Before I start this weeks blog update, I want to share an amusing quote from Charlie Aitken, Managing Director of Bell Potter Wholesale, when referring to the Greek President's comments that a government couldn’t be formed.

"Greece is like a mosquito you just can’t kill on a summer night. Just when you think you’ve got it, you hear that little buzz. This shambles has gone on for two years now and its holding back the broader global economy. It really is unacceptable that a truly irrelevant country economically can effectively hold the entire financial world to ransom."

Now moving onto this weeks blog update.

A couple looking to achieve a 'comfortable' (see Note 1) retirement lifestyle will need to spend $55,080 a year, while those seeking a 'modest' (see Note 2) retirement lifestyle need to spend $31,643 a year, according to new figures released 9 May 2012 for the Association of Superannuation Funds of Australia (ASFA) Retirement Standard.

For the second consecutive quarter, costs for retirees have remained steady and are in fact marginally down (by a dollar or two a week) on the equivalent figures for the previous quarter for the first time since June 2010.

The aggregate costs for a couple living comfortably in retirement were down by 0.3% in the March quarter 2012 from the December quarter 2011 (see budget breakdown below). For a single female living at the modest level, costs were down by 0.1% compared to the previous quarter.

The difference largely reflects the fall in the price of goods and services in the leisure category, which makes up a larger proportion of the budget at the comfortable level.

The movement in costs over the quarter for retirees at the modest level was similar to the 0.1% increase recorded in the All Groups Consumer Price Index (CPI).

However, in some quarters the price increases recorded will differ as retiree households on average have somewhat different spending patterns to the rest of the population.

Along with generally owning their own home outright (so cost increases for housing are less important for retirees), on average they spend a negligible amount on education services, ensuring the rising cost of both secondary and tertiary education in the March quarter 2012 had relatively little impact on retiree expenses.

In contrast, food, health, transportation and recreation spending form a large part of retiree budgets.

Budgets for various households and living standards (March quarter 2012)

The figures in each case assume that the retiree(s) are aged 70 and own their own home and relate to expenditure by the household. This can be greater than household income after income tax where there is a drawdown on capital over the period of retirement. Single calculations are based on female figures. All calculations are weekly, unless otherwise stated.

Between the December quarter 2011 and the March quarter 2012, retirees experienced a 2.1% decrease in the cost of food and over the year to the March quarter, there was a decrease of 2.5%.

The largest falls for the March quarter were recorded in Melbourne (-2.3%), Adelaide (-2.3%), Sydney (-2.2%) and Perth (-2.2%).

Largely responsible for this negative movement in all cities was a fall in the price of fruit over the quarter (by 30%), with much of this attributable to the decreasing price of bananas as supplies recovered after the adverse impact of Cyclone Yasi. Falls in the price of fruit ranged from 33.3% in Adelaide to 16.9% in Darwin.

Electricity costs rose on average by 3%, reflecting substantial price increases in a number of states. Typically electricity prices in each state are relatively constant for a few quarters followed by a large increase. The price increase over the year was 9.9%.

Transport costs increased 1.1%, with a 2.5% increase in the cost of automotive fuel. This was partially offset by a decrease in the cost of motor vehicles.

The prices of leisure goods and services fell by 2% between the quarters, with the cost of overseas holidays falling by 4.8% and domestic holidays by 2%. This had particular implications for the comfortable budgets.

Communications costs increased by only 0.1% over the quarter. The increase in costs over the year was also a relatively modest 1.6%.

The 4.4% increase in the price of health services reflected a 14.1% increase in pharmaceutical prices due to fewer individuals benefiting from the Pharmaceutical Benefits Scheme safety net.

Over the year there was a 4.2% increase in the cost of health services. Over the longer term, health services tend to experience higher increases in price than other categories of consumer goods and services.

Note 1 - Comfortable retirement lifestyle. Enabling an older, healthy retiree to be involved in a broad range of leisure and recreational activities and to have a good standard of living through the purchase of such things as; household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, and domestic and occasionally international holiday travel.

Note 2 - Modest retirement lifestyle. Better than the Age Pension, but still only able to afford fairly basic activities.

The above article has been sourced from The Association of Superannuation Funds of Australia Limited.

Important Information

The above information provides an overview or summary only and it shouldn’t be considered a comprehensive statement on any matter or relied upon as such. The above information doesn’t take into account your personal objectives, financial situation or needs. It’s important for you to consider these matters before making any financial decision and I recommend you seek help from a financial adviser.

The Federal Budget Analysis prepared by GWMAS trading as MLC Technical appears below.

8 May 2012

The 2012 Federal Budget only contained a few surprises as many of the measures had already been legislated or pre-announced. The main winners were lower income earners, families and the elderly.

Summary

The key new announcements include:

• tax may increase on certain employment termination payments

• the reduction in the company tax rate isn’t going ahead

• the increase in the concessional contribution cap for people aged 50 or over with less than $500,000 in super will be postponed until 1 July 2014

• the tax payable on concessional super contributions by people earning $300,000 pa or more will increase from 15% to 30%, and

• a ‘SchoolKids Bonus’ of $820 a year for each child at high school and $410 for every child in primary school will automatically be paid to parents who are eligible for Family Tax Benefit Part A, replacing the Education Tax Refund.

