Supporting your kids, without sacrificing your own retirement

With careful planning, you can give a helping hand to your adult children financially, while still enjoying a comfortable retirement.

In the past, wealth was often passed on through an inheritance. But with our longer lifespans, and the higher cost of living (especially housing), the desire to help our kids while we’re alive and well is increasing.

If your children are young, you may have twenty or thirty years to save and invest on their behalf, while also saving for your own retirement. If this is the case, it pays to put a strategy in place early on.

For those nearing retirement age, or already retired, you may have a large lump sum you’d like to gift to one or more of your kids. Giving money is a wonderful thing to do, but it’s not always simple. It can have tax implications, and may affect your income support payments from Centrelink. On the other hand, gifting may enable you to increase your government pension payments or benefits, if done right.

So how can you help your children without compromising your own financial security and comfort in retirement?

To find out more, click here

Changes to ‘super size’ retirement savings

For the average Australian worker, legislated rises in superannuation will mean an extra $85,000 in their super account at retirement.

The Association of Superannuation Funds of Australia on Wednesday released a report on how the increases set to kick in from July 1 will “super-size” retirement balances.

Super balances are also set for a whopper year of double-digit gains, despite COVID-19 wobbles.

The rise in the superannuation guarantee rate to 10 per cent from next month represents an extra $19,000 in a worker’s nest egg at retirement.

With the rate set to rise in steps to 12 per cent by 2025, and many workers making voluntary contributions, the nation’s pool of retirement savings is tipped to swell to $5 trillion by the early 2030s.

“The key objective of super is to provide dignity in retirement,” ASFA deputy CEO Glen McCrea said.

The increase in the super guarantee to 12 per cent will also mean a rise in the number of Australian workers able to reach the industry’s “comfortable standard” at retirement of $545,000 for a single person.

Currently, only 25 per cent of Australians achieve a self-funded retirement.

“By 2050, that number is set to double as a result of the super system moving to 12 per cent, Mr McCrea said.

“It’s a significant shift which will underpin Australia’s fiscal sustainability by diminishing the reliance on the age pension.”

The independent Grattan Institute argues workers will pay for the increases through lower wages.

Some federal Liberal MPs want the superannuation system to be scrapped altogether, arguing it was set up by Labor to benefit unions.

Central banks heading towards the easing exits - five reasons for investors not to be too concerned

The attached note looks at the gradual shift towards the exits from ultra-easy monetary policy by major central banks and the implications for investment markets. The key points are as follows:

  • The gradual shift of central banks including the Fed and RBA towards an exit from monetary easing has caused some volatility in investment markets.

  • We continue to expect the first RBA rate hike to be in 2023, albeit there is a risk it could come in late 2022.

  • However, there are five reasons not to be too concerned: central banks are simply reflecting economic recovery; monetary policy remains easy; shares rose through the last Fed taper; share bull markets usually only end when monetary policy is tight; and it's normal in this phase of the investment cycle for returns to slow.

Read here to know more

Inflation Q&A - should we be worried about higher inflation?

The attached note takes a look at current concerns about rising inflation. The key points are as follows:  

  • Inflation will likely rise further in the months ahead due to base effects, bottlenecks & reopening but it’s likely to fall back again from later this year as these drivers fade.

  • Shares face short-term correction risks but as inflation settles the broad trend is likely to remain up.

Viewed in a very long-term context, we are likely now going through the bottoming of the 40-year decline in inflation that’s been in place since the early 1980s.

Read full article

The Australian economic recovery remained strong in the March quarter with GDP up 1.8% – seven reasons for optimism

The Australian economy continues to recovery strongly.

 This note looks at the outlook. The key points are as follows:

  • With growth of 1.8% in the March quarter, Australian GDP is now back above its pre pandemic level.

  • While uncertainties remain – including around the latest coronavirus outbreak in Victoria – there are seven reasons for optimism that the recovery will continue at a decent rate:

    • Vaccines

    • Global growth is ramping up

    • Consumer spending is well supported

    • Dwelling investment is likely to remain strong

    • Business investment is strengthening

    • Fiscal stimulus is continuing

    • Monetary policy remains ultra-easy

 To know more, click here.

The return of geopolitical risk? - what to watch over the remainder of 2021

The attached note takes a look at the importance of geopolitical risk for investment markets and key geopolitical risks to watch over the remainder of 2021.

The key points are as follows:  

  • Geopolitical issues generate much interest, but don't necessarily have a significant impact on markets.

