When you’re building up your super, you’re in the accumulation phase. Once you’re able to access your super, you can start considering whether to make a withdrawal and/or start a retirement income stream. Of course, you can always have a combination of both.

With COVID-19 creating significant volatility in global investment markets – affecting many people’s super and retirement funds – it’s never been more important to have an informed strategy for defending and managing your retirement income as you move into drawdown. You’ll understandably have a lot of questions – Should I delay my retirement? Should I change how I invest?

They’re important questions to work through.

Retirement income 101: some important basics

These days, retirement isn’t necessarily a hard stop at 65. You don’t have to retire fully at your preservation age, which is the age you’re eligible to draw on your super. Many people now reduce their working hours and transition slowly into retirement by supplementing their reduced income using their superannuation through a ‘transition to retirement (TTR)’ income stream.

As soon as you hit your preservation age you can use a TTR. But be aware that the tax on investment earnings paid by your super fund will still be 15% until you move to a full condition of release [1]].

Once you retire after reaching your preservation age, you have unlimited access to your super. This means you now have the choice of taking a lump sum or income stream – or both. In some cases, it’s better to keep your money invested in the superannuation environment and generate a retirement income stream that you then draw down on to fund your lifestyle.

If you start taking an income stream, you’re now in retirement phase – and your earnings are taxed at 0%.

There are some important things to know about tax and limits –

Some types of super income streams are:

• Account-based pensions.
• Annuities.
• Defined benefit pensions (only available to some defined benefit members) [2]

Some important things to know about your income stream – if you’re in a taxed super fund:

• There’s a limit of $1.6 million [3] you can transfer into a retirement phase income stream from your super – this is called the Transfer Balance Cap. You can read more about this here
• The earnings on the capital supporting your income stream are tax free [4]
• Once you’re 60 or older, any income payments or lump sum from this source are also tax free.
• Between your preservation age to age 60, you’re entitled to a tax offset of 15% on the taxable portion, which provides a tax-effective retirement income. You do not pay tax on the tax-free portion. Lump sum withdrawals may be subject to tax.

Other things to think about with account based pensions:

• You can choose how your money is invested – however, investment earnings will vary based on economic and market conditions.
• There’s a minimum amount you must withdraw each year. Read here for more information.

Other things to think about with annuities:

• You’re protected from negative market movements; however, you generally won’t benefit from any positive market performance.
• Payments are paid at an agreed rate for a set period determined at when you start.
• You can’t change the amount and frequency of the income payments once they start.

Understand your big risks

Right now, one of the most important things all retirees can do is understand some of the unique risks to retirement funds posed by COVID-19 – and respond in the right way.

During the Global Financial Crisis, 80% of Australian retirees said their income fell when they retired.5 Poor returns due to volatility that depletes your capital just before or in the early years of retirement is one of the biggest risks to your retirement savings. It’s called sequencing risk, and it’s important to manage it. That’s where professional advice can really help.

Another key risk is locking in losses by suddenly switching some of your investments into cash – or physically taking cash out to hold in a bank account.

Talk to a professional about these kinds of decisions to make sure you don’t make a panicked move that could put you at a real disadvantage later, when markets turn.

Understand your options

The Federal Government has introduced some temporary measures to help if you’ve been affected by COVID-19, including reducing the minimum drawdown requirements by 50%.

For some super income streams, this means the minimum amount you’re required to draw down is less than usual, for the 2019/20 and 2020/21 financial years. This may help with the impact of volatility on your retirement savings by allowing more to remain in your
income stream.

Making the most of your retirement income

Even after you retire, you can use some smart strategies to continue building your wealth.

That means there will be less pressure on your retirement savings to keep up with the rising costs of living, and you’ll help safeguard your money from external factors such as market volatility.

Top tips to consider to help maximise your retirement income

• Retirement isn’t all or nothing – it’s not necessarily a hard stop at 65. You can gradually transition into part- time work.
• You’re probably going to live longer than you expect, so you’ll need an income for longer than you think.
• Have a fixed budget each year to make sure your money lasts.
• If markets turn or things happen, don’t panic – talk to a professional financial adviser who can help you assess your options.

Note: There are all sorts of risks and factors to consider when it comes to defending and managing your retirement income.  Consult a professional before choosing what’s right for you! Give us a call, we can help!

Footnotes
[1] A TTR will move to retirement phase when you reach age 65 or notify the trustee you meet a condition of release that enables you to access all of your superannuation, such as retirement after your preservation age.

[2] If you have one of these pensions you should consult your super fund about the specific rules relating to that pension.

[3] This applies for the 2019/20 and 2020/21 financial years. It may be indexed in the future.

[4] This excludes transition to retirement income streams
until you reach age 65 or meet a condition of release that enables you to access all of your superannuation.

[5] HSBC, Future of Retirement: Life after work?, 2013.

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One of the things that we all have in common as living beings is our finite lifespan and our awareness of this also contributes to motivating us to make each and every moment count.

Yet while many of us don’t want to reflect much on our mortality, we all want to live happier, healthier and longer lives. In fact, it’s a very human trait to be fascinated by the potential of extending our lifespans.