The Government has also confirmed that:

• people earning under $80,000 pa will receive modest tax cuts

• the minimum income payments for a superannuation pension/income stream won’t increase until 1 July 2013, and

• funding will go ahead for the landmark changes to Australia’s Aged Care System announced recently.

Superannuation

CC cap reduction confirmed - Date of effect: 1 July 2012 and 1 July 2014

The uncertainty around the concessional contribution (CC) cap for people aged 50 and over has been resolved in the short term. On 1 July 2012, the cap will halve from $50,000 to $25,000 for all super fund members aged 50 or over, regardless of their account balance.

The plan to allow those aged 50 or over to contribute up to $50,000 pa if they have less than $500,000 in super will be delayed until 1 July 2014. This is to give the Government time to work out the details regarding how they are going to monitor account balances and implement this measure.

Implications - Super fund members aged 50 or over should:

• consider taking full advantage of the current cap by making concessional contributions of up to $50,000 before 30 June this year 

• review their concessional contributions, especially from 1 July, to make sure they don’t exceed the reduced cap

• consider making non-concessional contributions if impacted by the cap reduction, and

• review their contributions and income payments if using the ‘transition to retirement’ strategy.

30% contributions tax for higher earners - Date of effect: 1 July 2012

As reported in the media before Budget night, the Government plans to increase the tax on concessional super contributions from 15% to 30% from 1 July 2012 for high-earners on more than $300,000.

While this has made employer super contributions (including salary sacrifice) less attractive for individuals who are required to pay 30% contributions tax, it’s still 15% less than the marginal tax rate of 45% they would pay on their salary.

Personal tax changes

Marginal tax rate and LITO changes - Date of effect: 1 July 2012 and 1 July 2015

The personal taxation changes legislated as part of the Clean Energy (Carbon Tax Relief) Package will take effect on 1 July 2012 and on 1 July 2015, including:

• changes to the marginal tax rates and thresholds for lower income levels, and

• a progressive reduction in the Low Income Tax Offset (LITO).

Implications - These changes will mean modest tax savings for people earning under $80,000.

Illustrative tax savings

Flood levy to finish - Date of effect: 1 July 2012

As originally intended, the Flood levy will cease on 30 June 2012. This means people earning over $50,000 pa will have more available money for the 2012/13 financial year and beyond.

Further restrictions on ETP tax concessions - Date of effect: 1 July 2012

Tax may increase on certain employment termination payments (ETP) such as golden handshakes.

People who know they are going to receive an ETP soon, may want to negotiate for the payment to be made before 30 June 2012.

Standard deductions and 50% interest discount not proceeding

The plan to allow taxpayers to claim a standard deduction for work-related expenses when completing their tax returns has been dropped, as has the proposed 50% discount for the first $500 of interest income.

Other taxation changes

Company tax reduction not going ahead - Date of effect: 1 July 2012

The planned reduction in the company tax rate, from 1 July 2012 for small business and 1 July 2013 for other businesses, isn’t going ahead. This is a permanent measure and will be of particular concern to small business owners.

Retirement incomes

Drawdown relief for super pensions extended - Date of effect: 1 July 2012

The Government confirmed that the 2011/12 minimum pension drawdown levels will continue for another 12 months before increasing to the ‘normal’ levels from 1 July 2013.

Implications - For pensioners who receive enough of a pension this is good news, as they won’t be required to draw more income than they need. As a result, they can keep more money in their pension account, and not be taxed on investment earnings. Also, they won’t be forced to sell investments that may have recently fallen in value to fund the additional income payments, and could keep more money invested to participate in any market recovery.

Tax-free super pension incomes to increase

People aged 55 to 59 will be able to receive more tax-free income from a superannuation income stream/pension than they can in 2011/12. These increases result from the marginal tax rate, income threshold and LITO changes legislated as part of the Clean Energy Legislative Package (see Personal tax section).

Social security changes

SchoolKids bonus to replace Education Tax Refund - Date of effect: June 2012 and January 2013

A ‘SchoolKids Bonus’ of $820 a year for each child at high school and $410 for every child in primary school will automatically be paid to parents who are eligible for Family Tax Benefit Part A. This is to replace the Education Tax Refund which many eligible parents weren’t taking advantage of as they had to keep records of approved expenses and lodge a claim. The first payment is expected in June 2012.

Family Tax Benefit Part A - eligibility - Date of effect: 1 January 2013

The Government will limit the Family Tax Benefit Part A to young people under 18 years of age or where the young person remains in secondary school, the end of the year in which they turn 19. Currently Family Tax Benefit Part A can be paid for a child up to age 22. The young person may be able to receive Youth Allowance after this.

Family Tax Benefit Part A – rate increases - Date of effect: 1 July 2013

The rate of Family Tax Benefit Part A will increase by $300 pa for families with one child, and $600 pa for families with two or more children. The base rate of Family Tax Benefit Part A will increase by $100 pa for families with one child, and $200 pa for families with two or more children.

Aged care changes

Date of effect: Various

The Government confirmed its commitment to the landmark aged care changes announced on 20 April 2012.

Under the 'Living Longer Living Better' plan, the Government will:

• overhaul the means-testing so care recipients with greater financial means make a greater contribution

• make it easier for older Australians to stay in their home while they receive care 

• ensure more people will get to keep their family home and avoid the need for fire sales, and

• establish a simplified gateway for accessing aged care information.

