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Thursday, 6 August 2020
Recently trending A hard dose reality check on vaccinesAfter 30 years of investing, I prefer to skip this partyHow we have invested during COVID-19Welcome to Firstlinks Edition 367Is the '4% rule' for retirement broken?
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Most Australians are comfortable in retirement provided they own their homes. We’re failing retirees who rent but we also need to include more of the family home in the pension assets test.
During the GFC, in the face of rapid falls in super balances, the minimum drawdowns required for pensions were reduced by 50% to help preserve overall retirement savings. It's time for a repeat.
Two-thirds of the responses to our reader poll say the family home should be included in some way in the age pension assets test, but the comments show it is an emotional and divisive subject.
Do people who have worked hard all their lives really have an 'entitlement' to an age pension? Somewhere along the line, has any government made a solemn promise to Australian retirees?
Super is reducing reliance on the age pension for the majority of people entering retirement. Most newly-retired Australians are not accessing the age pension at all, and only 25% of 66-year-olds are drawing a full age pension.
Life expectancies have increased dramatically since the nineties, but the uncertainty is forcing retirees to live too frugally. The super industry is switching its attention to the drawdown phase to find better solutions.
The 2018 Budget has opened the possibility that the Pension Loans Scheme will become a more popular part of retirement income planning.
A reader asks whether people can stay off the age pension by reducing the amount of money they live on in retirement but not drawing on their capital.
It's become common to claim there is no incentive to save more than $500,000 because of the loss of age pensions and possibly franking credits. But these arguments overlook the way super is supposed to operate.
There are many unanswered questions about why retirees spend so little in retirement, but perhaps it is a form of insurance against longevity risk.
Where both husband and wife are elderly and receiving an age pension, the structure of the will can significantly improve the pension and personal outcomes on the death of either person.
Gifting assets in the hope of increasing social security entitlements can be self-defeating. If certain financial levels are breached, the assets gifted remain assessable to the original owner.
With 160 programmes underway and billions of dollars spent on COVID-19 vaccines, investors are drawn to optimistic news. However, the company that has developed most new vaccines has a sober view.
Eventually, prices become so extreme they bear no relationship to reality, and a bubble forms. I believe we are there today, not for all stocks but for many in the technology space.
With signs that the economic recession will not be as deep as first feared, many companies will emerge strongly with robust business models. Here are the sectors with the best opportunities.
There is a similarity between the current health crisis and economic crises of the past. For COVID-19, record amounts of biotech funding from government agencies and private companies are looking for a vaccine. Likewise, central banks once struggled treating recessions but the 'vaccine' now is record amounts of financial stimulus to ensure liquidity. While the world awaits a COVID treatment, markets are purring along, at least until side effects hit.
The traditional 4% rule was designed to ensure retirees do not run out of money, but low interest rates and expensive equity markets question the sustainability of the level. What are the alternatives?
It’s not only products and business models that create wealth. Management teams make decisions on how to deploy capital and such actions drive vastly different outcomes over time.