While one 105-year-old woman, who has survived COVID and the 1918 Spanish flu outbreak, recently credited her longevity to eating gin-soaked raisins on a daily basis, there are those who go to much greater lengths[1].

Living long

Over the past 100 years, life expectancy in Australia has increased from around 50 years to well over 80 years, with a boy born today expected to live around 80.9 years and a girl 85.0 years [2]. Most researchers looking at trends in mortality believe life expectancy will continue to increase in the coming decades.

That’s not enough for a small cohort of people termed ‘Biohackers’ who ‘hack’ their bodies to make them function better and in many cases, live significantly longer.

One high profile biohacker, Dave Asprey, is vocal in his aim to reach the grand old age of 180. Dedicating millions of dollars to the cause, Dave gets regular stem cell injections, bathes in infrared light, uses a hyperbaric chamber and takes over 100 supplements a day [3].

How to live longer and better

We’re not all Silicone Valley millionaires, able to access expensive biohacking treatments, nor do we all want to. But there are some common-sense ways to not only live longer, but live better.

Eat well
While the ‘perfect’ diet is often contested, what the experts generally agree on is that we should incorporate plenty of plant foods, limit red meat, avoid processed foods and eat healthy fats and complex carbs [4]. Often the Okinawa Diet is referenced when it comes to living longer, as the residents of this Japanese island can live to 100 – Okinawa has the most centenarians per 100,000 population. The Okinawans eat a lot of plant foods, with some seafood and meat.

Move it
Being physically active is also important. Again, this can look different for different people, but regular exercise has been proven to improve heart health, control blood sugar levels, maintain or provide weight loss, and also possibly decrease our risk of developing cancer [5].

Stay sharp
Staying mentally active can also improve our lifespans. As we age, our mental abilities decline, but that doesn’t mean that there’s nothing you can do about it. And it’s not all bad news either, in fact, an older brain can create new connections between neurones. As some neurones die, their roles are taken up by others to help you adapt [6]. Prioritising your social life, being open to new experiences and taking up new hobbies will keep you mentally active, as will that puzzle book or a game of Trivial Pursuit.

Connection
Maintaining a healthy social life won’t just help your brain, research has also shown there are many physical benefits to staying connected. Lower blood pressure, a stronger immune system and possibly reduced inflammation can be the result of being happy around other people [7]

Purpose
It’s also important to be happy within yourself. Feeling fulfilled has been linked to longevity. A research scientist call Robert Butler found that those who could express their sense of purpose or life meaning lived about 8 years longer than those who were rudderless [8].

Ultimately, it’s not just the years in your life, but the life in your years that’s important. What’s the point of living to 100, or 180, if you don’t feel content and well? Living a full and satisfying life is the main goal we should strive for, and by taking care of ourselves, we hopefully will have years in our life and life in our years.

Footnotes

[1] https://www.forbes.com/sites/brucelee/2021/02/27/105-year-old-recovered-from-covid-19-her-tip-eating-gin-soaked-raisins/?sh=1b702a2ee551

[2] https://www.abs.gov.au/media-centre/media-releases/life-expectancy-continues-increase-australia

[3] https://www.menshealth.com.au/how-to-live-to-180-years-old-bulletproof-founder-dave-asprey

[4] https://www.nbcnews.com/better/lifestyle/what-science-says-about-best-way-eat-what-we-re-ncna1104911

[5] https://www.health.harvard.edu/healthbeat/5-ways-exercise-helps-men-live-longer-and-better

[6] https://www.betterhealth.vic.gov.au/health/HealthyLiving/healthy-ageing-stay-mentally-active

[7] https://www.betterhealth.vic.gov.au/health/healthyliving/Strong-relationships-strong-health

[8] https://www.bluezones.com/2019/05/news-huge-study-confirms-purpose-and-meaning-add-years-to-life/

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Getting married is a joyous time. However, if you are one of the 20 per cent of Australians who will do so a second (or more!) time, children from a previous marriage can present complex estate planning challenges.

Many Australians don’t realise that when you remarry, in most cases, your existing Will becomes invalid. For blended families in particular, this means family disagreements over how assets are distributed can be common.

To make sure your hard-earned assets don’t end up in the pockets of lawyers here are some things to keep in mind.

Without a Will
In the happiness of getting married it’s easy to overlook that your Will needs to be updated to reflect your relationship change. Not doing so means your assets are subject to the intestacy rules of the state you live in. This may mean your estate is passed to your spouse – and from there, not where you intended your assets to go. 

The family home
Generally, as joint tenants, the family home will transfer to the surviving spouse. Changing home ownership to tenants-in-common however, means each has a 50 per cent interest in the property that can be dealt with in each of their separate Wills.

Being tenants-in-common means each provides the other with a right of residence for their interest in the property. This means that the survivor will be able to remain in the property for the duration of their lifetime.

Superannuation
Many people don’t realise that they don’t own their super. Instead, it is owned by the trustee of the super fund and held on your behalf. That means that if you die, it doesn’t automatically go to your estate. Instead, the trustee will decide where the money should go.