More information?

For more information on what any of these changes may mean for you, please contact me on 9372 7955.

Important Information

The information contained in this MLC Technical is current as at 9 May 2012 and is prepared by GWM Adviser Services Limited ABN 96 002 071749 trading as MLC Technical, registered office 150-153 Miller Street North Sydney NSW 2060. This company is a member of the National group of companies. Any advice in this Federal Budget Analysis has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on any advice, consider whether it is appropriate to your objectives, financial situation and needs. Past performance is not a reliable indicator of future performance. Before acquiring a financial product, you should obtain a Product Disclosure Statement (PDS) relating to that product and consider the contents of the PDS before making a decision about whether to acquire the product.

There is a very real possibility that everything you and I have been taught about how to earn money is so far from the truth that it’s almost comical. Earning money has nothing to do with age, formal education, gender or geography. It has nothing to do with past experience or your formal years of education or your level of intellect. Check it out … there are individuals who are functionally illiterate who have become multi-millionaires, while there are others who are absolutely brilliant and they are broke. Virtually anyone can be taught how to earn millions of dollars and yet the sad truth is that 97 out of every 100 people born, live their entire lives, and die without ever learning how to earn money. To perpetuate this ridiculous problem, their ignorance is passed along from one generation to the next.

Our school system has been designed as an environment to enlighten young minds, to replace ignorance with understanding and thereby improve the quality of life. Our educational system has obviously been successful in many areas. However, it has woefully neglected one important subject, “How to Earn Money.” You can earn a doctorate degree in economics and have little or no knowledge of how to earn money. A lack of understanding in this area is the cause of numerous unwanted and unnecessary problems, since money is the medium of exchange that is used worldwide for other people’s products and services.

There has always been a small, select group, approximately 3% of our population, who clearly understand that prosperity consciousness is the primary cause of wealth and their prosperity consciousness, like ignorance, is also passed down from one generation to the next.

Let's look at “money.” What is it? Money is a reward you receive for the service you render. The more valuable the service, the greater the reward. Thinking of ways we can be of greater service will not only help us earn more money, it will also enable us to grow intellectually and spiritually.

MONEY IS AN IDEA

The paper you fold and place in your purse or pocket is not money. It is paper with ink on it. It represents money, but it is not money. Money is an idea. The earning of money has nothing to do with the paper stuff. It has to do with consciousness.

I am aware there are books that instruct you on how to manipulate the market, stocks and people … they might even help you get money. But, let me caution you … when there is no spiritual growth … there is no spiritual strength … there is no lasting happiness … and, there is no real or lasting wealth.

To accumulate wealth, a person must become very comfortable with the idea of money. That may sound strange, however most people are not comfortable with the idea of money, which is why they do not have any. The cause of poverty is poverty consciousness. A poverty consciousness will cause a person to see, hear, smell, think and feel ... lack and limitation.

The late Mike Todd said, "Being broke is a temporary situation. Being poor is a mental state."

He was correct. There are wealthy people who lose every cent they have through a series of mistakes in judgement … but that does not make them poor. They will have it all back in a short time because of their prosperity consciousness.

If you have any question in your mind regarding your level of consciousness with respect to money, be very honest with yourself and look at your results. Study the patterns in your life.

If you want to improve your financial position in life, focus your attention on creating a higher level of prosperity consciousness. Begin by preparing a powerful, positive affirmation and fuel it with emotion. When you do this, you are depositing this creative energy in the treasury of your sub-conscious mind. And, by repeating this process over and over and over again every day, it will begin to alter your conditioning and mentally move you in the direction you want to go. Write it out, read it, feel it, and let it take hold of your mind.

How much money do you want? Saying you want more is not good enough. Five dollars is more. How much more? Decide on a figure. Be specific. You will not seriously want more money than you are capable of earning ... however, you would be wise to remember, you must earn it.

THERE ARE THREE INCOME EARNNG STRATEGIES

1. Trading time for money – By far the worst of the three income earning strategies, it is employed by approximately 96% of our population – doctors, lawyers, accountants, laborers, etc. There is an inherent problem with this strategy – saturation. You run out of time. If a person accumulates any degree of wealth employing this strategy, it will be at the expense of a life. They compromise on the car they drive, the house they live in, the clothes they choose and the vacations they take. They rarely, if ever, get what they want.

2. Investing money to earn money – This strategy is used by approximately 3% of the population. The number is small for the obvious reason – very few people have any money to invest. Many people who effectively employ this strategy follow the advice of a trusted, knowledgeable advisor.

3. Leveraging yourself to earn money – This is where you multiply your time through the efforts of others by setting up Multiple Sources of Income (MSI). This is, without question, the very best way to increase your income. Make a decision to have many sources of income; it’s the strategy that wealthy people have used dating clear back to the ancient Babylonians. Unfortunately, this strategy is only used by approximately 1% of our population, yet that 1% earns approximately 96% of all the money that is earned! You are only a decision away from membership.

Once you determine how much money you want to earn, write it down on a sheet of paper in large figures. Look at the number with the dollar sign beside it and tell yourself over and over again:

THAT AMOUNT OF MONEY IS AN EFFECT.

IT REPRESENTS A REWARD THAT I WANT TO RECEIVE.

