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What happens to your super when you die?

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What Happens To Your Super When You Die?

The macabre side of financial planning – it’s not just insurance cover that leads us down a morbid path in this business, it’s also your estate planning.

Estate planning is a necessity whether we like it or not. Sometimes you just have to sit down and think about what will happen when you die (the practical side, not the “is there an afterlife” side).

It’s mainly to ensure that those you leave behind are looked after and your wishes are adhered to.

What does this have to do with super?

You hear us banging on all the time about your beneficiary nominations and how important they are, but do you actually know why? The most crucial thing that a lot of people don’t understand is that your super may not form part of your estate when you die, meaning what’s in your will doesn’t impact it. Considering super is often a person’s most valuable asset (especially as most of us have been building it since we were 14!), you definitely want to make sure that it’s left to the people you want to have it.

The Facts.

To make our job super easy in getting the info over to you, our friends at Colonial First State have put together one of the best fact sheets we’ve seen on what happens to your super. It’s got all the facts, breaks it down into who you can nominate and what those nominations involve, and also goes through an explains a lot of the jargon and key words/phrases that you need to know.

You can get a copy here.

Have a read through, and as always let us know if you want to discuss any of the above further. If you want to meet with us and you aren’t already one of our wonderful clients, you can book directly in with Kristopher here. 

You can reach us via email at hello@wealtheon.com.au or via phone on 1800 577 336. If you want a hand or to know what your current nominations are, just give us a shout!

2024’s Key Dates To Keep On Top Of Your Financial Game

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2024’s Key Dates To Keep On Top Of Your Financial Game

New Year, new you! As we charge into 2024 refreshed and recharged from another festive season, now is a great time to get on the front foot and understand some key dates that will help you keep on top of your financial game for another year.

Super Transfer Balance Caps

In January and February, the release of the Consumer Price Index (CPI) and Average Weekly Ordinary Time Earnings (AWOTE) figures will play a pivotal role in determining potential changes to the general Transfer Balance Cap (TBC), contributions caps, and associated Total Super Balance (TSB) thresholds starting from July 1, 2024. While the impact may seem distant, it’s crucial to consider implications for contribution and retirement advice before the end of this financial year.

With the inflation rate showing signs of easing, the likelihood of the general TBC being indexed to $2 million from July 1 seems somewhat improbable. However, it’s advisable to stay vigilant, as any adjustment to a $2 million cap could influence advice early in the upcoming year.

For instance, individuals should weigh the decision of commencing a retirement phase pension before or after July 1. Is it worthwhile to wait for potential indexation and a higher personal TBC? Understanding the costs involved is crucial. It’s also essential to assess the impact of pension refreshes on any indexation of the client’s personal cap, whether performed before or after this critical date.

Additionally, a review of clients with high-balance Transition to Retirement Income Streams is recommended, especially those who may fulfill a full condition of release before the fiscal year’s end. A Transition to Retirement (TTR) pension automatically enters retirement phase when an individual turns 65 or notifies the super fund that they’ve met specific full conditions of release.

These arrangements may necessitate a thorough review, with considerations to either commute part or all of the pension balance back to accumulation. This is done to avoid an excess transfer balance amount or to maximize the personal TBC by ensuring entry into the retirement phase aligns with the higher TBC when it takes effect.

Super Contribution Caps

Recent upticks in Average Weekly Ordinary Time Earnings (AWOTE) are pointing towards a potential expansion of contribution caps. This could result in an increase to both concessional and non-concessional caps, potentially reaching $30,000 and $120,000, respectively.

It’s important to note that the general Transfer Balance Cap (TBC) plays a crucial role in determining Total Super Balance (TSB) thresholds, which, in turn, influence non-concessional limits for high-balance clients, including those falling under the bring-forward rule. Consequently, any adjustments to either contribution caps or the general TBC will have implications on the eligibility for non-concessional contributions in the upcoming financial year. The table provided below offers a summary of potential limits effective from July 1, based on potential indexation.

As depicted in the table, the indexation of the general TBC holds the potential to enhance contribution opportunities for high-balance clients. However, it’s noteworthy that if contribution caps increase while the general TBC remains at $1.9 million, eligibility for contributions from July 1 might experience a slight decrease.

Given these potential changes, it is advisable to closely monitor developments early in the new year to maximize contribution opportunities and to be mindful of various scenarios. The table below outlines the potential outcomes to facilitate a better understanding.

Concessional Contributions

As we approach the end of the financial year, it’s crucial to review contribution strategies, especially with the imminent expiration of unused concessional contributions carried forward from FY19 and the commencement of Stage 3 tax cuts on July 1. This presents an opportune moment to ensure clients optimize their use of the concessional contributions cap.

Since July 1, 2018, the ability to carry forward unused concessional contributions for up to five financial years has been in effect. This means that the current financial year marks the final opportunity to capitalize on unused concessional contributions accumulated in FY19. Voluntary concessional contributions can be facilitated through a salary sacrifice arrangement or by claiming a deduction for a personal contribution, if eligible. It’s important to note that only prospective income can be salary sacrificed, necessitating a review of agreements in a timely manner to capitalize on unused concessional contributions. Alternatively, making a personal deductible contribution may be the simplest way to leverage the concessional contributions cap. However, it’s crucial to submit a valid Notice of Intent within the specified timeframes and before any withdrawals, rollovers, or pension initiations.

