 "Maximising your retirement savings: 6 Tips")
Money and Life
(Financial Planning Association of Australia)
You might think there’s not much you can do to increase the value of your superannuation in retirement. But with Australians now spending close to 30-years in retirement on average[1], our super needs to last longer than ever.
As a consequence, the federal government has proposed some changes to superannuation that will make it easier than ever to grow your balance following retirement. Here’s a look at some of the strategies you can use to maximise your super savings.
If you’re a retiree and your superannuation took a hit during to the COVID-19 pandemic, there is good news. Markets largely recovered recently and the federal government has extended the superannuation minimum drawdown rate for a further 12-months.
That means eligible retirees drawing certain superannuation pensions and annuities have until 30 June 2022 before they’re forced to withdraw the full pre-COVID-19 amount.
If you have sufficient cash flow to get by, it’s worth taking advantage of the reduced minimum drawdown and leaving your assets invested until they return to pre-COVID-19 levels.
Think you can’t add to your super after you retire? That’s not strictly true. If you’re aged 67 to 74 years old, you can make personal contributions, spouse contributions or salary sacrifice contributions to your super provided you meet the work test. That means you must have worked at least 40 hours over 30 consecutive days in a financial year.
Importantly, the federal government has proposed removing the work test altogether from 1 July 2022. That would allow individuals aged 67 to 74 to make or receive non consessional (after tax) contributions or salary sacrified contributions, subject to the existing contribution caps.
If you’re aged 65 years or over (and meet all the eligibility requirements) you can make a one-off contribution of up to $300,000 to your super from the proceeds of selling your home. If you’re part of a couple, each spouse may be able to contribute up to $300,000 each.
The federal government has also proposed reducing the age for making a downsizer contribution to 60 years.
It’s important to note that selling your main residence can affect your eligibility for income entitlements such as the Age Pension. So it’s best to seek professional financial advice if you’re considering making a downsizer contribution to your superannuation.
If you’re eligible for government benefits like the age pension, carer’s allowance or a disability support pension, this can really help your retirement income stretch further. It’s worth investigating your eligibility when you’re planning your retirement, as government payments are subject to income and asset tests.
Nothing chews up your income stream as fast as debt repayments, so aim to clear any outstanding debts before you enter retirement. By starting your retirement debt free, you’ll be able to use your retirement income for things that really matter, like living expenses, health, leisure and travel. If you’re already retired and you’re still carrying debt, such as a mortgage or credit card, speak to a financial planner and put a plan in place to become debt free.
Read more: Smart strategies for paying down debt
Finally, while it’s important to protect your super balance once you’re retired, it’s probable that you’ll still need to earn investment income for some time. It’s worth considering how long your superannuation needs to last when planning your investment strategy.
Everyone’s circumstances are different, and the right strategy for you will depend on things like your total super balance, your tolerance to risk and how you plan to fund your retirement. Always seek professional financial advice before making any changes to your super investments.
Related: The superannuation health check
If you’re looking for other ways to grow your retirement income, speak with a financial planning professional. They can give you tailored individual advice to help you achieve financial freedom in retirement.
| Posted in:News |
 "‘Sophistication’ warning for Aust economy")
Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)
Prior to the global coronavirus pandemic, Australia enjoyed 28 years of uninterrupted economic expansion.
However, a report warns the nation has become complacent and is not guaranteed the same sort of success over the next 50 years as it faces highly complex challenges coming out of the pandemic.
The report by consultants Deloitte says it will be more important than ever for Australia’s policy makers and business leaders to understand the structural changes underway and how they can effectively compete in a more complex and fragmented world.
“Out of uncertainty and volatility, we have the opportunity to shape a new future for Australia,” Deloitte Australia CEO Adam Powick said.
Central to Deloitte’s report is its new economic sophistication index that ranks countries based on their value add to goods and services they produce and how well their industries are connected in global supply chains.
Germany tops the rankings, followed by Great Britain, but Australia stands at a mediocre 37th.
“It’s a shock to realise we aren’t doing as well as we think we are,” head of Deloitte Access Economics Pradeep Phillip said.
“With half a century of hindsight, it’s little surprise that we have an economy characterised by low manufacturing capabilities and missed opportunities from not commercialising our strong research.”
He said Australia hadn’t built the business or structural foundations required for a diversified, resilient economy.
“Instead, we’ve been complacent with our success, and our lower value add and weaker connectedness with the global economy compared to our high-income peers is a serious issue for our future prosperity,” Dr Phillip said.