WHAT SERVICE CAN I RENDER THAT WOULD BE DESERVING OF THAT REWARD?

You can take the total figure and divide it into multiple parts. Each part would represent a source of income. Each source of income represents a separate reward that you would receive for a service you would render.

Work on one source of income at a time; each one can become an exciting part of your life. What you are actually doing is thinking of different ways you can be of service to others.

• Think of how you can do whatever you do – more effectively.

• Think of how you can improve the quality and quantity of service you render.

• Think of how you can help people in a greater way.

Money is the ultimate servant. The more you earn, the more you can help others.

The above article has been sourced from LifeSuccess Productions and was written by Bob Proctor. 

Bob Proctor is widely regarded as one of the living masters and teachers of The Law of Attraction. Featured in the blockbuster hit, The Secret, Proctor has worked in the area of mind potential for over 40 years, is the best-selling author of You Were Born Rich, and has transformed the lives of millions through his books, seminars, courses and personal coaching.

Editors Note

This edition includes the regular Inspirational Quote, Funny Picture and Market & Economic Report. This month I have also included an Educational Video about the global recovery and what are the risks.

Europe’s debt problems pose the biggest threat to the global recovery. However, a financial crisis is looking less likely thanks to cheap ECB lending to banks and the European recession should be mild. Continued growth is likely elsewhere with the US expected to grow 2% this year, China 8% and the world 3%. Australia - While mining investment is booming, retailing, housing, manufacturing and tourism are likely to remain soft. Given constrained global growth and soft Australian indicators, the RBA is likely to cut rates further in the months ahead.

Inspirational Quote

The brick walls are there for a reason. The brick walls are not there to keep us out; the brick walls are there to give us a chance to show how badly we want something.

Randy Pausch (American Professor)

Funny Picture

The evolution of man - back to where it all started!

Market & Economic Report

Global economy

Review: US economic data has been mixed. The Institute for Supply Management composite survey rose solidly in March after experiencing a mild pullback the month prior. February’s retail sales rose by 1.1% month-on-month to reach 6.5% growth year-on-year (yoy). Overall the US economy appears to be growing at a moderate 2% to 2.5% pace. US labour market data disappointed with a fall of 120,000 jobs in March, although the unemployment rate dropped slightly to 8.2%. US housing data was also weak with falls in housing starts and existing home sales, and auto sales and construction were soft. Meanwhile, the US Federal Reserve ‘stress tests’ of the US banking system show only four large banks failed the very tough scenario applied.

Europe remains a source of concern for global markets, with economic data pointing to a mild recession and downside risks persisting. European official policy interest rates were kept on hold at 1.0% at the European Central Bank (ECB) meeting and President Draghi made it clear that any talk of exit from easy monetary policies is premature. The European growth forecast for 2012 was revised down to a range of -0.5% to 0.3% for real gross domestic product (GDP) growth (our forecast is -1%). In terms of data releases, European business surveys were steady in April after deteriorating in March, with the European purchasing managers’ index (PMI) remaining at 47.7. Encouragingly, there was a lift in Europe’s largest economy with the German PMI rising to 48.4 from 48.1. Yet Eurozone retail sales and German factory orders were both weak and unemployment rose further to 10.8%. In Italy it is at a record high with around one third of youth unemployed. The ability of European policymakers to adequately respond to the ongoing crisis remains a key focus for markets with Eurozone finance ministers signing off on Greece’s second bailout being well received, although this was dampened by the decision to cap new bailout lending to €500 billion rather than increase it to €740 billion as had been flagged.

China is also being watched closely for signs of weakness and its potential impact on global growth. However, economic data continues to point to a soft landing for China rather than the hard landing feared by some. Growth in economic activity has moderated further, with industrial production and retail sales growth slowing. Official PMIs rose in March and while the HSBC PMI fell it was above the flash estimate, and all are at levels consistent with 8%. Meanwhile, average residential property prices fell for the seventh month in a row. China’s annual consumer price index inflation climbed more than expected in March to 3.6% from 3.2% previously, however the trend remains down and the rise was mainly due to a hike in food prices. Non food inflation was just 1.7% and the producer price index fell 0.3% yoy, which still leaves plenty of scope for monetary easing. China’s growth target for 2012 has been set at 7.5% and the March data is consistent with real GDP growth of 8%, reinforcing our view that there is little evidence of a hard landing.

News out of Japan was mixed with mostly stronger readings in the Tankan survey and stronger auto sales, although the Bank of Japan conceded that “Japan’s economic activity has remained more or less flat” over recent months.

Outlook: Europe’s debt problems pose the biggest threat to the global recovery. However, a financial crisis is looking less likely thanks to cheap ECB lending to banks and the European recession should be mild. Continued growth is likely elsewhere with the US expected to grow 2% this year, China 8% and the world 3%.

Australian economy

Review: Australian economic data continues to point to a slowdown in activity, but with large differences between states as a result of the multi-speed economy. Australia’s real GDP growth for the December quarter of 2011 was only 0.4%, half that of the preceding quarter. Labour market data for March showed a solid gain following a loss in February but annual jobs growth is a mere 0.3% yoy which is not enough to stop unemployment from rising. The National Australia Bank business survey for March remained weak despite showing a slight improvement in business confidence and business conditions. Consumer confidence as measured by the Westpac Melbourne Institute survey fell slightly. Elsewhere, data was equally disappointing with a sharp fall in building approvals, flat house prices, soft retail sales and another surprise trade deficit in February. The Reserve Bank of Australia (RBA) kept interest rates on hold at 4.25% at its April meeting. However, the Board did note that it “judged the pace of output growth to be lower than earlier estimated, but also thought it prudent to see forthcoming key data on prices to reassess its outlook for inflation, before considering a further step to ease monetary policy”.