To ensure that your super goes where you want it to, put in place a binding death nomination. This will, in a legally binding way, tell the trustee what you want to happen with your super if you die.

With over 1.1 million self-managed super funds (SMSFs) in Australia, this type of super fund will also be a consideration for many estate plans. One consideration is moving from an SMSF to a small APRA fund (SAF). The difference between these two types of funds is the trustee structure. In an SMSF, the members of the fund are also the trustees of the fund. In a SAF, the services of a professional trustee company are employed. So, in the event that there are family disputes, the use of a professional independent trustee protects the wishes of the deceased.

Testamentary trusts
A testamentary discretionary trust is activated only on death and provides a trustee the discretion to distribute assets between the beneficiaries nominated in your Will. As the assets are not legally owned by the beneficiaries, there is a greater level of protection from legal proceedings arising from marriage breakdown or bankruptcy.

You don’t need to remarry

In many circumstances it isn’t necessary to be married before a partner is entitled to a share of your estate. Depending on where you live this could be as little as two years of continuously living together.

Don’t leave it up to chance and remember to plan for the unexpected. To make sure your assets are protected for the next generation, speak to us today.

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The end of the financial year is approaching quickly, which means it’s time to get smart with your super. There are a lot of different super strategies, so we’re here to help you find the ones that are appropriate for you – today, and further down the track.

Boost your super while saving on tax
You might be able to claim after-tax super contributions as a tax deduction this financial year. This opportunity to boost your super may be a smart option if:

• Your employer doesn’t offer salary sacrifice, or
• You’re already salary sacrificing and you also want to make concessionally taxed super contributions from your after-tax pay or savings.

Like salary sacrifice and super guarantee contributions, personal deductible super contributions are taxed at 15%, or 30% for higher income earners. This may be considerably lower than the marginal tax rate you pay on your taxable income, which may be as high as 47% (including the Medicare levy).

They also count towards the concessional contribution cap and penalties may apply if you exceed the cap, which is $25,000 in FY2020/21 or may be higher if you contributed less than $25,000 in 2018/19 or 2019/20.

This is just one of your options

To find out if this strategy is right for you, give us a call on 03 9723 0522 before 30 June 2021. We’ll also talk you through some other strategies that may help you achieve a better lifestyle in retirement.

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This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. These articles are not owned by Integrity One Planning Services. Please consult your adviser, finance specialist, broker, and/or accountant before making decisions using this information.

During this year’s Federal Budget announcement Treasurer Josh Frydenberg stated “Australia is back!”. The Budget proposes positive changes to superannuation, an extension of the low and middle-income tax offsets, and a boost to aged care services.

Across the five largest cities, the low watermark for national home values looks to have been October 13, almost exactly six months after prices started declining.

We’ve summarised some of the key points from the Budget below but, remember, these are subject to the passing of legislation:

• From 1 July 2022, if you’re aged 67 to 74 you will not be required to meet the work test to make non-concessional contributions and salary sacrifice contributions to super

• From 1 July 2022, you can make downsizer super contributions if you’re age 60 and over (currently you need to be age 65 or over).

• From 1 July 2022, if you’re a first home buyer you can release up to $50,000 (up from $30,000) from your voluntary super contributions to help you buy your first home.

• The low and middle income tax offset is to extend to the 2021/22 financial year with a maximum offset of up to $1,080 for individuals or $2,160 for a couple.

• Additional support for elderly Australians requiring care either within the home or in a residential aged care facility

For a more comprehensive look at all the changes click here.

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This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. These articles are not owned by Integrity One Planning Services. Please consult your adviser, finance specialist, broker, and/or accountant before making decisions using this information.

Contrary to much publicised expectations of collapsing property prices, at Integrity Finance Australia we are seeing strong demand in property pushing quality property prices up.

Interest rates now below 2% and increasing optimism that the worst of COVID-19 related economic lock-downs in Australia are most likely behind us, are combining to create renewed demand for property well in excess of supply.

We do not see that momentum-changing and expect a stronger December/January summer real estate market than is traditionally the case.

This view is supported by media stories as below.

AUSTRALIA’S REAL ESTATE MARKET IS SPLITTING IN HALF

Based on CoreLogic’s daily hedonic index, the Melbourne residential property market bottomed on October 18. Since then, dwelling values in the southern city have appreciated by a solid 0.44 percent.

In the first 12 days of November, they climbed 0.22 percent, outperforming Sydney, Brisbane and Adelaide, although lagging stronger growth in Perth (0.40 percent).

This reconciles with impressive auction clearance rates on what have been healthy volumes: CoreLogic estimates the clearance rate in Melbourne last weekend was 68 percent on a total of 607 auctions.

Across the five largest cities, the low watermark for national home values looks to have been October 13, almost exactly six months after prices started declining.

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Nicholas Berry Credit Representative Number 472439 and Thomas Bailey Credit Representative Number 472440 are Credit Representatives of Integrity Finance (Aust) Pty Ltd – Australian Credit Licence 392184.

This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. These articles are not owned by Integrity One Planning Services. Please consult your adviser, finance specialist, broker, and/or accountant before making decisions using this information.