Smart Investing
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The Federal Budget’s confirmation that the annual cap on concessional superannuation contributions for all fund members over 50 will halve to $25,000 from the 2012-13 financial year, has some investment commentators envisaging that more investors will turn to negative gearing.
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We've been told by the financial community at large that it's a tough time to be an investor. The financial markets are extremely volatile. Bond yields are near historic lows. The outlook is uncertain.
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The latest bouts of sharemarket volatility and this month’s cut in official interest rates once again highlight the crucial role of bonds in a properly diversified investment portfolio.
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Self-managed super funds typically have a much high exposure to cash than fixed interest.
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The Australian superannuation industry reverted this week to its unwanted status as one of the government’s favourite Budget ‘hollow logs,’ with billions of dollars in savings extracted from the system by reneging on a tax break meant to encourage higher retirement savings, and a doubling of the concessional tax rate on the super contributions of those earning more than $300,000.
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News & Commentary
No more Star Trek conventions for Spock 18 Oct 11
Seemingly inconsequential announcements of retirement and non-retirement can make headlines – particularly given the rapid ageing of the population, longer life expectancies and the general inadequacies of retirement savings.
Take just two examples, original Star Trek stars William Shatner, 80, (Captain Kirk) and Leonard Nimoy, 80, (his first officer, Mr Spock).
Nimoy recently announced that he had probably attended his last Star Trek convention. And Shatner responded in an interview with The Wall Street Journal’s SmartMoney in the US that he intended to work for the rest of his life.
Certainly, attending Star Trek annual conventions year after year would understandably induce some people to retire – after all, there have been 45 of them.
Of course, the views of Shatner and Nimoy about retirement colourfully reflect a much-wider debate taking place throughout the world.
The GFC, followed by highly volatile markets and concerns about a global economic recovery are triggering much discussion about whether or not to postpone retirement.
From a financial perspective, there is at least a double benefit from delaying retirement: an opportunity to save more while fewer years in retirement means that less money is needed to achieve a satisfactory living standard than would otherwise be required.
An ABS report, Retirement and Retirement Intentions, Australia 2008-09 – unfortunately, the latest available – found that 13 per cent of Australians over 45 did not intend to ever retire, while another 9 per cent were yet to decide whether to ever retire.
The report revealed quite a deal of uncertainty in the workforce about retirement plans. Of those who intended to retire at some time in the future, 38 per cent did not have a retirement age in mind.
And of those who nominated an intended retirement age, 46 per cent aimed to retire at ages 65-69, 29 per cent at 60-64, 12 per cent at 55-59, 12 per cent at 70 plus and the remainder at 45-54.
In December, the ABS expects to release an updated Retirement and Retirement Intentions Report. Smart Investing expects that those intending to retire close to their 70th birthday could markedly rise.
Economic issues aside, many people gain great satisfaction from their work.
* Written by Robin Bowerman, Principal, Corporate Affairs & Market Development at Vanguard Investments Australia.
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