Wisdom in hindsight: a Case Study on ‘hypoH’

How often have you said – or have you heard your senior friends say – ‘if only I had….’? In this post we are going to look at some of the decision points as we journey through life, but looking back from a time when retirement is being contemplated to consider how things may have turned out differently if more informed decisions been taken at some of those occasions.

Let’s contemplate hypothetical Harry: this imminent retiree has arrived to a time when a decision needs to be made about retirement – looking at the asset position, he finds that as a 65 year-old, his superannuation account is sadly shy of what is desirable for a comfortable retirement. The fund has less than $200,000 invested – and because of investment decisions based on his age, the asset allocation in the fund is for a defensive outcome. Harry also has a home, still subject to a mortgage at about 65% of its current market value. He is married (for a second time) and has a teenage child still in the family home.

We won’t detail all of the financial position for ‘hypoH’ but suffice it to say that there are some decisions he has reflected on that he feels he could have had a better end-position had he taken appropriate advice.

‘hypoH’ has been employed in well-paid positions for the past thirty years. He has had reasonable cash flow over the past ten years in spite of having settled a marital breakdown situation some fifteen years ago. Unfortunately, much of what should have been ‘surplus’ cash flow has been expended on lifestyle items including new cars, overseas holidays and expensive interior furnishings for the home; and so only a limited amount has been deployed to reduce the mortgage debt.

What could hypoH have done differently over the most recent few years? Since age 55, our subject could have been accessing his superannuation account in a way that would actually help him to grow the amount accumulating – yes, he could have been eating some of the cake and still have more left! Since he turned age 60, this strategy could have been even more effective. [From age 55, the withdrawals would have been subject to some taxing considerations; from age 60, no tax would have applied.]

Since 1 July 2007 hypoH could also have been making higher levels of contribution to bolster the accumulating funds: with separate caps on Concessional and Non-concessional contributions, the spent ‘surpluses’ could have put the family I a stronger position to cope with the imminent retirement.

Fortunately for hypoH his health has stood by him well over the past several years, but his failure to insure himself (and his family) has meant that they have lived those years with a higher level of risk – and anxiety – than was necessary. In the absence of a considered Estate Plan the family has not considered their need for life insurance products and hence hypoH is entering retirement phase with only a limited (and diminishing) amount of insurance protection that has been provided by his employer-sponsored superannuation scheme. Even with this, his Income Protection and his TPD covers have now reduced to Nil. His wife and young family are in financial danger if he meets an untimely demise any time soon. [And with a ‘former family’ in the background, the lack of Estate Planning may mean that there is an even greater risk for them should there be any challenge by the former family to participate in the distribution of the Estate.]

When hypoH was between 35 and 45 years of age, he might have been wise to heed the recommendation of that insurance adviser that called on him so many times and taken some properly structured insurance – and taken ‘level premium’ insurance so that it remained very affordable towards the latter years.

Whilst hypoH may have had to settle out some of the accumulate wealth on the breakdown of his first marriage, having established a habit of regular saving would have stood him in good stead – and made him aware of the benefits of ‘dollar cost averaging’ to establish a fund for the education of his second family.

All of these strategies were available to hypoH over the course of his financial journey: hypoH won’t get another go at getting his affairs in order (unless of course he wins Lotto, benefits from a significant inheritance or in some other way receives an unexpected significant capital windfall). Our readers however, can take advantage of the lessons learned through hypoH’s experiences – but the time to act is NOW!

To ensure you don’t arrive at this position, call Continuum Financial Planners on 07 3421 3456 to arrange a meeting with one of our experienced advisers; or if wanting to contact out of office hours, use our online facility to Contact Us – the first three enquirers to respond will be given a free, no obligation consultation.

Disclaimer: The information contained in this article is general in nature and does not take into account personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and   read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product. 

Insurance - offload the risk!

Want to bet you don’t need it - insurance, that is? - That’s exactly what you are doing when you fail to adequately insure yourself (and your family)! You take a bet that your family that you will stay in great health for the rest of your very lengthy, healthy and safe life!

So why don’t we take adequate protection with an insurance company?   Some of the reasons we hear include –

• Never thought of it;
• Can’t afford it/ it’s too expensive;
• Not yet.

What of those explanations?

Never thought of it¹
Well, now you are at least in a position to read about it. The link below has a number of further links that provide many opportunities to broaden your understanding about the benefits of the different types of insurance protection available – and without promoting any one provider for any of them!

Australians are (almost) hopelessly under-insured: it’s almost cultural! Some ‘haven’t thought of it’ because they ‘haven’t heard of it’; some are too busy leading exciting lives they haven’t turned their minds to the matter; and some others don’t understand the implications of being under-insured – and so just don’t think about it!

If any of the following situations describe aspects of your life, you should be insured – and you should review the level of insurance you ‘carry’ – so as to be able to reassure your loved ones that their future is sound:

• you have a spouse;
• you have dependants (children, parents etc);
• you have debt (mortgage, credit cards, personal loan, line of credit);
• you are employed;
• you operate a business;
• you have employees who are key to your business;
• you have business partners.

..and whilst the above list is not exhaustive, any one of those situations means you have people who are critical to your financial well-being and/ or who are dependant on you maintaining your financial well-being.

