With the Reserve Bank reducing interest rates to record lows and not anticipating a rise until 2024, it’s more important than ever to ensure your retirement savings are working as hard as possible.

One way to do that is by taking advantage of super, which offers valuable opportunities to tax-effectively rebuild your retirement savings.

Reducing your tax bill

If you make super contributions by setting up a salary sacrifice arrangement with your employer, for example, you can potentially reduce your tax bill while also boosting your super.

By diverting some of your pre-tax salary into super rather than taking it as take-home pay, your money will be taxed at 15 per cent, rather than your marginal tax rate.

Investments made through super also enjoy a concessional tax rate of only 15 per cent on any investment earnings. This compares with tax at your marginal rate, which could be as high as 47 per cent (including the Medicare Levy), on investment earnings outside super.

Claim a tax deduction

You are also able to make personal super contributions on which you claim a tax deduction.

Previously only available to the self-employed, this strategy is now available to everyone. It allows you to claim a tax deduction in your annual tax return for eligible voluntary contributions into your super account made during the financial year from your after-tax earnings.

Providing you stay under the annual concessional contribution limit (currently $25,000 a year), this can be a useful way to cut the amount of income you pay tax on.

Play catch-up with your contributions

If you have less than $500,000 in your super account, you may consider making carry-forward concessional contributions. If you haven’t fully used your annual concessional contributions caps since 1 July 2018, you may have some unused cap amounts that you could use to make a larger contribution this financial year.

Unused concessional cap amounts can now be carried forward for up to five years.

Consider non-concessional contributions

If you have more funds available and are closer to retirement, you might also consider making a non-concessional (after-tax) contribution into your super account to boost the amount you have in the run-up to retirement.

Generally, you can contribute up to $100,000 a year in after-tax money. Not only is the tax on investment earnings on these contributions only 15 per cent, but they boost the income you can enjoy tax-free in retirement.

If you have a larger amount available, from an inheritance or selling an asset, for example, you could even consider making a bring-forward contribution of up to $300,000 in a single year if you are under age 65.

Get the government to contribute

Another opportunity for eligible low to middle-income earners is to make a personal after-tax contribution of up to $1,000 and potentially receive a co-contribution of up to $500 from the government. The co-contribution amount will vary depending on your income and the number of contributions you make, but it can be an easy way to increase your super balance.

Another tax strategy to consider if your spouse or de facto partner earns less than $40,000 is to make an after-tax contribution into their super account. You could be eligible for the maximum tax offset of up to $540 if you make a contribution of at least $3,000 into your spouse’s super account, provided they earn $37,000 or less. The tax offset tapers off as your spouse’s income increases before cutting out at $40,000.

Strategic review of asset allocation

As super is a structure for investing, not an investment in its own right, it might also be a good time to take a closer look at the mix of assets in your super.

After COVID-induced market volatility, and with historically low-interest rates, your allocation may have drifted away from your strategic plan.

With the right advice, tax-effective super strategies offer an easy way to rebuild your retirement savings and achieve your overall wealth creation goals.

If you would like to discuss your super or investment strategy, call us today.

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But sometimes these plans go awry, leaving the elderly parent in a living arrangement they don’t enjoy and can’t afford to leave.

Although everyone meant well, the outcome may be elder abuse, which experts define as “any act occurring within a relationship where there is an implication of trust, which results in harm to an older person”.

Paper trail

One of the problems is that family agreements are often oral with no paper trail, says Russell Westacott, CEO of Seniors Rights Service and co-chair of Elder Abuse Action Australia. He urges people to write things down.

“If the plan does not work out, then at least the older person can show how much money they put into the arrangement and claim some or all of it back.”

Russell is concerned about the financial turmoil caused by COVID-19.

“Lots of adult children have stresses on their businesses, or they may have lost their job and be struggling to pay their bills. Some may put pressure on Mum or Dad around access to the capital in their family house or their savings and investments.”

Unwelcome guest

Elder financial abuse does not necessarily involve cash or transactions, notes Russell.

“A common scenario is an adult child being out of work and moving back to their bedroom as a temporary solution.”

But years later, they are still there against their parents’ wishes and it can be difficult, emotionally and legally, to get rid of them.

Another subtle form of financial abuse involves a family member or a friendly neighbour offering to go to the shops for the older person but skimming off money each time, Russell says.

“We have people calling us to say for the last 12 months they have been giving this person $200 a week, but they only get $100 of groceries back,” Russell says.

People can reduce this risk by formalising shopping arrangements and other support with a service provider.

This is an area in which financial planners can make a positive impact.

“A little like estate planning, every financial plan should include a solution for aged care planning,” says Louise Biti, a Director at Aged Care Steps who has been training financial planners for more than 23 years.

