Money can buy happiness (but usually doesn’t)
The relationship between money and happiness is complex. Beyond a certain level of wealth, there is no evidence that happiness increases with wealth. And often the reverse is true; our happiness can decrease as we get richer.
Granted, for the poor, every extra dollar counts. More money provides for life’s necessities, relieves financial stress and increases life satisfaction.
Wealth paradox
But for those with average or higher than average incomes, the nexus between happiness and increasing wealth breaks. For those households with enough to satisfy basic needs, more money does not deliver happiness and it can increase financial stress.
Calm the farm: US economic fears overblown
The Australian share market experienced losses of $100 billion over two days in early August because of fears of a US recession. But how likely is the economic threat really and, ultimately, will the markets care?
What the future holds
It’s a shame money doesn’t buy happiness, because from a financial perspective the future looks bright.
Treasury released its latest intergenerational report this month and it makes for fascinating reading. With the luxury of a 40-year outlook, the report lifts above the distraction of day-to-day noise. Instead, it analyses the macrotrends that will drive the economy and the retirement income system in the long-term.
SKI club: Why it’s losing its members
Spending the Kids’ Inheritance (SKI). Every retiree jokes about it. But in our recent experience, Australian retirees are turning their minds to helping family members financially. They are more concerned about the impact of the rising cost of living on their families than themselves.
Waste not want not
Minimum pension drawdowns limits doubled on 1 July; are you ready?
Account based pensions are flexible retirement income streams. When you stop and think about it, there are very few restrictions on what you can do with them. If you are retired, you can access your money whenever you like, you can switch providers, you can choose how you invest, you can choose the level of income you desire and there is no maximum drawdown imposed.
Man in the Mirror: How community will transform financial planning
A tourist is travelling through Ireland. He stops a local and asked for directions to Dublin. The local earnestly responds: “Well, Sir, if I was going to Dublin, I wouldn’t want to be starting from here”.
Global banking turmoil and your super
It all started a couple of weeks ago with the collapse of mid-tier US institution Silicon Valley Bank. Soon another mid-tier bank in the US, Signature Bank, collapsed.
If you have been brave enough to look at your super balance in the past few days you will know that the share market has since fallen more than 5% and is now trading at four months lows. In that two weeks markets have fallen because the recent turmoil in banking has spooked investors who remember the pain of the Global Financial Crisis 13 years ago.
Bad Medicine
Bad medicine: Why the RBA is right to increase rates
In February the Reserve Bank of Australia (RBA) increased official interest rates again, this time another 25 basis points. The official interest rates are now 3.35% pa, up from 0.1% pa in May last year, an increase that is sure to be causing mortgage stress and rental increases amongst the most vulnerable.
But, as bad as high interest rates are, they are better than the alternative; high long-term inflation. That’s why the RBA is right to keep increasing interest rates.
The best and worst super funds in 2022
Most people don’t engage with their super until they’re about to retire. But APRA’s annual performance report on super funds shows why it’s important that you do. Not all super funds are equal and there is a big difference between the best and worst funds.
Who you gonna call?
The financial advice industry is in the process of transforming into a profession. It hasn’t been a painless process. Financial planners are leaving the advice industry in droves. Since December 2018, the number of advisers registered with ASIC has almost halved, falling from 28,000 to fewer than 16,000 in less than four years.
Stay the course: Five things to remember during uncertain times
Stay the course: Five things to remember during uncertain times
It’s tough being an investor right now. It’s even harder to be a retiree investor because retirees are generally more conservative than their younger selves. Let’s face it, most of us are feeling significantly poorer than we were 12 months ago. With the US share market off 16 percent since the start of the year, house prices falling for six consecutive months, and with the cost of living rising at levels not seen for 30 years, it’s no wonder that retirees might be losing confidence.
But this is not the first economic slowdown we have seen and it’s not the first market correction. Here are the five most important things for retiree investors to remember during uncertain times.
Inflation and your retirement
Inflation and your retirement
With the property market cooling, Australians have finally stopped talking about real estate prices. At dinner parties everywhere, there’s a new conversation.
The bad news? The new conversation is about the rising costs of living. It’s understandable. In the year to July 2022, the costs of consumer goods and services rose 7 per cent.
While the media focus has been on the plight of young families with mortgages, rising inflation presents unique challenges and risks to retirees as well. Especially in low growth economic conditions.
But there are things retirees can do to manage inflation risk and make sure their money lasts.
Not a time to set and forget
Markets have been volatile recently. In the last month alone the Australian share market has fallen around 6%. There’s so much uncertainty now; the Ukraine war, the ongoing Covid pandemic, and now systemic global inflation and rising interest rates.
Markets hate this uncertainty. So, what should retirees be doing to protect their retirement incomes?
Spending Confidence
One of life’s biggest mysteries is knowing how much we can afford to spend day-to-day in retirement. It’s hard because there’s just so much we don’t know.
We don’t know how long we are going to live, so we don’t know how long our money needs to last. We don’t know what emergencies and life challenges will crop up from time to time and require money.
We don’t even know what return our investments will provide.
War in Ukraine: Implications for your retirement
War in Ukraine: Implications for your retirement
Russia’s invasion of Ukraine is first and foremost a human tragedy. The images we’re seeing on the news are just terrible. But if we turn our minds to the economic impact, we can see that there have been immediate consequences. Sure, they’ve been felt most acutely on the other side of the world, particularly in Europe. But there are economic consequences of the war in Ukraine being felt right here in Australia as well.
So, what does it mean for Australian retirees in the short-term and should we be doing anything now to protect ourselves?
Independence: The key to trustworthy advice
Last month Dixon Advisory, a once respected retirement specialist firm, collapsed into voluntary administration. In the end, it was overwhelmed by compensation claims and legal actions from 5,000 former clients who had sustained heavy losses from Dixon’s in-house products.
So, what went so wrong for Dixons? And what can we learn from their business model and the experience of their clients?
The importance of strong returns for retirees
When it comes to money, what’s most important to us changes over time. When we’re younger, and starting a family, perhaps taking out a mortgage, life insurance is the most important thing. When we get to midlife, super contributions become more important, loading money into super and taking advantage of the mathematics of compound interest.
But when we come to retirement, investment returns become most important. That’s because the period around retirement is when our super balances are at their highest. It’s what finance nerds call the ‘portfolio size effect’.
Spending in retirement
There are lots of uncertainties when it comes to retirement. While most Australians are working longer, we’re also living longer, so our retirement is longer. In fact, for some of us, retirement can span a period of 30 or 40 years.
A lot can happen in 40 years and it can be difficult to know how much we can afford to spend. How do we balance spending today, and still be responsible for the future?
Why we all need a Plan B
Over the course of our careers we have met thousands of pre-retirees and retirees. During that time, we have observed changing attitudes to retirement.
Today, most of us are planning on working longer; the average age we plan to retire is now 67. And almost all of us want to transition into retirement, reducing our work hours over time.
But foresight may be vain. According to the Australian Bureau of Statistics “Retirement and Retirement Intentions” research, in reality, the average age at retirement is around 55.
Most of us don’t get to choose the timing of our retirement. It’s forced on us by circumstances and that’s why we all need a plan B.
Fork in the Road
Most Australians think that superannuation was introduced by Paul Keating in the early 1990s, but it wasn’t.
Some Australian super funds have existed for more than a hundred years. And if you’re fortunate enough to be a member of an old scheme, it pays to understand your options.