Outlook: While mining investment is booming, retailing, housing, manufacturing and tourism are likely to remain soft. Given constrained global growth and soft Australian indicators, the RBA is likely to cut rates further in the months ahead.

Australian shares

March review: Australian shares showed some gains early in the month but remained constrained by the relatively high interest rates in Australia, the strong A$ and concerns about a hard landing in China. By month-end, the S&P/ASX 200 finally broke above the 4300 resistance level that had been in place all year, partly boosted by increasing expectations that the RBA would soon cut interest rates. The S&P/ASX 200 Accumulation Index returned 1.2% for the month overall.

Short-term outlook: While shares might be in for a rougher patch, Australian shares are likely to provide positive returns on a 12-month view.

Medium-term outlook: Reflecting reasonable growth prospects, medium-term returns of around +10% per annum are likely (or +11.5% if franking credits are allowed for).

Australian bonds and cash

March review: Australian bond yields weakened over the month on softer data releases and lowered interest rate expectations. 3-year Australian government bonds opened the month at a yield of 3.61% and closed 13 bps lower at 3.48%. 10-year bond yields were relatively flat, opening the month at 3.97% and closing 1 bp higher at 3.98%. The 90-day bank bill yield opened the month at 4.41% and fell 13 bps lower to close at 4.28%. 

Short-term outlook: Australian bonds are poor value at current yields but they are a good diversifier against global concerns.

Medium-term outlook: Returns from local sovereign bonds over the medium term are likely to be low, reflecting low yields.

Key financial markets

The above article is by Dr Shane Oliver, Head of Investment Strategy & Chief Economist, from AMP Capital Investors Limited.

Educational Video - Global recovery - what are the risks?

Dr. Shane Oliver discusses the current path to global recovery and what to watch out for.

The above video is from Dr Shane Oliver, Head of Investment Strategy & Chief Economist, from AMP Capital Investors Limited.

Important Information

The above information provides an overview or summary only and it shouldn’t be considered a comprehensive statement on any matter or relied upon as such. The above information doesn’t take into account your personal objectives, financial situation or needs. It’s important for you to consider these matters before making any financial decision and I recommend you seek help from a financial adviser.

Yesterday, I attended a presentation called "You never know what is around the corner" by John Maher.

For John Maher, his wife Ange and their four daughters, Sunday 4 April 1993 seemed like just any other day. John was on his way to a local cricket function. But he would never reach his destination.

John was involved in a horrific car accident. Emma, aged 18, the driver of the other car, was killed instantly and John suffered serious head and neck injuries that would leave him in pain and with short-term memory loss for the rest of his life.

Not just emotionally but financially too, John’s family now faced an uphill battle. Previously, John was a senior manager and earned more than $150,000 a year. He and his wife had a substantial mortgage, other loans and children at university and private school.

Due to his condition John found himself unemployable and his employment was terminated.

Fortunately, 10 years prior to the accident, John had taken out Income Protection insurance. Over the period of his cover he’d paid around $9,800 in insurance premiums.

Income Protection insurance has proven to be the Maher family’s financial lifeline. Over the last 14 years, John has received more than $1.1 million in benefits and he will likely continue to claim his monthly benefit until age 65.

As John says, “Insurance was my greatest ever investment. I remember thinking at the time that nothing was likely going to happen to me – but you never know what lies around the corner.”

30 months after John's car accident, he was dealt the cruellest of blows, his youngest daughter Carmen, aged 18, was killed in a car accident. Listening to John talk about the heartache of losing his daughter, his baby girl, brought tears to my eyes.  

In a recent survey, 89% of Australians aged 25 to 65 said they were not likely to have an accident (making them unable to work) in the next 20 years. John would have been one of those people before his accident. But the frightening reality is that every working Australian has a 1 in 3 chance of becoming disabled for more than 3 months before turning age 65.

The presentation was confronting, personal, thought provoking, emotional and factual, and will make financial advisers and clients understand the need to secure the one thing that makes their financial life tick, their income.

I will conclude with John comments, "Income Protection is the most valuable insurance protection for a family when a scenario such as what happened to me strikes down the breadwinner."

Australia has one of the highest life expectancies in the world and the average retirement length has increased accordingly.

You may therefore need to plan for 20 to 30 years without the financial security of regular employment.

So it’s really important you make the most of your super and other savings in the lead-up to and during your retirement.

You can use your super to start an income stream which:

• Can provide regular and tax-effective income to help meet your living expenses at age 55 or over.

• Could enable you to access or increase your entitlement to Age Pension benefits.

There are generally 2 types of income streams that can enable you to convert your super into a regular and tax-effective income at age 55 or over. The table below summarises the key features and benefits.

The above article has been sourced from MLC Limited.