Plan for frailty

Louise believes a well-documented plan can help protect people from elder abuse. But she is concerned many people find it challenging to plan for frailty.

But having a retirement plan that acknowledges a period of frailty may reduce the risk of an older client giving their money to an adult child without considering the consequences.

Often, the last line of defence is the financial planner — the voice of reason at the table, Louise says.

A financial planner with experience in aged care can help you set up a well-documented plan for your retirement and may also be able to advise you about budgeting for and accessing home care support and frailty care. Before you take a step, give the Integra team a call or book a meeting here.

Source: Money & Life

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One of the main reasons people give for wanting to establish an SMSF is to have greater control of their investments and taking control of a difficult situation is exactly what they’ve been doing.

Changes to asset allocation

According to the 2020 Vanguard/Investment Trends SMSF investment report, nearly half of SMSFs made substantial changes to their asset allocation this year.

The survey of over 3000 SMSF trustees shows most reacted defensively, with 55 per cent increasing their cash and property holdings, mainly at the expense of equities. Direct shares now represent 31 per cent of SMSF portfolios, their lowest level since 2009 during the GFC.

The report found that one third of SMSF have fixed income exposure. Hybrid securities remain the most popular product, although more trustees are investing in bonds which has become easier with the profusion of bond ETFs (exchange traded funds). In fact, bonds were among the better-performing asset classes in the year to June 2020. International bonds returned 5.4 per cent while Australian bonds returned 4.2 per cent.ⁱ

However, the search for a reliable income stream that is better than you can get from bank deposits remains a challenge. The hunt for yield

With interest rates on the decline for several years, and currently at or near zero, investors have turned to shares for their dividend income as well as capital growth. But this source of income is also under threat from the economic impact of COVID-19 on company profits.

The Vanguard/Investment Trends survey also found that SMSFs expect dividend yields to fall from 4.8 per cent pre-COVID-19 to 3.6 per cent this year. While the actual decline in dividend income will depend on the shares you hold, many SMFS will already be feeling the pinch.

In July, the Australian Prudential Regulation Authority (APRA) ordered Australian banks and insurers to restrict dividend payments to 50 per cent of their earnings. Given the banks generally pay out up to 90 per cent of their earnings, this will have a big impact on SMSFs who often rely heavily on bank shares.

In the latest company reporting season, many popular blue-chip companies cut or suspended dividends. According to CommSec, 68 per cent of companies issued dividends in the year to 30 June 2020 but dividend payments were down 32 per cent on aggregate.

Yet despite this setback, SMSF investors are already positioning themselves for the future.

The Vanguard/Investment Trends survey showed SMSFs were poised to buy back into the share market, with 37 per cent willing to increase their allocation to blue-chip Australian shares, and 23 per cent to increase investment in international shares.

Diversification is key

In these uncertain times, having a well-diversified portfolio with multiple sources of income as well as capital growth is more important than ever.

As well as Australian shares, many SMSFs also have relatively high exposure to property, either through residential real estate or listed property. But the property also faces challenges.

Listed property was the worst-performing asset class last year, down 13.4 per cent.ⁱ Although past performance is not a reliable guide to the future, commercial property faces challenges due to falling demand for retail and office space during the pandemic, as well as falling rents.

While residential property held its value last year, the outlook there is also uncertain given rising unemployment, falling rents and a halt to immigration. It’s also yet to be seen how many investors who temporarily deferred loan repayments will eventually decide to sell their properties.

A time to revise strategy

All in all, SMSF are performing well. However, with reduced dividend income and low-interest rates in the medium term, SMSFs in retirement phase may need to make decisions that were not anticipated, such as drawing on their capital to cover their income needs.

At the very least, this is a good time to ensure that your SMSF is well diversified and positioned for continuing market volatility. If you would like to discuss your SMSF investment strategy, retirement planning or tax planning, do give the Integra team a call or book a meeting here.

i Vanguard: The power of diversification

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On the positive, this disruption has given us an unexpected gift of space and time; physical space and time to think about how prepared we were coming into this pandemic. If the current situation is making you worry about your finances, we have some tips to get you through the crisis.

The Great Lockdown

In an attempt to contain the virus, social distancing and quarantine measures have caused major inactivity; causing immediate job losses and business shutdowns. The economic toll of which will be felt for years to come. The International Monetary Fund (IMF) even likened the impact of the downturn as its worst since the Great Depression. The IMF also warned the global economy would contract by 3 per cent in 2020, a reversal of their earlier forecast the world economy would grow by 3.3 per cent, outpacing 2019.

On a smaller scale, this crisis has brought about a new set challenge for all of us. If you are impacted or likely to be impacted through reduced income or unemployment, then we have 5 tips on how you can adjust your spending to weather these difficult times.

