John Cameron's personal blog

Serious discussion about your financial position now - and in the future.

Redundancy – Beware An Unwanted 65th Birthday Present – More Tax!

Redundancy payments are in the air again, with the WA Government announcing plans to cut the number of public servants.

However, there is a nasty little surprise lurking in the tax laws for people over age 65. The tax treatment is very different either side of 65.

Just to be clear, what we are talking about are specific REDUNDANCY PAYMENTS. These are separate from superannuation and a range of other exit payments. Broadly speaking, a redundancy payment is a specific extra payment that is made when an employees’ job has been abolished, and the person is no longer required. Redundancies can be either voluntary, or not.

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4 Things To Think About When Deciding Whether Or Not To Do It - The Age Pension and Downsizing

The recent Federal budget contained some incentives for older Australians to sell their homes and downsize. Specifically, people over 65, who were selling their home that they had owned for 10 years or longer, will be able to put $300,000 each into their superannuation. Previous restrictions that would prevent this, will not apply.

However, it remains to be seen how attractive this is, especially to people who may lose all or part of the age pension in the process. By freeing up capital in this way, it moves from the non-means testable area (your home), into the area where it becomes means testable. In the process, all or part of your age pension may be affected.

In our experience, people often decide not to downsize when faced with this loss of pension. However, this action is not logical and puts too much emphasis on the age pension. After all, the age pension is nothing but a source of income, and it is not inherently better than an alternative source of income.

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3 Things To Look Out For In 2017

1. Changing Times

For several years, we have been in an environment of ever falling interest rates, as Governments have relied on monetary policy to fix the damage wreaked by the GFC.

However, while this has arguably prevented some really horrible things from happening (such as a world-wide depression), it has not succeeded in making good things happen. Now many are looking to more Government spending to boost economic growth. In this context president-elect Donald Trump spoke on election night of modernising America’s often old and creaking infrastructure and making it the world’s best. Depending on the scale, this would indeed be a game changer. If successful, it could also draw other countries down this path, as well as lead to rising (instead of falling) interest rates.

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Amended Super Amendments Pass

Miracle of Miracles, Wonder of Wonders -  the much debated, and heavily criticised (by some) changes to the superannuation system have passed Parliament and are set to become law. The original changes (amendments) were announced in the May budget. As a result of heavy criticism, the original amendments have been amended sufficiently to pass through the Parliament.

Passage through Parliament at this time indicates a degree of cooperation between the various political parties. It was starting to look like they may not pass until the March sitting of Parliament, and this would have put their implementation date under pressure, as the changes are due to start on 1st July, 2017.

Now the work begins of looking closely at the details. On first glance, it looks like the effects of the changes will vary greatly between different individuals. Some people will see no change at all. For others, the changes will be substantial. More to come.

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More On The Culture Wars

It seems that the “culture wars” continue spreading, and have now reached the corporate regulator, ASIC, itself. 

Remember, we are dealing with culture as being the values and norms that an organisation holds and which drives much behaviour, not culture as in music, statues and paintings.

Before continuing, let me wind back a few months.

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What’s In A Name?

We call our business “Black Swan Event Financial Planning” for a very specific reason – to keep reminding ourselves that, despite the best efforts of the legions of financial analysts in the world, there is an awful lot that nobody knows when it comes to giving financial advice.

Too often the exercise of doing projections provides a false sense of certainty about how somebody’s position may evolve over time. It’s almost as if the exercise of coming up with numbers enhances the certainty of a future outcome – without looking into the assumptions behind the calculations. Then, hey presto, some unanticipated change happens, and the projections go out the window.

Changes of this kind are known as “Black Swan Events”, and the crunch is that they happen far more often than theory dictates. This point (the fact that things changed in big ways much more often than they were meant to) was noticed by Nazim Taleb, and formed the basis of his book, “The Black Swan, The Impact of the Highly Improbable”. It also enabled him to pursue a very successful career as a New York fund manager.

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Back in the Top 10

The video Securing your Future: featuring John Cameron was in the top 10 of the most viewed videos on The West Australian website Monday (12th Sept 2016).

"Different decades, different investment returns" 

You can watch it here: Securing your Future

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It’s The Plan, Stupid.

George Bush lost the 1992 election to Bill Clinton by focussing on the wrong thing. Bush focussed on his record, and success in Gulf War one. Clinton focussed on the economy and jobs, and won the election, thus giving rise to the saying “It’s the economy, stupid”. In other words, focus on the right thing.  Often it is right in front of you, and afterwards you can seem stupid for not spotting it.

It’s much the same when it comes to planning your financial future.

Too often we see people focussing on particular financial products as a cure to their financial ills. Often the discussion goes along the lines of, “Should we have an allocated pension?” or, “Is an annuity the answer?” or “Is superannuation worth it?” or …….

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Securing Your Future - the most viewed item on The West Australian website

'Securing Your Future' was the most viewed material on The West Australian’s website yesterday. It’s the online version of The West’s financial planning supplement. 

The West Australian newspaper published a financial planning supplement yesterday 'Securing Your Future' (Monday 22 August 2016). I contributed an article to the supplement and participated in a video for The West's website. You might like to read the articles online - there is some useful material. 

Click on this link to view my article and video about different investment returns in various decades: https://au.news.yahoo.com/thewest/a/32389394/sequencing-and-retirement-income/#page1 

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How Big Is Your Buffer?

One of the issues that repeatedly crops up when dealing with clients is, “How well placed are you to deal with unforeseen expenses?” 

The expenses can range from relatively minor things such as an appliance suddenly failing, a minor car accident or a leaky roof, through to things far more catastrophic – a major illness, death of your partner, loss of job, marriage breakdown or any of a whole host of other things.

I started thinking along these lines, on reading a story in the Financial Review on 1st July. The story reported a survey carried out by the US Federal Reserve, to assess the resilience of American households if some financial shock occurred.

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Is Your Financial Planner Putting You In A Box??

Unfortunately, much of what passes for financial advice today, amounts to little more than a box-ticking exercise.

For many of the bigger institutional advisor groups, the process goes something like this:

• Fill out a risk profiling questionnaire, and go into a risk profile box. Tick

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What Is A Financial Planner’s Role??

Just what does a Financial Planner do?

Coming up with a suitable strategy and recommending suitable investments is an obvious job, and is the one that attracts the most public attention.

However, another job that can be just as important, is helping clients make better financial decisions. Your financial planner should be able to engage with you on a range of issues, help you clarify the different options that are available to you in a given situation, and choose between the alternatives.

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Later this year Britain will vote on whether to stay in the EU, or leave. This is an excellent account of the pros and cons.

Should they stay or should they go?

Oliver Hartwich | The New Zealand Initiative | 17 March 2016

I wrote recently about the political implications of the UK's forthcoming referendum on EU membership. Let's take a closer look at what the British are voting on, and why your columnist is not sure what to wish for.

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