Important Information

The above information provides an overview or summary only and it shouldn’t be considered a comprehensive statement on any matter or relied upon as such. The above information doesn’t take into account your personal objectives, financial situation or needs. It’s important for you to consider these matters before making any financial decision and I recommend you seek help from a financial adviser.

The greatest stumbling block you will encounter when making important decisions in your life is circumstance. We let circumstance get us off the hook when we should be giving it everything we’ve got. More dreams are shattered and goals lost because of circumstance than any other single factor.

How often have you caught yourself saying, “I would like to do or have this but I can’t because...” Whatever follows “because” is the circumstance. Circumstances may cause a detour in your life but you should never permit them to stop you from making important decisions.

Napoleon said, “Circumstances, I make them.”

The next time you hear someone say they would like to vacation in Paris, or purchase a particular automobile but they can’t because they have no money, explain they don’t need the money until they make a decision to go to Paris or purchase the car. When the decision is made, they will figure out a way to get the amount needed. They always do.

Many misguided individuals try something once or twice and if they do not hit the bulls-eye, they feel they are a failure. Failing does not make anyone a failure, but quitting most certainly does and quitting is a decision. By following that form of reasoning, you would have to say when you make a decision to quit, you make a decision to fail.

Every day in America, you hear about a baseball player signing a contract which will pay him a few million dollars a year. You should try to keep in mind ... that same player misses the ball more often than he hits it when he steps up to the plate.

Everyone remembers Babe Ruth for the 714 home runs he hit and they rarely mention that he struck out 1,330 times.

Charles F. Kettering said, and I quote, “When you’re inventing, if you flunk 999 times and succeed once, you’re in.”

That is true of just about any activity you can name, but the world will soon forget your failures in light of your achievements. Don’t worry about failing, it will toughen you up and get you ready for your big win. Winning is a decision.

Many years ago Helen Keller was asked if she thought there was anything worse than being blind. She quickly replied that there was something much worse. She said, “The most pathetic person in the world is a person who has their sight but no vision.” I agree with Helen Keller.

At 91, J.C. Penny was asked how his eyesight was. He replied that his sight was failing but his vision had never been better. That is really great, isn’t it?

When a person has no vision of a better way of life, they automatically shut themselves in a prison; they limit themselves to a life without hope. This frequently happens when a person has seriously tried, on a number of occasions, to win, only to meet with failure time after time. Repeated failures can damage a person’s self-image and cause them to lose sight of their potential. They, therefore make a decision to give up and resign themselves to their fate.

Take the first step in predicting your own prosperous future. Build a mental picture of exactly how you would like to live. Make a firm decision to hold on to that vision and positive ways to improve everything will begin to flow into your mind.

Many people get a beautiful vision of how they would like to live but because they cannot see how they are going to make it all happen, they let the vision go. If they knew how they were going to get it or do it, they would have a plan not a vision. There is no inspiration in a plan but there sure is in a vision. When you get the vision, freeze frame it with a decision and don’t worry about how you will do it or where the resources will come from. Charge your decision with enthusiasm ... that is important. Refuse to worry about how it will happen.

Advanced Decision Making

We make advanced bookings when we fly somewhere - that is quite common. We make advanced reservations to eliminate any confusion or problems when the time arrives for the journey. We do the same with renting a car, for the same reason. Think of the problems you will eliminate by making many of the decisions you must make ... well in advance. I’ll give you an excellent example. As I am preparing this message it is Ramadan, a time where all practicing Muslims fast. I was in an office yesterday in Kuala Lumpur and was asked if I would like a cup of tea or coffee. I replied that I would appreciate a cup of tea. The lady next to me was then asked if she would like a cup and she replied ... “No, I’m fasting.” When she was asked, she did not have to decide whether she wanted anything or not. Whether she was thirsty or not was not a consideration. A decision had previously been made and her advanced Decision was well tempered with discipline.

The exact same concept works with a person when they are on a diet to release weight. Their decisions are made in advance. If they are offered a big slice of chocolate cake, they don’t have to say, “Gee, that looks good ... I wonder if I should.” The decision is made in advance.

I made a decision a long time ago that I would not participate in discussions of why something cannot be done. The only compensation you will ever receive for participating in or giving energy to that type of discussion is something you do not want. I always find it amazing at the number of seemingly intelligent people who persist in dragging you into these negative brainstorming sessions. In one breath these people tell you they seriously want to accomplish a particular objective. And, in the next breath, they begin talking about why they can’t. Think of how much more of life they would enjoy by making a decision that they will no longer participate in that type of negative energy.

The humanistic psychologist, Dr. Abraham Maslow who devoted his life to studying self actualized people, stated very clearly that we should follow our inner guide and not be swayed by the opinion of others or outside circumstances. Maslow’s research showed that the decision makers in life had a number of things in common; most importantly, they did work they felt was worthwhile and important. They found work a pleasure, and there was little distinction between work and play. Dr. Maslow said, to be self actualized you must not only be doing work you consider to be important, you must do it well and enjoy it.

Dr. Maslow recorded that these superior performers had values, those qualities in their personalities they considered to be worthwhile and important. Their values were not imposed by society, parents or other people in their lives. They did make their own decisions. Like their work, they chose and developed their values themselves.

Your life is important and, at its best, life is short. You have the potential to do anything you choose, and to do it well. But, you must make decisions and when the time for a decision arrives, you must make your decision where you are with what you’ve got.

