Max Newnham - Funding your retirement: A survival guide

First published 2011 by Wrightbooks

an imprint of John Wiley & Sons Australia, Ltd

42 McDougall Street, Milton Qld 4064

Office also in Melbourne

Typeset in Granjon 12/15 pt

Max Newnham 2011

The moral rights of the author have been asserted

National Library of Australia Cataloguing-in-Publication data:

Author: Newnham, Max.

Title: Funding your retirement: a survival guide /Max Newnham.

ISBN: 9780730375081 (pbk.)

Notes: Includes index.

Subjects: Retirees Australia Finance, Personal.

Retirement Economic aspects Australia.

Retirement income Australia.

Retirement Australia Planning.

Dewey number: 332.0240140994

All rights reserved. Except as permitted under the Australian Copyright Act 1968 (for example, a fair dealing for the purposes of study, research, criticism or review), no part of this book may be reproduced, stored in a retrieval system, communicated or transmitted in any form or by any means without prior written permission. All enquiries should be made to the publisher at the address above.

Cover images: Stiggy Photo, 2011; Danny E Hooks, 2011; STILLFX, 2011; Robyn MacKenzie, 2011; lakov Kalinin, 2011. All images used under license from Shutterstock.com.

Table 3.4 and tables 17, 18, 19, 20, 21, 22 in appendix: reproduced with permission from Centrelink. Rates are current as of March 2011. Readers need to refer to for up-to-date Centrelink information.

The 10 worst stock market crashes on the New York Stock Exchange since 1900, pages 178179. Source: . Used with permission.

Tables 3.1, 3.2, 4.1, 4.2, 4.3, 6.3 and tables 3, 4, 5, 6, 7, 8, 13 in appendix: Australian Taxation Office. The ATO material included in this publication was current at the time of publishing. Readers should refer to for up-to-date ATO information.

Printed in Australia by Ligare Book Printer

10 9 8 7 6 5 4 3 2 1

Disclaimer

The material in this publication is of the nature of general comment only, and does not represent professional advice. It is not intended to provide specific guidance for particular circumstances and it should not be relied on as the basis for any decision to take action or not take action on any matter which it covers. Readers should obtain professional advice where appropriate, before making any such decision. To the maximum extent permitted by law, the author and publisher disclaim all responsibility and liability to any person, arising directly or indirectly from any person taking or not taking action based upon the information in this publication.

Also by Max Newnham

Tax for Small Business: A Survival Guide

Self Managed Superannuation Funds: A Survival Guide

About the author

Max Newnham is a chartered accountant who has been working in public accounting since 1974. He is a partner in the firm TaxBiz Australia, which has two offices in the outer eastern suburbs of Melbourne and looks after clients from all around Australia.

Like many chartered accountants, Max started his professional life in auditing, moved into insolvency, and then found his niche in looking after the tax, accounting and financial affairs of small business owners and individuals.

Worried about the quality of financial advice his clients were receiving from commission-driven financial planners, Max became a certified financial planner (CFP) and gained the designation of Chartered Accountant Financial Planning Specialist. He is also a specialist adviser on self managed super funds (SMSFs) to the Self-Managed Super Fund Professionals Association of Australia.

During the mid 1980s, when Australia had, in Maxs opinion, the worlds greatest treasurer, Max mounted a media campaign against the Australian Taxation Office (ATO), which was disadvantaging low-income earners who had been made redundant. This campaign led to the Hawke government issuing legislation to force the ATO to stop overtaxing lump sum termination payments, and was also the start of Maxs writing career. The firm he was working with at the time, recognising his interest in tax issues, asked Max to write tax articles that they issued as press releases. When he started his own firm in 1989, he became a columnist for the weekly Money section in the Melbournes The Age and t he Sydney Morning Herald . The topics Max covered in these articles increased in range to include not only tax, but also small-business issues, superannuation and investing.

At the same time Max attended his first federal budget as part of The Ages budget coverage team, preparing tables and other analysis related to budget and tax issues. Since 1989 he has covered every federal budget except for one.

The articles he loves writing most come from interviewing people, ranging from Lindsay Fox to The Waifs, about what it takes to be successful in business. A collection of these stories formed his third book, published as Great Aussie Success Stories . Keeping up with these modern electronic times, Max now also writes weekly columns for the online version of Fairfax publications on small business and investing issues.

Maxs first book dealt with the introduction of the goods and services tax (GST), and the second with the introduction of the new superannuation system. He has written three books for Wiley: Tax for Small Business , Self Managed Superannuation Funds , and now this one, which are all written as survival guides.

Max lives in an outer eastern suburb of Melbourne in the beautiful Dandenong Ranges. He and his wife are fast becoming empty-nesters (not before time) and are looking forward to a long and happy retirement in the not too distant future. Their six children have all embarked on different careers and they have two grandchildren, an old dog, and a young puppy that keeps everyone on their toes.

Acknowledgements

There are many people I need to thank for having helped through the gestation period and the birth of this book. First of all, thanks to Kristen Hammond from Wiley, who alternated between being my mentor and chief whip cracker, liked my idea for this book and came up with its title and so its direction.

To Daniel Dutt, my right-hand man at TaxBiz financial services, a big thank you for proofreading the chapters relating to financial planning. My wife, Liz, deserves a medal for shouldering more than her fair share of the household duties while I wrote this book.

To all of the editors and subeditors Ive worked with over the years in the Fairfax organisation, thank you for giving me the opportunity to fulfil a lifelong ambition to write and even get paid for it. Thank you to Michael Wilkinson who talked me into writing my first book, and Steve Berry from Fairfax Publications for championing my next two books. Steve, you are sorely missed.

A last big thank you to Mr Wallace, my fifth form English teacher at Mitcham High, who failed me in his subject. This meant I repeated the year, got to do an extra year of accounting, and ended up in a class where the girls outnumbered the boys by five to one.

Introduction

This book is meant to be a practical guide for anyone interested in having a financially secure retirement. At times technical points must be discussed, but this book is designed to be a step-by-step guide to help people who want to help themselves.

It is not a get-rich-quick, or get-rich-slow, guide based on teaching the principles of borrowing against property and becoming a tycoon that way. It wont explain the mysteries of foreign exchange or derivative trading so you have some secret way of making money known only to the incredibly clever. And it wont tell you how you can apply the principles of some of historys greatest share investors and become as rich as Warren Buffett.