This issue of Wealth Adviser includes:

• Navigating the 2024 Super and Tax Landscape: 20 Essential Questions Answered. The superannuation guarantee contribution rate has increased to 11.5%, and contribution caps have also increased.  Personal income tax rates have been reduced.  Find out about some potential strategies and consequences of contributing to or accessing super.
• CPI may understate the rising costs of retirement.  The rising costs of retirement may be understated by the Consumer Price Index (CPI), leading to potential discrepancies in financial planning. It emphasizes the importance of accurately assessing retirement expenses to ensure adequate preparation. The article suggests that relying solely on CPI may not fully capture the true financial demands of retirement.
• The Importance of Home Ownership in Achieving a Comfortable Retirement. Home ownership is important in achieving a comfortable retirement, providing financial stability and security in later years.  It is estimated that 71% of retirees own their home outright, and 18% rent.  Uncertainty in retirement can impact quality of life both financially and emotionally.

Q & A

1. My mum told me that part of her income that is funding retirement comes from market linked annuities. What is a market linked annuity? How is it different to a traditional annuity? 
2. What impact, if any, will the upcoming US elections have on my investments?
3. Everything I read on the news is always talking about how inflation is rising. I am invested in bonds. What is the impact of inflation on Bonds?

This issue of Wealth Adviser includes:

• The Five Reasons Why The $A Is Likely To Rise Further – if recession is avoided. “After a soft patch since 2021, there is good reason to expect the $A to rise into next year: it’s undervalued; interest rate differentials look likely to shift in favour of Australia; sentiment towards the $A is negative; commodities still look to have entered a new super cycle; and Australia is a long way from the current account deficits of the past. The main downside risks would be recession or a new Trump trade war.”
• The Money Supply and Inflation Puzzle: What Every Retiree Should Know.  The connection between money supply and inflation is crucial for retirees to understand. This relationship can impact their financial well-being significantly. Retirees should endeavour to structure their portfolio to account for inflation potentially using annuities and continuing to invest in a diversified portfolio.
• Our finances should enable and not dictate our lives. It is important for our finances to support our lifestyle choices, rather than control them. Financial stability should provide opportunities for personal growth and fulfillment. Balancing our finances can help us lead a more fulfilling life.

Q & A

1. I keep seeing on the news that inflation is recently quite high. How is high inflation impacting the value of my share portfolio?
2. My retired friend told me that he is receiving income from his super via an account-based pension. What is an account-based pension, and how do they work?
3. My husband and I are planning to travel overseas for the next few years as part of our retirement. We have used an SMSF for our retirement funds but I recall there are issues with using one while living abroad. What are some things that we should be aware of?

This issue of Wealth Adviser includes:

• How not to run out of money in retirement.  To avoid running out of money in retirement, it is important to plan carefully and consider various financial strategies. One key suggestion is to create a retirement budget and stick to it to ensure long-term financial security. Additionally, seeking professional advice and adjusting investments as needed can help individuals maintain financial stability during retirement.
• Australian home prices up again.  Australian home prices have shown a recent increase, reflecting a trend in the housing market. The chronic housing shortage persists, with a growing disparity between home prices and affordability. Signs of a potential slowdown in the housing market are emerging amid these challenges.
• Bursting the myth: Understanding market bubbles. Market bubbles are marked by unsustainable price increases unsupported by underlying fundamentals. By understanding the dynamics of market bubbles, investors can better navigate volatile market conditions. Sometimes normal market movements are misrepresented as bubbles.

Q & A

1. I’ve just turned 60 but haven’t yet retired and I’m not planning to anytime soon. Can I still access some of my super?
2. Recently a friend of mine suggested I get some advice and start thinking about having a retirement plan. What makes a good plan?
3. I’ve never had superannuation and I’m about to set up a new account for the first time. What should I look for when deciding which company to go with?

Australia has had poor housing affordability for over a decade.  The 2020 Demographia Housing Affordability Survey showed the multiple of median house prices to median annual incomes in Australia is 5.9 times, in Canada is 3.9 times, in the UK is 4.5 times and in the US is 3.6 times.  Up until the last decade Australia was considered to have relatively cheap and affordable housing.  There have been some recent cyclical downswings including the GFC, in 2011, and in 2017-19, but prices quickly bounced back each time.

