Most people have another ‘asset’ up their sleeve leading up to retirement; their leave entitlements.
In some cases, you may also be able to choose whether to take these entitlements as a lump sum or have this paid as a regular income (i.e. go on leave and then retire at the end of the leave period).
So, which is best?
Often when I tell people I’m a financial adviser they ask me ‘what do you think the share market will do this year’ or ‘what do you think about NAB shares’ or something similar.
When I say that I have no idea they either think I’m holding out by not letting them know the ‘good oil’ or that I’m a terrible financial adviser.
When talking to people about their financial situation, I often hear ‘I need to look at this more often’. But I’m not sure that’s the answer. Some people may need to spend more time working on their financial situation, but I think for most people it’s just a matter of using the time they already spend focusing on the right things.
“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” – Peter Lynch
I like to conceptualize! Every time one of my clients retires, I like to picture the accumulated retirement savings of that couple waking up to an early morning alarm, getting dressed, and going to work on behalf of them. When you think about it, that’s precisely what happens. For the entirety of one’s working life, their living costs are met from their physical exertion, in getting up and going to work. In fact, retirement savings are boosted by the worker’s act of waking up and going to work, in the form of employer superannuation contributions and the worker’s salary sacrifice contributions. All of that abruptly changes when the worker retires. Not only do contributions cease (no more employer super or salary sacrifice going in), but money starts to come out to meet the living costs of the newly retired.
Most people aren’t aware of the fact that their superannuation fund has an earnings tax rate of 15% applied to the income. For example, if you have $500,000 in super, and have investment earnings of 5%, you will have to pay tax of $3,750 (15% x $25,000). This happens ‘behind the scenes’ and is automatically deducted by your superannuation fund.
I heard a great quote recently: bad things come suddenly, good things take time. When I thought about it, I realised how much it applies to everything in life. In so many areas of our life, it’s hard to stay motivated to keep sticking to a plan because it can take so long to see the effects. We start a new exercise regime, and the first week is mostly just pain without feeling as though we’ve actually achieved anything. It’s only after we string a couple of months together that we finally see some results. Good things, by their nature, are rare and hard to achieve, and in most cases are only possible with the compounding effects of time.
In 1990 the forward thinking Norwegian government established the Government Pension Fund of Norway (also known as the Oil Fund) to invest the surplus revenues of the Norwegian petroleum sector. The purpose of the fund is to invest parts of the large surplus generated by the Norwegian petroleum sector, mainly from taxes of petroleum companies but also payment for licenses to explore for oil as well as the State’s Direct Financial Interest and dividends from the partly state-owned Equinor. Current revenue from the petroleum sector is estimated to be at its peak and is envisaged to decline in the future decades. The Oil Fund was established to counter the effects of the forthcoming decline in income, as the oil reserves eventually run out completely, and to smooth out the disruptive effects of highly fluctuating oil prices.
The Dutch East India Co. was the world’s first corporate powerhouse and laid the foundations for the modern multinational corporations of today. However, they are often remembered for trading away New York City. In 1667 the Dutch, whom at the time had occupied New Amsterdam (now New York), conceded the island of Manhattan (now New York) to the English in return for the tiny island of Run in the Banda Islands of the Moluccas Indonesia. The English promptly changed the name from New Amsterdam to New York. Why did they make this trade? Firstly, some background on the Dutch East India Co.
Tulip mania, (Dutch names include: tulpenmanie, tulpomanie, tulpenwoede, tulpengekte and bollengekte) was a period in the Dutch Golden Age during which contract prices for bulbs of the recently introduced tulip reached extraordinarily high levels and then dramatically collapsed in February 1637. It is generally considered the first recorded speculative bubble (or economic bubble); The term “tulip mania” is now often used metaphorically to refer to any large economic bubble when asset prices deviate from intrinsic values.
Dallas Davison, Michael Hogue and Ali Hogue.