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30 April 2010

Investing for generations – growing your wealth

As your circumstances in life change so do your financial needs and priorities. With some forward planning you can manage the changes life brings, while consolidating your wealth for yourself and the next generation. Here we look at some simple strategies that can help you plan ahead to maximise your wealth.

Strategies for growing your wealth

  • Create a financial plan – A plan is the starting point which can help you and your family clearly define your financial goals now and for the long term. Your plan should assess your current situation, what you want to achieve, how you are going to get there and most importantly, it should be adaptable to any changes.
  • Manage debt – Not all debt is ‘bad’ and there may be options to better manage debt or use it to your advantage. Tax-deductible debt (from which an income is derived) can potentially improve your tax and wealth position if structured appropriately. One strategy to consider could be ‘debt recycling’ which coverts inefficient (or non-deductible) debt into efficient (deductible) debt. Please note, debt recycling is generally only suitable if you have a stable income, a long-term investment time horizon and a high tolerance to risk.
  • Set up a regular savings plan – Investing through a regular savings plan provides a simple, cost-effective way to grow your investments without even thinking about it. It also provides the benefits of dollar-cost-averaging which averages out the entry price you pay for your investments over time.
  • Reinvest your distributions and dividends – This is the easiest way to benefit from the magic of compounding, which is, earning returns on your returns.
  • Invest in super – Super is one of the most tax-effective ways to save and invest for retirement. The earlier you start, the more you will have to live on later.

The power of super

Super is a long-term savings structure to help fund your retirement. Investing through super can be an effective savings strategy as it offers many tax concessions compared to investing outside of super.

Some of the tax benefits of super include:

  • 15% tax rate on contributions and up to 15% on earnings
  • being able to draw on your super tax-free from the age of 60
  • concessional tax treatment for self employed small business owners who transfer assets into super.

Super tips

  • Making before-tax contributions (eg salary sacrifice) may lower your income tax.
  • Making additional contributions above the compulsory 9% employer contributions can help to grow your super (be aware of the contributions caps).
  • If you are under age 65 you can make after-tax contributions of up to $450,000 over three years.
  • If your spouse earns less than $10,800 pa, you can make a $3,000 after-tax contribution to their super and receive a tax rebate of $540.
  • If you earn less than $31,920 a year you may be eligible to receive a $1,000 ‘co-contribution’ from the government into your super fund.
  • As super is long term, you should ensure your investment strategy has the potential to grow over time to retirement. Depending on your situation, this might include investing predominantly in growth assets when you are younger and a mix of growth and defensive assets as you approach retirement.


Would you like to know more?

If you think any of these strategies might benefit you, your family or friends, please contact your Private Client Adviser or phone 1800 631 381.

Perpetual Private Clients advice and services are provided by Perpetual Trustee Company Limited (PTCo) ABN 42 000 001 007, AFSL 236643. This publication has been prepared by PTCo. It is general information only and is not intended to provide you with financial advice or take into account your objectives, financial situation or needs. The tax information in this document is not tax advice and should not be relied upon as such. You should consider whether the information is suitable for your circumstances and we recommend that you seek professional financial and tax advice. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. No company in the Perpetual Group [Perpetual Group means Perpetual Limited and its subsidiaries] guarantees the performance of any fund or the return of an investor’s capital. No allowance has been made to taxation. Past performance is not indicative of future performance.