He says this will leave Australia vulnerable should geopoliticial tensions with China worsen or meaningful action on climate change catches Australia’s off-guard.
“If Australia’s action on climate change continues to lag and, in response, overseas governments introduce limits on our high emission intensity production flows, this too would be devastating for the Australian economy,” Dr Phillip said.
“The world would no longer want what we have, and our Index ranking would drop.”
AUSTRALIA NEEDS TO BE MORE SOPHISTICATED: DELOITTE
* Feeding the world – demand for Australian food is strong, but the core industries involved in Australian food production are among the least sophisticated
* Decarbonising the world – with competitive advantage in natural resources, technologies and energy, Australia can take part in the move to global decarbonisation, by producing new sustainable energy
* Shaping the future of health – Australia can create new value by using technology to turn its world-class health research into implementable health and wellbeing solutions
* Looking to the sky – Australia has a strong track record in the areas it has chosen to play in space, but also needs to grow its capabilities from niche research and manufacturing to end-to-end products and services
* Manufacturing the future – Australia should have a clear focus on moving up the value chain by connecting advanced manufacturing into areas of greatest economic opportunity
* Satisfying the senses – Australian organisations need to continue to be responsive and innovative by co-designing products and services for the ever-changing demands of consumers
* Servicing the world’s businesses – using virtual and digital technology, a significant opportunity exists to export business-to-business services such as engineering, telecommunications, professional services, and financial and insurance services.
| Posted in:News |
 "Treasurer sees case for RBA review")
Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)
Treasurer Josh Frydenberg believes there is a case to review the operations of the independent Reserve Bank of Australia.
Last month the Organisation for Economic Cooperation and Development said there should be a review into the RBA’s monetary policy framework, noting underlying inflation has undershot its two to three per cent target band since 2015.
The RBA does not expect inflation to be sustainably within the target before 2024.
Economists like Westpac’s Bill Evans also thinks the two to three per cent inflation target has been set too high for too long when other major central banks target two per cent.
“I think there is a case there for having a review. It has been a number of years since they have had a review into their operation,” Mr Frydenberg said in an online address to the Citi Australia and New Zealand investment conference on Wednesday.
“That is something that I am certainly open to and I’ll continue to talk to the Treasury and the RBA about a timetable.”
Labor has backed an RBA review for some time, believing it could be to its benefit.
“I don’t think this is about beating up on the institution, but about making it better in the interest of all Australians,” shadow assistant minister for treasury Andrew Leigh said in a recent interview.
Dr Leigh said the RBA is less transparent than some of its peers, noting that it doesn’t hold press conferences when it announces its policy decisions and doesn’t produce the minutes of the meeting showing the voting decisions that members make.
“(It) has a board which is largely made up of talented generalists rather than monetary policy experts,” he said.
“I think, given what we’ve seen in the inflation performance over recent years, it is appropriate to have a look at that.”
| Posted in:News |
 "RBA not budging on cash rate until 2024")
Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)
The Reserve Bank of Australia governor Philip Lowe is sticking to his long held view that the cash rate won’t be lifted before 2024.
As widely anticipated by economists, the RBA left the official cash rate at a record low 0.1 per cent following its monthly board meeting on Tuesday.
Dr Lowe reiterated the cash rate will not be increased until inflation is sustainably within the two to three per cent target range, saying such conditions will not be met before 2024.
“This contrasts with several other central banks that seem to be bringing rate hikes forward and arguably reflects more confidence on the RBA’s part that the current spike in global inflationary pressure is transient,” AMP Capital chief economist Shane Oliver said.
However, Dr Lowe remained fairly upbeat about the economic outlook beyond the current spate of lockdowns in the nation’s two largest states – NSW and Victoria.
“The Delta outbreak has interrupted the recovery of the Australian economy and GDP is expected to have declined materially in the September quarter,” Dr Lowe said.
“This setback to the economic expansion in Australia is expected to be only temporary. As vaccination rates increase further and restrictions are eased, the economy is expected to bounce back.”
However, he said there is uncertainty about the timing and pace of the bounce-back, and it is likely to be slower than that of earlier in the year.
“In our central scenario, the economy will be growing again in the December quarter and is expected to be back around its pre-Delta path in the second half of next year,” Dr Lowe said.
Among its policy toolkit, the RBA will continue to target the April 2024 government bond yield at 0.1 per cent, while buying bonds at a rate of $4 billion a week until at least February 2022 with the aim of keeping market interest rates and borrowing costs low.
Dr Lowe said the package of policies is providing substantial and ongoing support to the Australian economy.