  • But geopolitical risks are higher than prior to the GFC reflecting three big themes: a populist backlash against economic rationalist policies; the falling relative power of the US; and the polarising impact of social media.

  • After a lull following the transition to President Biden, key geopolitical issues to watch this year are: US and Australian tensions with China; Iran/Israel tensions; Russia and Ukraine; the German election; US tax hikes; and a possible early Australian election.

Read more about the article here

Shares have had a very strong rebound since March last year so where are we in the investment cycle?

With shares coming up to the one year anniversary of their pandemic lockdown driven lows on 23rd March 2020, the attached note takes a look at where we are in the cyclical bull market in shares and the broader investment. The key points are as follows:

  • The history of cyclical bull markets in shares suggests that the rebound since last March still has a way to go.

  • But it’s normal for the second 12 months of a cyclical bull market to see slower returns from shares.

  • While shares are vulnerable to a further correction triggered by the spike in bond yields, we are not seeing the sort of unambiguous overvaluation, economic overheating, monetary tightening and investor euphoria normally seen at cyclical tops.

Read more here

Market outlook Q&A – global recovery, vaccines, inflation, the risk of a share crash, Aust house prices and other issues

The attached note takes a look at the main questions investors commonly have regarding the investment outlook in a simple Q&A format.

Some of the key points are as follows:  

  • Global recovery is on track. Vaccines are working.

  • JobKeeper’s end won’t derail Australia’s recovery.

  • Inflation could become an issue in the medium term.

  • Shares are at risk of a correction but are supported by economic and earnings recovery.

Australian house prices are booming again but expect measures to slow it down in the months ahead.

Read full article here

An introduction to Exchange Traded Funds (ETF)

Exchange traded funds (ETFs) are a low-cost way to earn a return similar to an index or a commodity. They can also help to diversify your investments. You can buy and sell units in ETFs through a stockbroker, the same way you buy an sell shares.

Click here to read on how ETFs work, types of ETFs, pros and cons of investing in ETFs and how to trade ETFs.

Show your finances some self-love

Are you guilty of changing your spending habits when you’re in a relationship? Do you have a financial plan, or are you relying on a partner to take care of you in retirement? Whatever your situation, there’s never been a better time to step up and take charge of your finances.

The most important thing is to make sure your finances are sound for you. This is especially true for women, who face extra hurdles to financial freedom. On average, women retire with 47% less super than men, so it pays to have a clear retirement plan.

Click here to read more

The bond crash of 2021? Seven things for investors to consider

The attached note takes a look at the upswing now underway in the bond market.

The key points are as follows:  

  • Higher bond yields are normal in economic recovery and should not be a major problem for shares if they are matched by rising earnings. But too rapid a rise in bond yields risks driving a deeper correction in shares.

  • Central banks want higher inflation but will look through any short-term spike.

  • The 40-year downtrend in inflation and bond yields is likely over.

  • But the fundamental backdrop of improving growth, rising profits and still low rates supports the case for solid 6-12 month returns from shares.


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Top 5 tips to achieve your money goals in 2021

Work out your financial position

Start with a financial stocktake to work out what you own and what you owe. 

Use the net worth calculator

Make a plan for your money

What are your money goals this year?  Give yourself the best chance at achieving them. 

Plan and manage how you spend

Build a savings buffer

Having a financial safety net will give you peace of mind.

Save for an emergency fund

 Tackle your debt

The good news is there are steps you can take to relieve the financial pressure. 

Get debt under control

Master the investing essentials

Planning is the key to successful investing. Creating a plan will help you find investments that fit your goals.

Get ready to invest

Nine common mistakes investors make

The attached note takes a look at the nine most common mistakes investors make.

The key points are as follows:  

  • Many of the mistakes investors make are based on common sense rules of thumb that turn out to be wrong

  • As a result, it’s often wise for investors to turn common sense logic on its head.

  • The easiest way to avoid many of these mistakes is to have a long-term investment plan that aligns your financial goals with your risk tolerance

Click here know more.

Seven key charts for investors to watch regarding the global economy and investment markets this year

Seven key global charts worth keeping an eye on by investors this year are:

  • the trend in new coronavirus cases and deaths;

  • global business conditions PMIs;

  • unemployment;

  • global inflation;

  • bond yields

  • the gap between earnings yields and bond yields; and

  • the US dollar.

Click here to access these charts