To determine available unused concessional contributions, clients can log into myGov. Additionally, the Total Super Balance (TSB), which must be below $500,000 on the prior June 30, is displayed on a separate screen, so it’s important to verify both components.

Conclusion

As always at the start of a new year, it’s so important to make sure you have some key dates marked on the calendar to refresh your finances and make sure you take advantage of changes. If you want more information on the above, don’t hesitate to get in touch with us by booking in a free 20 Minute Discovery Call here. Don’t forget to check out some of our other articles on similar topics, like this one here. 

Important Money Stuff This Quarter – January 2025

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Looking Ahead With Cautious Optimism

As we wrap up another eventful quarter, there are exciting developments to highlight in both Australian and global markets.

The signs of a “soft landing” in the U.S. economy, coupled with easing inflation and improving corporate earnings, offer a sense of stability and opportunity for investors.

Meanwhile, Europe is showing encouraging signs of recovery, with bank lending and household incomes on the rise, setting the stage for stronger economic performance.

Closer to home, Australia is navigating a challenging economic landscape, but with inflation expected to steadily decline, there’s potential for interest rate cuts that could invigorate consumer spending and unlock growth opportunities across key sectors.

Globally, the easing of central bank policies and attractive valuations in markets like Europe and Japan are creating compelling investment opportunities for those ready to seize them.

This quarter’s update explores these positive trends in greater detail, while also offering insights into the potential risks and strategies to navigate them. Our friends at Russell Investments have provided a lot of the data for this, as well as their expert opinions. Dive in to discover how a carefully balanced approach can help you stay ahead in an ever-changing market.

 

1. Australia and Global Economic Update

  • Australia: The Australian economy is experiencing a slowdown, with high interest rates impacting consumer spending and borrowing. The Reserve Bank of Australia (RBA) has maintained the cash rate at 4.35%, aiming to control inflation, which is expected to ease to 2.5% by 2026.
  • Global: The U.S. economy shows signs of a “soft landing,” with the Federal Reserve beginning to cut interest rates amid declining inflation and moderating wage growth. Europe and the UK are recovering from near-recession conditions, supported by improved bank lending and rising incomes. However, China’s economic outlook remains challenging due to unresolved property market issues and low consumer confidence.

2. Investment Market Update:

  • Equities: U.S. equities are priced for a soft landing, but even a mild recession could lead to significant market corrections. European stocks are attractively valued and may perform well if earnings recover alongside the economy. In Australia, equities face pressure from high interest rates and subdued consumer spending.
  • Fixed Income: Government bonds in developed markets are fairly valued and offer diversification benefits, especially if economic conditions worsen. High-yield and investment-grade credit markets appear appealing, given the currently low default rates.
  • Currencies: The U.S. dollar is considered expensive and may decline as the Fed continues to cut rates more aggressively than other central banks. This scenario could provide upside potential for currencies like the Euro and British Pound.

3. Looking Ahead (Opportunities and Risks):

  • Australia: The economy is expected to cool further, with potential increases in unemployment. The RBA may consider rate cuts if inflation continues to decline, which could support sectors reliant on consumer spending.
  • Global: The U.S. is likely to experience a soft landing, but the risk of recession remains. Europe and the UK are on recovery paths, though a U.S. recession could negatively impact global trade and confidence. China’s growth prospects are subdued without significant government stimulus.

Opportunities and Risks:

  • Opportunities: European equities offer some attractive valuations, and sectors like listed real estate and infrastructure could benefit from central bank rate cuts. In Australia, dividend-yielding stocks and fixed-income assets may provide income opportunities amid market volatility.
  • Risks: A harder-than-expected economic downturn in the U.S. or China could lead to global market corrections. In Australia, high household debt and weak consumer spending pose challenges to economic growth.

In summary, while certain markets present investment opportunities, it’s crucial to remain vigilant of potential risks, particularly those stemming from global economic shifts.

Diversification and close monitoring of economic indicators are essential strategies in navigating the current financial landscape.

References:

Market Outlook 2024 – Q4 Update | Russell Investments

Have a read through, and as always let us know if you want to discuss any of the above further. If you want to meet with us and you aren’t already one of our wonderful clients, you can book directly in with Kristopher here. If you’ve missed any of our recent articles, you can find them here.

You can reach us via email at hello@wealtheon.com.au or via phone on 1800 577 336.

The Hype Around AI Stocks – Is it Worth It?

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The Hype Around AI Stocks – Is It Worth it?

There is so much hype around how AI is going to change the world, so should we invest in it?

Why is there hype in the first place?

We’ve all heard about it and now we’re seeing it – the rise of AI in the workplace, at home, and basically anywhere you can think of. The applications seem endless, and the promise that it brings to end mundane tasks for humans is exciting.

Now, no matter whether you’re an eternal optimist like I am, or an AI/robot uprising pessimist like my wife, there’s no denying that there is some serious opportunities in the AI space.