Take stock of all your bills

You’ll need to know how much money you have coming in and out every month. If you’ve lost your job or you expect your income will be reduced, it’s important to know if your income will cover all your bills. These important bills are your rent or mortgage, utilities, credit cards, and loans. Call your bank or loan provider to find out if they offer extensions or deferred payments for a period of time. Shop around for lower insurance premiums on your car or health fund. If you have direct debits in place, it’s a good idea to cease them and pay these manually until your income situation improves.

Buckle down

If you haven’t got one, it’s time to make a crisis budget. Do you know if you’re living below your means or over-extending yourself? Categorise your items as “wants” and “needs”. If you’re feeling adventurous, try doing the budget as if you had half of your income available. Once you’ve determined your living expenses, find areas where you might be spending more money than necessary.

If you’re paying for internet data that you don’t use, switch to a lower plan. Switch your plan to a cheaper mobile phone. Do you really need that landline? If you have both Netflix and Foxtel, cancel one of them. If you have a credit card, get a better credit card deal with a lower-rate and transfer the balance. Keep cutting down until your expenditures match your diminished income.

Shop smarter

Toilet paper and pasta aside, there is no shortage of common foodstuff in the supermarket. Choose to focus on food with long shelf lives and don’t be afraid to buy generic brands. Plan your meals and know what’s in your pantry so you don’t buy food you don’t need. Takeaway food is convenient but also expensive, compared to home-made. It could be fun to start growing your own vegetable garden with your children or grandchildren! It’s a great to eat healthy and paying the cost of over-indulging in the wrong food. Learn to manage your grocery shopping and your wallet will thank you for it.

De-clutter for some extra cash

Stuff you no longer use sitting in your wardrobe or shed can be sold for extra cash online or a garage sale. Generally, if you haven’t used something for at least 12 months, you don’t need it. Even small amounts can add up to something meaningful. At the very least, you’ll have a less cluttered house.

Emergency savings

Only in the event of an extreme financial crisis, you may need to dip into that savings fund. You may have been working hard to save up for that Caribbean Cruise or that Mt. Everest trek, but you may need to use your savings to meet any budget shortfall temporarily until the economic situation improves.

Time to recalibrate

During these tough times, we need to re-assess and prioritise. Sometimes we are clouded by what we think we need because we’ve become used to having it. We drift off-course and need to recalibrate. Sometimes recalibration happens by choice. Sometimes it’s forced upon you.

Recalibrating is not easy because we’re creatures of habit. Routines are hard to change.

So, stop focusing on the negatives and obsessing over what you’re missing out on. Instead, start thinking about what you do have and all the things you could do.

Don’t be afraid to adjust and adapt to the current conditions. Recalibrating by controlling costs is a proactive way to prepare yourself and lower your risk of a financial crisis. The goal is to survive without losing the things most important to you.

Final Note

It’s ok to be worried about money. Your action plan for a financial crisis depends on your individual needs. By re-calibrating your goals to meet your income and spending, you can focus on what’s important now you will come out the other side of this challenging time.

While we won’t know the full impact of this pandemic for a few years, implementing these tips can help bring some degree of comfort knowing you can still take control of your finances even if we’re in the midst of a crisis. If you need support, the Integra Financial team are here to support you. Book a meeting here to discuss how to manage your money, whether you are in retirement or still planning your retirement.

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The COVID-19 (coronavirus) pandemic has triggered a share market crash, in Australia and internationally. Since 31 December 2019, when the first cases of the new virus were reported in China’s Hubei province, the disease has spread rapidly to Europe, UK, North America, Asia, the Middle East and Australia.

We’re now seeing extraordinary disruption to economies and societies, at home and abroad, and the effect on share markets has been substantial. They’ve suffered major falls across all regions, as supply chains are disrupted and business activity is restricted.

It’s possible they’ll remain low or fall further as the shutdown measures put a squeeze on companies’ turnover and profits and damage consumer confidence. The Australian dollar has also fallen significantly against the benchmark US dollar.

At times like these, it can be easy to make knee-jerk decisions, but rash short-term thinking can often be counter-productive. 

Fear-driven decision making

Seeing the value of your investments go down is never a pleasant feeling. Given the fear and uncertainty COVID-19 has caused in the community, many investors may feel panicked about the state of their portfolio.

Cutting your losses and moving your holdings into cash may seem a tempting option at this time. The emotion is understandable but allowing it to drive your decision making may not serve you well in the longer term.

Different assets classes produce different returns, at different times in the market cycle. A diversified investment strategy is often the surest way to grow the value of your portfolio over the long term.

You can also further diversify across fund managers and investment styles, so your portfolio is less vulnerable to a falling market. Different investment styles always perform differently throughout the investment cycle.