Let me leave you with the words of two great decision makers, William James and Thomas Edison. William James suggested that, compared to what we ought to be, we are making use of only a small part of our physical and mental resources. Stating this concept broadly, the human individual thus lives far within his limits. He possesses powers of various sorts which he habitually fails to use.

Years later, Thomas Edison said, and I quote, “If we all did the things we are capable of doing, we would literally astound ourselves.”

By making a simple decision, the greatest minds of the past are available to you. You can literally learn how to turn your wildest dreams into reality.

Put this valuable information to use and recognize the greatness which exists within you. You have limitless resources of potential and ability waiting to be developed. Start today - there’s never any time better than the present. Be all that you are capable of being.

This edition includes the regular Inspirational Quote, Funny Picture and Market & Economic Report. This month I have also included an Educational Video which looks at the risk of a broken Euro.

Europe’s debt problems pose the biggest threat to the global recovery. However, a financial crisis is looking less likely and the European recession should be mild. Continued growth is likely elsewhere with the US expected to grow 2%, China 8% and the world 3%. Australia - While mining investment is booming, retailing, housing, manufacturing and tourism are likely to remain soft. Given constrained global growth and mixed Australian indicators, the RBA is likely to cut rates again in 2012.

Inspirational Quote

Few people take objectives really seriously. They put average effort into too many things, rather than superior thought and effort into a few important things. People who achieve the most are selective as well as determined.

Richard Koch (American Author)

Funny Picture

Now this is what I call THE ROCK.

Market & Economic Report

Global economy

Review: American economic data remains consistent with continued recovery. Notably, US consumer confidence improved markedly in February with the Conference Board's Consumer Confidence Index surging to a 1-year high of 70.8 in February. The US labour market also continued to improve with solid jobs growth of +243,000 in January and the unemployment rate falling to 8.3%. The manufacturing sector fell back slightly in February with the Institute for Supply Management (ISM) composite survey falling back to 52.4 after January’s rise to 54.1, its highest reading since April 2011, but the ISM’s non-manufacturing conditions index rose. In regards to America’s housing market, the Standard & Poor’s Case Shiller house price index showed a 4% year-on-year (yoy) decline in the December quarter, but other house price indicators appear to be stabilising or rising. Meanwhile, US housing starts showed a 1.5% month-on-month gain in February which is particularly encouraging as housing construction has been a severe constraint on the US economy since 2006.

While Europe continued to face ongoing sovereign debt issues, a second Greek bailout deal was eventually agreed on at the end of February. Additionally, the European Central Bank (ECB) provided a second tranche of long-term funding to European Union banks totalling €529.5 billion which saw Italian and Spanish bond curves decline further suggesting the risk of contagion to core countries has declined. Nonetheless, economic data was indicative of a mild recession having started. Europe’s economic activity contracted in the December quarter with the majority of European nations showing a decline in real gross domestic product (GDP). The European Commission recognised these deteriorating conditions with a downward revision to 2012 European Real GDP forecast to -0.3% from +0.5%, although this is just catching up to general market expectations. The ECB kept policy interest rates on hold at 1.0% in March and the Bank of England also left interest rates on hold at 0.5% at its March Monetary Policy Committee meeting.

In China, inflation fell to 3.2% in February and is now well down from the 6.5% peak last July. China’s February manufacturing data was suggestive of economic growth of 8% with the HSBC flash manufacturing purchasing managers index rising to 49.7 from 48.8 in January. During February, the People’s Bank of China announced a 50 basis points (bps) cut in the reserve requirement ratio (RRR), taking the RRR for large banks to 20.5%. Further easing is likely given the slowing in growth, inflation and the property market.

In Japan, GDP growth contracted by 0.2% quarter-on-quarter in December after a robust 1.7% growth in the previous quarter, driven primarily by deteriorating export performance. In response, the Bank of Japan introduced further quantitative easing measures, increasing the size of its asset purchase program by approximately ¥10 trillion in an effort to “better ensure the economy's return to a moderate recovery path.”

Outlook: Europe’s debt problems pose the biggest threat to the global recovery. However, a financial crisis is looking less likely and the European recession should be mild. Continued growth is likely elsewhere with the US expected to grow 2%, China 8% and the world 3%.

Australian economy

Review: The Reserve Bank of Australia (RBA) left interest rates on hold at 4.25% in March, emphasising again that given Australia's "growth (is) expected to be close to trend and inflation close to target, the Board judged that the setting of monetary policy was appropriate for the moment". Australia’s two speed economy was acutely apparent in the December quarter business investment intentions survey which pointed to very strong capital expenditure growth in 2011-12 (+38%) and 2012-13 (+37%) but essentially all of this coming from the mining sector. Price pressures in Australia eased further in February with the TD Securities-Melbourne Institute inflation gauge rising 0.1%, showing that annual inflation is running at a 2.0% pace, which is at the lower end of the RBA’s 2% to 3% target range. Australia’s labour market was soft in February with the loss of 15,400 part time jobs and the unemployment rate rising to 5.2% from 5.1% in January. Nonetheless, business confidence and consumer sentiment data improved as evidenced by the National Australia Bank confidence business survey for January which rose to a reading
of +4 and the Westpac-Melbourne Institute index of consumer sentiment which showed a 4.2 point lift in February. Reflecting this retail sales in Australia rose 0.3% in February. The housing market continued to lag with new home sales falling sharply and house prices falling slightly across January and February. Finally, December quarter GDP growth was just 0.4% or 2.3% yoy.