“Borrowing rates are at record lows, sovereign bond yields are at very low levels and the exchange rate has depreciated over recent months,” he said.
“The fiscal responses by the Australian government and the state and territory governments have also been providing welcome assistance in supporting household and business balance sheets.”
Dr Lowe also gave little away about what the banking regulator, the Australian Prudential Regulation Authority, may introduce to take the heat out of the housing market.
He said housing prices are continuing to rise, although turnover in some markets has declined following the virus outbreak.
But housing credit growth has picked up due to stronger demand for credit by both owner-occupiers and investors.
“The Council of Financial Regulators has been discussing the medium-term risks to macroeconomic stability of rapid credit growth at a time of historically low interest rates,” Dr Lowe said.
“In this environment, it is important that lending standards are maintained and that loan serviceability buffers are appropriate.”
| Posted in:News |
 "The superannuation health check")
Money and Life
(Financial Planning Association of Australia)
Does your super deserve a clean bill of health? Managing your super might seem tricky, but it doesn’t need to be. With a few simple tweaks, you can put the basics in place to last you a lifetime. Here’s how to do a quick and easy health-check on your super.
It’s likely that your super will provide much of your income in retirement, so it’s worth spending a little bit of time upfront to get it working for you. Here’s what you can do now, to make sure you’re on track for a comfortable retirement.
Consolidating your super into one account makes it easier to manage, plus, you’ll save a fortune in fees. That adds up to a higher account balance when you retire. It’s easy to consolidate your super using the Australian Taxation Office’s (ATO) online services, accessed via your MyGov account.
Before you consolidate your super, do your research and choose the best super fund for you. Also check your insurance cover and make sure you can get similar cover with your new fund. This is especially important if you’re over 40 or have a pre-existing medical condition.
Read more: A guide to retirement in Australia
Nowadays it’s really easy to find any ‘lost’ or unclaimed superannuation. Super providers are required to pay all low and inactive account balances to the ATO, who hold onto it until you make a claim. The ATO will then transfer your funds to the super account you nominate. To check whether you have any lost super, simply log into your MyGov account and click on ‘Manage my super’.
How well your fund performs can have a big impact on your retirement savings. That’s because superannuation isn’t just a way of saving for retirement. Rather, when your employer pays money into your super, the funds are invested on your behalf by your super provider, with the aim of generating a return.
Keep an eye on how your super is performing by checking your annual account statement. Always look at the returns over a longer time period, like five or 10 years, as this eliminates any short term volatility.
If you’re choosing a new fund, check their investment performance on their website. Always compare like with like, for example, a balanced option with another balanced option, over the same time period. If you’re not sure whether your fund is performing well, or you’d like advice on which fund is right for you, speak to a financial planner.
Read more: Superannuation 101 – Your guide to a happy retirement
All super funds charge fees in return for managing your money. How much you pay in fees can have a big impact on your retirement balance, so it pays to shop around. Look for low fees combined with good returns. You can find out how much your current fund charges by checking your account statement or looking on their website.
Within each super fund, you’re given a choice of how your super is invested. Each investment option comes with its own level of risk and reward, so take the time now to review your settings and make sure they’re right for you. Your investment strategy should be tailored to your age, stage of life, super balance, values and appetite for risk. For advice on how to invest your super, contact your super fund or speak to a financial planner.
Read more: Super milestones to hit in your 20s, 30s and 40s
Taking out insurance through your super fund can be a cost effective way of protecting yourself and your family against the unexpected. Most funds offer products such as life insurance, total and permanent disability (TPD) and income protection. The fees are taken out directly from your super account.
To do a health check on your cover, find out what you’re covered for and how much insurance you have. Will it be enough to support you and your family if you were to lose your income? Are there any waiting periods you need to serve before receiving the funds? And have you chosen a beneficiary to receive your payments, if you were to pass away? Speak to a financial planner for advice if you’re unsure.
Last, but not least, consider making extra contributions to your super. Every extra dollar you contribute now could be worth thousands by the time you retire. There are even some tax benefits to making extra super payments.
There are a couple of different ways you can contribute to your super:
Read more: Get your super back on track
The great thing about super is that it’s a long term investment. That means once you get it set up right, you don’t need to do a whole lot again for a while. Just review your settings each year when you receive your account statements, and whenever your life circumstances change.
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Are you on track for a comfortable retirement? If you’d like advice on any aspect of retirement planning, including your superannuation, investments or insurance, speak to a Financial Planner.
| Posted in:News |
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