changes to their superannuation. I think there’s a broad assumption that you have to stick with those default options in your fund which is not the case. Super currently reflects 11% of our income (by 2025 it will be 12%) and is our main investment for retirement so we need to start seeing it as our money. Taking an interest in your superannuation should also be inconsequential to your age and stage in life. I know when I was younger, I gave my super fund little consideration – in part because I couldn’t touch it but so much has changed since then. You can make extra contributions to super giving you personal tax deductions on your income. Even better, you can draw on the deposited amount and some of the growth for your first home deposit.
Q. Why is it advantageous to have insurance protection as part of your superannuation?
A lot of the industry superannuation funds provide it as default cover for clients (i.e. Life Insurance, TPD – Total & Permanent Disability and Income Protection / Salary Continuance). Having this cover within your super can be advantageous to those who can’t afford it outside of their super so it’s always better to have some cover than none. Additionally, the cost of the cover is tax deductible in super. It’s advisable to have your cover reviewed by an expert to ensure it’s the right cover for you and your personal circumstances. It may be the case that you’re over insured and paying more than you need to which can deplete your ultimate funds for retirement.
Q. As an adviser, where do you feel you can make the biggest difference to people’s finances?
When I started in this industry those approaching us for retirement advice were already in their 60s, whereas now they’re often a decade or two younger. This enables us to do small things over longer periods than having to opt for more drastic measures. Time and planning allow strategies to play out. Another advantage is that the modelling software we use can reveal differences over the long-term. I often say to clients, ‘Would you like to see your future now instead of waiting until you get there?’ We can bring the future forward in that sense. With pre-retirees we can map things out and make small changes now that will have a tremendous impact on their super and retirement down the track.
Q. If someone is concerned about their super balance, what are some ways they can boost this ahead of retirement?
It’s good to understand your investments and learn what they do for you over a long period. Also, ask an expert about tax minimisation through super as well as the possibility of contributing lump sums. Additionally, if in a couple, consider moving money from one member to another. This depends on age and their personal circumstances. Finally, review your protection (insurances) and make relevant changes to it throughout your life.
Q. What are your tips around contributions for the self-employed?
It’s simple. Make contributions. Self-employed individuals don’t have to contribute, but they should. There are tax advantages in doing so and better long-term growth on their funds. A lot of self-employed people rely on the sale of their business for super down the track but there are benefits in using super to reduce the tax owing when the business sells.
Q. What’s the easiest way to find out if your superannuation is on track and in determining your protection levels?
Websites have tools that compare funds and project a potential balance at the time of retirement, but they tend to be very generic and don’t take into account one’s personal situation. They’re ‘one size fits all.’ Chatting with an expert who can deliver a custom-made approach for each client means getting quality advice from the outset. The benefits in seeking tailored advice will soon outweigh the cost and the gains are long-term, too. Advice from a well-intended friend over a backyard barbeque, school gate or sporting field is not relevant to your personal needs. With that said though, there is one particular sporting field where players have a definite advantage….
Q. How did you come to be involved with the Club?
I played with them for seven seasons in my late teens and twenties and in recent years I’ve joined the fold once again. I’ll be involved with them for life now.
Q. And you share your knowledge with the cricketers?
Yes, I offer educational talks. Initially it was superannuation focussed to the players in the nine teams (five men’s teams and four women’s’ teams) and more recently it was to the wider club community about budgeting and other life skills.
Q. What do you hope they take away from your future educational talks?
I want young people to know that they don’t have to have a lot of money to get sound financial advice. Initial discussions with players and their support network may focus on how to try and grow their wealth and how to put strategies in place to get themselves ahead of the crowd. When it comes to superannuation, I want young players to know that there are different ways to pay for advice. For example, a lot of funds will allow people to pay through their fund. Plus, there are ways to reduce fees due to the tax environment in super as well. I appreciate that the cost of financial advice can be a barrier. No-one wants to pay for something if they don’t see the value in it, so I aim to help people understand why the right advice matters.
Q. Any final words of wisdom?
I think it’s really important for people to know what cover they have in place to protect themselves and their family. You don’t want to be that person or family that a community is having to raise funds for. The worst time to find out that you don’t have enough cover or that you have the wrong cover is when you’re trying to make a claim.
About Michael Osbourne
Michael Osbourne (51) happily left Sydney behind 20 years ago to settle in the Lake Macquarie region. He shares his lovely 65-acre property in Cooranbong with wife Clair, daughter Ivy and their menagerie – a cat, two dogs and three horses.
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Posted in Superannuation & SMSF, Ask An Adviser