Outlook: While mining investment is booming, retailing, housing, manufacturing and tourism are likely to remain soft. Given constrained global growth and mixed Australian indicators, the RBA is likely to cut rates again in 2012.

Australian shares

February review: In contrast with the global trend, Australian shares rose only modestly over the month due to tougher monetary conditions. Dampened interest rate cut expectations, a rise in mortgage rates and the strong A$ weighed on Australian shares. The S&P/ASX 200 Accumulation Index returned 1.9% for the month overall.

Short-term outlook: While short-term volatility will remain high, Australian shares are likely to provide positive returns on a 12-month view. Unfortunately though relatively tight monetary conditions may see Australian shares continue to underperform global shares in the short term.

Medium-term outlook: Reflecting reasonable growth prospects, medium-term returns of around +10% per annum are likely (or +11.5% if franking credits are allowed for).

Australian bonds and cash

February review: The RBA’s decision to keep interest rates on hold and comments that it was comfortable with current policy settings pushed rates up over the month and led to a rise in money market yields and an unwinding of expectations for future monetary policy easing. 3-year Australian government bonds opened the month at a yield of 3.17% and closed 44 bps higher at 3.61%. 10-year bond yields also rose further, opening the month at 3.72% and closing 25 bps higher at 3.97%. The 3-month bank bill yield opened the month at 4.30% and rose 11 bps higher to close at 4.41%. The 6-month bank bill opened at 4.26% and closed 17 bps higher at 4.43%.

Short-term outlook: Australian bonds are poor value at current yields but they are a good diversifier against global concerns.

Medium-term outlook: Returns from local sovereign bonds over the medium term are likely to be low, reflecting low yields.

Key financial markets

The above article is by Dr Shane Oliver, Head of Investment Strategy & Chief Economist, from AMP Capital Investors Limited.

Educational Video - What would a broken Euro mean for investors?

Dr. Shane Oliver looks at the risk of a broken Euro. What happens if Greece defaults on its sovereign debts? Does it really matter? How can investors put all this noise into context?

The above video is from Dr Shane Oliver, Head of Investment Strategy & Chief Economist, from AMP Capital Investors Limited.

Important Information

The above information provides an overview or summary only and it shouldn’t be considered a comprehensive statement on any matter or relied upon as such. The above information doesn’t take into account your personal objectives, financial situation or needs. It’s important for you to consider these matters before making any financial decision and I recommend you seek help from a financial adviser.

Most people have insurance for their motor vehicle and home but fail to cover their most valuable assets – their life and their ability to earn an income over the long term.

As the chart below shows, only around 16% of people actually have life insurance and only 6% of people have income protection.

While these statistics can be confronting, the flipside is that checking, maintaining and possibly upgrading your insurance cover can provide tremendous peace of mind.

Watch this true story from Melissa Wandall (scroll down) about the importance of life insurance.

It should be well known that share markets go through longer term secular bull and bear phases. This is most clearly evident in the US share market (which of course sets the direction for global shares) and illustrated by the following chart. It shows the cumulative real value of $100 invested in 1900.

Secular bull markets, or 10 to 20-year periods where the trend in shares is up, can be seen in the 1920s, 1950s and 60s, and the 1980s and 90s. In between in the 1930s and 40s, 1970s and over the past decade are secular bear markets which are longer term periods where shares have poor and volatile returns.

These secular bull and bear phases are driven by a combination of the macro environment (conditions that exist in the economy as a whole rather than in a particular sector or region) and related long waves of innovation, periods of excess in the provision of credit and long term swings in market valuations.

In summary:

• The 1920s bull market was associated with electricity, mass production and easy credit. The good times ended when markets became overvalued and the world slipped into depression.

• Cheap valuations, post war consumerism, petrochemicals, electronics, aviation and low inflation underpinned the secular bull market of the 1950s and 60s.

• By the late 1960s shares had become overvalued again. This, in combination with rising inflation, poor economic management and oil shocks, gave way to a secular bear market in the 1970s.

• This set the scene for the secular bull market of the 1980s and 1990s, which started when shares became very cheap in 1982. Share market growth was underpinned by the shift to low inflation, deregulation, globalisation, the peace dividend and ultimately, the technological revolution.

• By the turn of the last century, shares had become expensive again and the "tech wreck", corporate governance scandals, a bursting of credit and various housing bubbles and public debt concerns have all underpinned a secular bear market in US and European shares since 2000.

Conclusion

While the US long term or secular bear market in shares that started in 2000 is getting "long in the tooth" and showing some positive signs, it could linger for a few years more. Valuation measures could still move to secular bear market extremes and debt reduction, ageing populations and less business friendly governments are all likely to constrain growth.

The above information is from Oliver's Insights by Dr Shane Oliver, Head of Investment Strategy & Chief Economist, from AMP Capital Investors Limited.

Important Information

The above information provides an overview or summary only and it shouldn’t be considered a comprehensive statement on any matter or relied upon as such. The above information doesn’t take into account your personal objectives, financial situation or needs. It’s important for you to consider these matters before making any financial decision and I recommend you seek help from a financial adviser.