Moving your money into cash now, when the share market is so volatile, may only crystallise any losses and could leave you with insufficient funds to meet your long-term financial goals, such as having enough to retire on. And being out of the market may mean that you miss out when the market starts to recover again. Timing the market is almost impossible.

Legendary investor Warren Buffett is well known for his investment philosophy and strategy of holding the course when markets fall – and he’s one of the world’s most successful investors. One of his famous quotes is “our favourite holding period is forever”. 

Dramatically changing course

While COVID-19 represents new territory for investors and businesses, chances are the market will stabilise in the medium to long term, that is, over the next three to five years. History has shown time and again that share markets have the ability to recover from significant market events and be a source of returns in the long term.

Reminding yourself of your long-term goals can be a good way to counter any sense of panic the current situation may have generated around your personal finances and investments.

Going it alone

Now isn’t the time to go it alone. We’re available to talk through any concerns you may have, as you navigate the continuing uncertainty the next few months have in store for all of us, financially and personally.

Financial advice is critical in uncertain economic times. Reach out and book an appointment with the Integra Financial team here to discuss your investment strategy.

Source: IOOF

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A recent report from The Lancet¹ says studies have shown being in quarantine can result in psychological distress that lasts beyond the period of isolation. Feelings of depression, stress, low mood, irritability, fear, insomnia and even post-traumatic stress symptoms can be evident years later.

Ann Jewitt is Founder and CEO of Workplace Mental Health Consulting and believes many people’s emotional health is at risk.

“Currently, over two million Australians live with anxiety and over one million with depression in any one year. And this is without the additional distress of COVID-19”.

This makes it an even more important time to invest in some self-care.

Whether you live alone, with a partner, friends, or have a full house of family, here’s seven ways to care for yourself during isolation.

Catch-ups without contact

Spending more time with people who make you feel good about yourself can help you build the resilience² you’ll need to get through this time. Attend those coffee dates or after-work drinks online and book time in the calendar to meet up with your friends or family on Skype, WhatsApp, Zoom or FaceTime. Being able to see as well as hear your nearest and dearest makes all the difference.

Keep a routine

It doesn’t have to be strict, but broadly sticking to a routine will benefit your wellbeing during isolation. Try waking up at your usual time, eating healthy foods, allocating time to exercise, and getting enough sleep. These things may help to regulate your mood and feel more prepared to face each day.

Engage with your community

Social distancing means no more hobby groups. If you’re missing being able to connect with like-minded people, you’ll be able to find fellow enthusiasts online. Sport, gardening, knitting, reading, keeping fit or building model aeroplanes; whatever your niche there’s probably a Facebook Group, Instagram account or online forum ready to welcome you.

Train your brain

No, we’re not talking Sudoku. It’s common during times of crisis and uncertainty to feel mentally overwhelmed³ – especially if you have a lot of time to ‘think’. Remind yourself that this situation is temporary. Your efforts to stay isolated mean you’re helping everyone in our community, and can help you feel calmer and gain perspective.

Avoid the hype

With COVID-19 saturating our TVs and social media feeds, it’s easy to overdose on ‘news’. Many headlines are designed to sensationalise and stir up emotions that are already heightened. Sticking to factual websites can help, and the government website Head to Health has specific information and resources to help Australians with their mental health through the pandemic.

Get physical

Our physical health plays a big factor in our mental health⁴. Being able to get fresh air every day is vital. Whether that be in your own backyard, balcony, shared garden (as long as you are 1.5m away from other people) or going out for a daily walk. Take it an important step further and exercise between 75-150 minutes per week⁴, as exercising releases endorphins that improve your mood. There are thousands of home workout videos on YouTube and social media. Or if that’s not your thing, turn up the music and dance!

Focus on what you can control

When critical events beyond our control are taking place, it’s natural to feel uncertainty, fear, anxiety, dread, helplessness or denial⁵. It’s how humans are wired to react. So, what can we do to counteract those feelings? Ann Jewitt, Founder and CEO of Workplace Mental Health Consulting gives this advice –

“It is by acknowledging and accepting there are things we have little or no control over and letting them go. Through this, we can gain control over how we feel, think, behave and interact with others, thereby having a positive impact on our mental health and wellbeing.”

Useful resources for additional support during this time:

• Beyond Blue
• Lifeline
• World Health Organisation
• Head to Health

^{1 https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(20)30460-8/fulltext#seccestitle10
2 https://www.healthdirect.gov.au/resilience
3 https://www.lifeline.org.au/get-help/topics/mental-health-and-wellbeing-during-the-coronavirus-covid-19-outbreak
4 https://www.who.int/dietphysicalactivity/factsheet_adults/en/
5 https://emergency.cdc.gov/cerc/ppt/CERC_Psychology_of_a_Crisis.pdf}

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