EOFY - End of Financial Year...here again already!!


I just know I've written about this before! To be specific, last year! For those readers in offshore jurisdictions, 30th June marks then end of the Australian Tax Year and accordingly all individuals account for their earnings and tally their deductible expenses - and most companies do similar....

Here we are, two "self-funded retirees" (SFRs) just home from a very special overseas cruise and we are brought back to reality with the annual need to close off our superannuation fund books for presentation to our accountant for tax return lodgement and assessment. Whilst we operate a complying fund under Australian Tax Law we are nevertheless obligated to report our fund's annual performance. From our perspective our primary interest is to take stock of the investment performance of our balanced portfolio and importantly to note how each of our benefit accounts are holding up! We are very conscious that during the past 12 months our drawings have been a bit higher than usual - some one-off special outlays - but thankfully we hope these are somewhat mitigated by continuing wise investment decisions by our portfolio advisers.

The real issue for us, and I dare say everyone else who is "self-funded" in retirement, is just how long we need our investment capital to endure and provide us with a continuing modest yet comfortable lifestyle. It seems we are all wanting to retire earlier and with our active lifestyles and fitness regimes - not to mention the considerable benefits of modern medicine - all contributing to our longevity, the pressure on our hard-earned "nest-eggs" is continually mounting!! Is there enough and will it last?? - the vexing questions we continually hear among our peers both here at home and during our travels abroad.

The good news is that with the aid of a simple but well constructed electronic spreadsheet using some fairly conservative assumptions about earnings capacity, inflation and of course your estimated future annual drawings, you can reasonably assess how long your money will last. She and I have projected we'll be ok until we reach age 93, and we take some solace in that, though we appreciate we cannot anticipate economic downturns or indeed another GFC the likes of 2008, but that's why I emphasise "conservative" assumptions.

And its also my observation that whenever you hold significant liquid funds, they quickly and mysteriously diminish - we all know just how quickly a wallet of cash goes these days and minutes after an ATM withdrawal, we are almost quizzically trying to work out what we spent it on! The risk is that the larger the cash amount, the larger the splurge - and we are all masters at self-justification - "we really did need to buy that shiny new car" when in reality the old one was perfectly adequate! I recently blogged about my dilemma over whether or not to but a new motor home - I could easily justify it on emotional grounds but I soon realised that once spent I would immediately have much less invested capital and consequently much less annual earning power.... forever!! And I would also have invested in a depreciating asset as opposed to a growth (investment) asset. So the moral is - conserve your capital, invest it well and live comfortably off the interest it returns each year!

Against this rather harsh position is the opposing argument that you should not make your retirement a purgatory by going without, just so you can leave your capital behind for others to enjoy! So its a matter of balance and by keeping a watchful eye on your financial position you will make more prudent judgements and decisions. Your timely attendance to your annual compliance obligations to the tax office will provide that opportunity. Make sure you do it!!


...and remember...have a fabulous retirementLIFE....




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