Make the best of what you have as markets stay edgy
WE are now well into a new financial year. So far it's been a challenging one, and current market gyrations in the Eurozone and China indicate more challenges ahead.
What makes this year unique is a growing awareness of the immense challenges we will face due to the combination of an ageing population, and a world that is deep in debt.
Already this is manifesting itself in a change of attitude to the age pension. It was once regarded as a right - now it is regarded as welfare.
Gloomy as the outlook may be, experience tells us that those who make the best use of what they have are the ones most likely to cope. Far too many spend so much time worrying about their future that they never do anything tangible to protect themselves.
Interest rates are almost certain to go lower. This may be great news for borrowers but makes it tough for many retirees who are nervous about growth assets such as shares and property. If you are one of these nervous souls, I suggest you talk to an adviser about making a small foray into managed funds that invest in local and international shares. You may have 30 years of living ahead of you, and you'll almost certainly run out of spending money if you stick with cash in the bank.
If you're over 55, you should be pouring as much money as you can into superannuation. Certainly, you need to keep cash available for emergencies, but there is no point in leaving money lying in bank accounts where the interest is fully taxable, when you can move it to superannuation where income will be taxed at just 15%. There is no entry tax on non-concessional contributions, and once you reach 60 you can make withdrawals tax-free as needed.
A major benefit of placing money into super is that Centrelink does not count it until you reach pensionable age. This is particularly appropriate if there is a large age difference between a couple.
This is also the perfect time to think about finding yourself a financial adviser. Regulations, markets, investment products and strategies are continually evolving, and you need someone who can help you optimise your financial position. A good adviser will help you crystallise your goals and set in place specific strategies to reach them. Good advice doesn't cost, it pays.
Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: firstname.lastname@example.org.