- Posted by Robert Wolski
- On August 8, 2022
- 0 Comments
As outlined in the MLC financial year in review, this financial year has been one of challenges where the longer term implications of the pandemic are now being felt across the world. The global economy is facing a myriad of different issues at the moment with inflationary pressures, rising interest rates, the war in Ukraine, more frequent environmental shocks and the resurgence of a third wave of Covid which has led to further economic and supply chain instability. This has translated into a volatile period for investment markets which MLC’s economist Bob Cunneen summaries in his article.
The current return environment reminds us that long term investing will have its ups and downs and that the path to wealth generation is by no means a straight line on a graph. The journey will involve volatility as can be seen from viewing past performance of asset classes/portfolios and it is inevitable that market downturns will occur, but they will be followed by years of positive growth which eventuates in the long term to the positive return averages listed on page 2 of the MLC article.
Further to this point, when overlayed with financial advice you can optimise the building of wealth to achieve your goals and I’ve listed a variety of strategies that have been implemented for Critique’s clients in recent times.
- Maximising Superannuation Contributions to reduce your tax and boost your super: Over the last financial year we have assisted our clients to manage their superannuation contributions and to top up their super via personal contributions and to claim these amounts as a tax deduction. The instances we have seen clients engage in this strategy are: when there is a windfall lump sum/the client needs to reach their the concessional contributions cap which was $27,500 in financial year ending 2022/managing capital gains tax from the sale of properties.
- Using Catchup Superannuation Contributions: This strategy involves using a “catchup super contributions” whereby over the last three financial years they have not reached their concessional contributions caps (ie $25,000 in FY18/19, $25,000 in FY19/20, $25,000 in FY20/21 and $27,500 in FY21/22. This strategy allows clients to utilise the remaining balance to their caps and carry forward this into one financial year.
- Downsizer Super Contributions: For clients embarking on retirement and seeking to downsize from their home (primary place of residence) a strategy exists whereby a couple can contribute $330,000 into superannuation each from the proceeds of the sale of their family home if they are downsizing and have residual cash leftover. This strategy enables clients to unlock equity to boost their retirement assets and is possible from age 60 and has no time limit.
- Pension Phase Retirement Income & Bucket Investment Strategy: For some clients currently drawing a retirement income from their superannuation pensions, the recent market volatility has provided the impetus to review their income payment requirements and provide for a buffer to meet these liabilities/drawdowns over the next few years. In light of the rise in term deposit rates, this strategy does provide the ability to give additional comfort to clients that have one off large expenses expected or wish to set aside amounts for the next 2-3 years.
- Maximising Social Security Entitlements: An example of a recent strategy implemented for a client is whereby one party of a couple became eligible for the Age Pension and it made financial sense to plan to transfer assets to the younger (not eligible for the Age Pension) client’s superannuation accumulation account (which is not counted in the assets for Centrelink purposes) enhancing the social security payment available.
- Aged Care Advice: The demand for this arena of financial advice is a growing exponentially as our population ages. Requests for advice in this area are critical to not only our clients, but it is vital for their parents. Advice provided in relation to Aged Care can highlight the options available and the implications/costs of entering the aged care system, giving clarity to those requiring this level of care and their partners/children.