Hi, I'm 64 and recently retired. I believe the possibility of wide variations in life expectancy makes many people frightened to spend through retirement just in case they live to be 100 or more. Do you know of a product that is a true "life insurance policy"? i.e. I pay annual premiums now, and if I reach 90 (or any other nominated age), then I start receiving a nominated annuity? That way I could confidently plan to spread my retirement funds over the years between now and when I reach 90 years of age. I assume if I don't reach 90, the money would then be used to fund those who do.
Doug Turek’s response: Thanks for your letter. This solution doesn’t exist in Australia, it should and its introduction is being talked about following recent tax changes to apply from 1 July 2014. The solution is called a “deferred annuity” (http://www.investopedia.com/terms/d/deferredannuity.asp) where the start of a stream of annuity payments are deferred to a future age, often being your life expectancy. Watch this space, or more specifically watch Challenger, which has been lobbying for these changes and is the leading innovator in annuities in Australia
Could you please advise the best way to invest in Australia’s tourism industry, considering that Chinese middle class growth and the falling Aussie dollar are both positive for the industry? I recently read a report claiming that last year 650,000 Chinese visited Australia and they spent $7,000 per head on average. In addition, Australia tourism is expected to launch a major campaign next year to promote Australia as a tourist destination.
Editor’s response: Thanks for your letter. A recent report by consultancy firm Deloitte identified six ‘super sectors’, including tourism, that Australia’s future prosperity could come from. For investors, this presents a buy-and-hold long-term investing opportunity. But it’s important to consider other aspects when investing in a company rather than only taking a top-down, macroeconomic approach. Eureka Report cannot give personal advice on investments, but among those that could potentially benefit from an increase in tourism include Crown, Flight Centre, Wotif and Webjet.
LICs rise again
As a long time devotee of listed investment companies (LICs) I was delighted to see an analysis of them on Eureka Report (see LICs rise again). Cliona O'Dowd and Scott Francis make good points about the advantages of LICs over managed funds, but there are more.
Having tried to extract my money from the managed fund recommended by a financial adviser in the past, I encountered delays, a long form, tiresome demands to provide a photograph and a JP endorsement of it to confirm my identity. The process was repeated with each extraction, and the funds were not sent to me but placed in a cash management fund from which I had to extract them with more paperwork. The resulting delay in getting my money was considerable at a time of considerable fluctuation in the market (where I wanted to place it). Getting invested money from an LIC is a same-day job as simple as placing a "sell" order. All my investments that were in managed funds are now in several LICs which perform well, send me fully-franked dividends and take no commission which, in managed funds over many years, can add up to a very large amount.
For more Eureka Correspondence, click here.