Whenever this happens in any industry and with any new technology, people get really excited to buy in (think Apple stocks circa 1999), but how we take advantage of these opportunities is key.

So how do we do that?

There are really two ways I look at it when trying to take advantage of hype in investments.

The first is through a momentum lens which is to use the hype to buy into stocks that are currently producing the hyped up news. In this case, it would be the producers and sellers of AI and trying to ride the wave of good news.

The problem with this is that momentum can be fickle and speculative and often does a backflip when bad numbers come out. A good example of this is marijuana stocks in Australia over the last few years. Great hype, no real results.

The second is through the secondary market view. What I mean by that, is who is going to actually benefit from the hype? Sometimes this marries up with the momentum but often not.

A good example of this is the dot com boom which saw most companies who traded in websites having inflated valuations which came crashing down, but the underlying technology was able to be used to create the likes of Google and Yahoo as well as Amazon.

So what could we be looking for?

My take on the AI hype is that there is currently a race to create an artificial intelligence that can support people and business. As someone who is trying out a lot of different AI and multiple different applications for it, most of these are still pretty disappointing.

We are really close to having an AI engine that can reliably help people and business and integrate well with current systems, but we have no real way of picking the winner (or even the runners up) of the race.

What I am looking for in the current space are businesses that have the ability to supercharge their earnings or profit once that key has been cut or, who will be the main suppliers in helping to produce the goods needed for the computing and continued development.

Final thoughts

I think that is a long-winded way of saying that no one has a crystal ball and picking the best AI stock to purchase is anyone’s guess at the moment. Looking for any opportunities in the markets come with their risks, and no one knows how things will turn out in the long run, no matter how promising they look right now. It is often the best bet to either find those areas that will profit from the invent as a whole, or who will flourish alongside the new tech.

If you would like any help or more information, don’t hesitate to get in touch with us. You can book directly in with me here. Check out some of our other posts and articles that might interest you on current topics, like this one here. 

Quarterly Compass: Spring 2023

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Quarterly Compass: Spring 2023

Spring has sprung in earnest which has brought a whole lot of change. We have been working hard at Wealtheon and Huxter Estate and are implementing a few big things that we are excited about launching in 2024.

Some of these new launches I need to keep tightly wrapped but something I can shed some light on is that we are adding some great new features to our values research and alignment with goals and portfolios and possibly building out some new incredible technology for all of our clients to benefit from. We are also changing some of our review format which has had great feedback so far and I am looking forward to running through it with all of our ongoing clients.

At Huxter Estate we have had bud burst and all of the vines are coming out in full swing. It’s crazy how fast spring changes the vineyard.

Lauren and I have also added a new addition to the Wealtheon and Huxter Family. Our little Kelpie pup named Bones joined the team and he is quickly finding his feet. He has some big shoes to fill but I think Marley would be very impressed with his progress.

The last quarter saw some big developments so let’s get started.

What’s Happening In The Economy?

Developed nations still seem to be in a watch and wait mode hanging off every central bank and how they will interpret inflation figures. Interest rates are still one of the topics of economics but most markets are anticipating that we have successfully orchestrated a ‘soft landing’ which means markets believe we will still see some economic growth over the year.

I personally take a slightly different view. I think here in Australia, the impact of interest rates has not come anywhere near it’s full effect. I think the household sector is putting on a brave face with working families who have bought into big housing markets with high debts facing a huge hurdle in front of them. I think we will see a turbulent pre-Christmas run before households really tighten their belt after xmas.

What’s happening in Australian investment markets?

After a really strong start to the year, this quarter has seen some of the volatility we have been warning about. The ASX is down -0.77% for the quarter and whilst it is still up for the year, the markets have lost nearly 3% in the last month. I expect some big swings up and down for the rest of the year with a big focus on earnings season in November. Energy, IT and consumer discretionary are the big performers this year and with health care under performing, there may be scope to re-align positions to take advantage.

Our property market has held out to be relatively resilient in the face of higher rates with the major factor being a reduction in supply and reduced rates entering the market. Builders are still suffering from inflation issues.

What’s happening in global markets?

International markets have had a belter first 6 months of the year but we are seeing some significant drops over the last 3 months. The “Magnificent 7” (Alphabet, Apple, Microsoft, Amazon, Tesla, Nvidia and Meta) all declined and as these seven companies have been a main contributor to growth in the US markets, it has had a significant effect. Inflation mostly remains in a downward trend which is good but with strong labour markets, we likely won’t see interest rates across the world drop any time soon.

What does all of this mean for you?

Overall, this all means that Australia is very close to or at the bottom of the trough of economic growth in my opinion. I think that we will likely see a few more rate rises but the prior year has shown just how strong the economy has been. Now if we move into recession territory, the RBA has plenty of scope to reduce rates again and agitate economic growth.

Get in Touch

As always, if you would like to discuss any aspect of your financial plan or situation please don’t hesitate to get in touch. You can book directly in with us HERE. Check out our other articles for current topics such as how paying your mortgage repayments fortnightly can save you $$$.