If you haven’t thought about insuring your life think about their position if you meet with an unexpected illness or accident, or worse if you die. Some Case Studies might heighten your awareness of the need for adequate protection: see links below².

Can’t afford it/ it’s too expensive
Sometimes excuses can be justified, but when your mind is numbed by the message the doctor has just delivered about an unexpected illness or disability, the next fear by most victims of such circumstances is what financial position will they (and their loved ones) be in as the disorder/ disability takes effect?

A recent survey (from which we published some extracted statistics)³ shows that most of the people who make this statement don’t have a correct perception of the likely cost of the insurance in any event – in most cases, their estimates of what cover would cost in their circumstance was considerably in excess of the market average premium applicable!

When the need arises and there are education costs to pay, medical costs/ ongoing care to pay, mortgage costs to pay – and limited financial resources available at the desperate time, the cost of the protection that would facilitate the servicing of all of these financial obligations (and normal day-to-day living costs) – through an appropriate insurance plan – suddenly seems as though it wouldn’t have been so high after all!

Not yet!
This is the really scary one folks! This is the response of the person who knows they need to have the cover; they know they should have the cover – but they choose to bet that they can get the timing right! GOOD LUCK!

The facts are that –

• insurance protection is more easily obtained for healthy applicants with no adverse medical history (i.e., no risk exclusions or premium loadings – and unlikely to be declined cover);
• illness and disease can strike with short notice – and once that happens, the whole spectre of insurability can change; and
• good habits formed early mean peace of mind for you and your loved ones over the longer term.

Don’t bet against the odds: Ensure that you are adequately insured.

¹ http://www.continuumfp.com.au/services/risk-insurance-services/;
² http://www.continuumfp.blogspot.com.au/search/label/Insurance (Who Do You Love? Case Study); http://www.continuumfp.com.au/ashleys-story/
³ http://www.continuumfp.blogspot.com.au/2011/08/insurance-numbers-crunch.html#links

Disclaimer: The information contained in this article is general in nature and does not take into account personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and   read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.

Savings or Investment (which do you do?)

With all of the turmoil reported in the financial media over the past couple of years, the focus has been concentrated on the assets in which people invest – and diverted from the investment process they are engaged in. To a large extent the activities of (high frequency) traders and speculators are the cause of this volatility and the media is not reporting the scenario as it applies to savers and investors.


The very definitions¹ of these two words should tell us something as to how the money held for each purpose should be ‘held’. In short, savings should be held in very liquid assets with a high level of capital certainty and with little risk in relation to what will by corollary, be the low interest/ income earned. (We will return to this theme a little later.)


Investments on the other hand ‘use’ the money (it is put to work) – and so a more complex process is required to ensure that all relevant matters are considered. Professional financial planners² work with each client to establish the factors that apply to them – and how they apply to the particular client under consideration.


One of the features that ‘savers’ and ‘investors’ have in common is that their intended timeframes are generally medium to long-term. Sure, savers may be confronted with an unexpected short-term ‘call’ on the fund but generally they hope that will not be the case. The risk of that is protected by the fact that the fund is held in very liquid assets, usually cash at bank. Investors will have their assets diversified according to their identified needs – but usually targeting medium (3 to 7 years) to long-term (more than 7 years).


Some of the key questions a prospective investment client will need to be able to answer for their financial planner include –

• Current holdings of assets in various classes ³;
• What debts have been incurred to acquire the above assets;
• Are all of the assets (and the debt associated with them) for income-generating purposes;
• What cash flow position are you in (what sources/ level of revenue; and what expenses – including personal/ lifestyle, debt servicing and any work-related): is there a surplus to work with;
• With indicative timeframes specified, what acquisitions/ wealth accumulation is required (allowing for major costs along the way such as, children’s education; holidays; home renovations/ replacement; cars etc);
• What is your sensitivity to investment market risks such as – income/ valuation volatility; particular asset classes such as – shares/ property/ commodities; economic and market cycles; and
• To what extent are people who are financial dependants to be considered (children; parents; business partners).

For this discussion, investment is a process as well as an activity. [Contrast trading or speculating with investment-type assets, which can be bought and sold – directly or based on derivative products, at short notice and even repetitively. Such activity is better considered as a business (active financial transacting) rather than investment (more passive financial transacting).]


If you are a saver looking to become an investor over time; or if you are an investor seeking to ensure that you are ‘on the right track’ – call our office (on 3421 3456); or use the online Contact Us facility to arrange an obligation-free, no cost first interview with one of our experienced financial planners.


¹ Definitions:

• Savings: (noun) a fund of money accumulated (and put aside as a reserve)
• Investments: (noun) money used to make more money – assets purchased to gain income; to increase capital, or both.

² At Continuum Financial Planners we have a number of experienced advisers available to work through these processes with you. Go to http://www.continuumfp.com.au/about-continuum/meet-the-team/ and select an adviser to contact for your needs.


³ Refer our article on the risk characteristics of the more common asset classes – at http://www.continuumfp.com.au/avoid-over-diversifying-your-investment-portfolio/; and what should be done with them – at http://www.continuumfp.com.au/risk-and-reward/


Disclaimer: The information contained in this article is general in nature and does not take into account personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and   read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.