The reasons often cited include; tax concessions, foreign buying, government related housing infrastructure charges, stamp duty, low interest rates and easy credit.  Each of these only have a minor impact and rather the surge in population is the main cause, with an inadequate supply response.  Since 2006 average annual population growth was about 150,000 people above what it was over the decade to the mid 2000s, requiring an extra 50,000 new homes per year.  The surging demand and restricted supply caused price increases and poor affordability, and continued after each cyclical downturn.

The coronavirus has already pushed capital city prices down 2% since April, with average capital city prices potentially falling 10% to 15% to mid next year with a greater fall likely in Melbourne.  There are 3 reasons this may not simply be a cyclical downturn and may have longer term impacts on affordability.

1. The economic hit from coronavirus is bigger than anything in the post war period.  While some areas may recover quickly, other areas, such as travel and tourism and shopping, education, health care and sports may take longer to recover.  This may mean high unemployment for longer, potentially at 9% at the end of 2021.  This may result in more forced property sales.

2. Immigration has been significantly reduced due to travel bans, down as low as 35,000 this financial year from 240,000 last financial year.  The 2020-21 population growth will be the lowest since 1917!  This could reduce demand for homes by 80,000 dwellings and reverse the years of undersupply.  If this drop in immigration is only short term it may not have a lasting impact, however with high unemployment the government may need to keep immigration low for some time.

3. The shift to working from home could have a huge impact on residential property prices.  It has sped up the shift to remote working with a significant amount of white-collar workers able to even increase productivity.  This could lead to less demand to be close to the CBD and increase demand for regional property.  Office space and potentially some retail (with the shift to online shopping) could be repurposed to residential use, also boosting housing supply.

The combination of higher unemployment, diversification of location, falling demand and potential increased supply may lead to more affordable housing in Australia.

Please see the full article for more of Shane Oliver’s thoughts.

You can download and print the full article here.

Important note: While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided.

The Autumn issue of infocus includes:

• Achieving Financial Freedom.  Financial freedom has a different meaning for everyone, based on personal preferences.  If you want to achieve it, a little time spent planning will set you on the right course.
• The fast way to a life supported by passive income.  What are the options to build passive income so going to work can become a choice?
• Insurance – don’t go it alone.  With research suggesting any one of us may experience an extended period out of work due to sickness or injury, what are the options to protect your lifestyle, and how would you put this in place?

Click here to read the full articles  – Opens as a printable pdf

If you would care to share your experience with me, please comment below!

The Summer issue of infocus includes:

• Being sensible with Buy Now Pay Later this silly season.  The key is really to have a budget, particularly for your Christmas spend, and put a little thought into your shopping before heading out to avoid getting carried away in the moment.
• Taking care of business.  Owing a business can provide flexibility and a sense of control.  You also need to consider what might go wrong and put a disaster recovery plan in place.
• Not ready to retire?  This might be an option.  Can you turn a hobby into a business, or would it be better to buy an established business to keep you busy in retirement, and keep the income flowing?
• Retire at 65 but don’t retire your money.  With people living longer and healthier lives, and low interest rates, retirees need to consider an appropriate mix of growth and income producing assets to make sure the money lasts as long as they do.

Click here to read the full articles  – Opens as a printable pdf

If you would care to share your experience with me, please comment below!

The Spring issue of infocus includes:

• Beat the scammers at their own game.  $90 million was lost to scammers in 2017, with 161,582 reports of scam.  Scammers are getting smarter so it’s important to be alert to some of the signs, and exercise caution.
• Traps to avoid in retirement – Going too hard too fast.  You might have big plans for retirement when you have so much time, but remember to plan and budget for your expenses so you don’t run out of money.
• Is household debt consuming you?  Australia has one of the highest levels of household debt in the world.  Some of the warning signs that you could have a debt problem and tips for taking control.

Click here to read the full articles  – Opens as a printable pdf

If you would care to share your experience with me, please comment below!

This issue of financial snapshot includes:

• How to play catch up with your super.  Starting from the 2019-20 financial year there are changes to the superannuation contribution rules.  Find out what’s changing and how this may effect you.
• Take control of your finances now for the new financial year.  At the half way point of the year, it’s a great time to check in on any new year resolutions you made in January.  If you are off track, here are some ideas to put the focus on your financial well being.
• Ways to invest your money.  There are more options than property and super.  Find out what other investment options are available and how to spread your risk.

Click here to read the full articles  – Opens as a printable pdf

If you would care to share your experience with me, please comment below!