Tag Archives: Wealth Accumulation
What to do next if you’re facing redundancy
By Robert Wright /October 16,2020/
Uncertainty around COVID-19 might be increasing your stress levels about losing your job, but here are five ways to soften the financial blow.
In April, Australia hit its highest unemployment rate in five years, and with the Federal Treasurer expecting an unemployment rate of around 10% by the end of the year, many Aussies may be feeling a little uneasy about their future job prospects.
Which sectors have been hardest hit?
COVID-19 has affected all areas of the workforce, but analysis by AMP reveals recruitment, retail and hospitality make up almost half of all early super release withdrawals, suggesting people in these sectors may have been more greatly affected by job losses.
Uncertainty around the reopening of interstate and international borders makes any tourism rebound also hard to predict.
How to get on the front foot with your situation?
It’s important to know that a genuine redundancy payment is made when you’ve been retrenched because there’s no longer a need for the job that you’re doing.
Here are some ways to help make sure you get what’s yours if you’re faced with a redundancy so you can be well prepared for the future.
1. Know what you’re entitled to
What your employer is required to pay you will depend on your conditions of employment, so ask your boss or HR department (which might be easier if you’re still working), or be sure to check your redundancy payment summary carefully to ensure you get what it is you’re owed.
Fair Work’s redundancy calculator (www.calculate.fairwork.gov.au/endingemployment) can help you find what redundancy pay and entitlements to expect. It’s also a good place to find details of pay and conditions if you’re covered by a registered agreement.
Meanwhile, keep in mind that apart from your actual redundancy payment, you may be eligible for things like payout of accrued annual leave and long service leave.
When the redundancy happens, if you’re under your Centrelink Age Pension age (which will be between 65 and 67 depending on when you were born), special tax treatment is also given to genuine redundancy payouts, which means some payments you receive will be tax free up to a certain limit based on your years of service.
2. Sort out your money situation, including benefits and super
The size of your payout may determine the time you can afford to be out of work, what you’ll be able to live on from week to week, along with how you’ll tackle financial responsibilities until you find another job. With that in mind you may want to:
Create a workable budget
You can do this by writing down your daily living expenses, and what you estimate any upcoming bills and loan repayments will total. This way you’ll be across all your outgoings, as well as where you may be able to make minimum repayments and cut back on other forms of spending.
Put your money somewhere useful
It might be tempting to go on a holiday, undertake renovations or pay off all existing debts with your redundancy packet, but if you don’t find work within a certain timeframe, you may leave yourself short.
Think about where you could put your money, still have access to it and potentially reap added benefits. Options may include high-interest savings accounts or a mortgage offset account that allows you to redraw funds while reducing what you pay in interest on your home loan.
Apply for financial hardship with your lenders
If your redundancy payout starts to run out and you’re struggling to make repayments, you may be able to seek assistance from your lenders by claiming financial hardship.
All providers must consider reasonable requests to change their terms in instances where you may be suffering genuine financial difficulties and feel help would enable you to meet your repayments, possibly over a longer period.
Find out if you’re eligible for government assistance
There’s a range of Federal and State government assistance available related to COVID-19. Make sure you’re across these and don’t miss out on support you might be able to access straight away.
These may change as the economy emerges from hibernation, so bookmark the pages relevant to you, in case you’re out of work for longer than you anticipate.
Depending on your age, different benefits may be appropriate at different ages – for instance most workers may look to JobSeeker payments where they’re out of work, while the Age Pension may be more appropriate for older Aussies.
Waiting periods may apply to some benefits, so keep that in mind when it comes to any payout you receive, as you may need it to cover your living expenses for a while.
Loss of a job and income in the family could also mean that you may qualify for Family Tax Benefits, or for a higher rate of payment.
Look into your super situation
See how much money you have in super and think about the effect a break from work may have on your balance.
If you have insurance inside super and are paying premiums with your super money, consider how this may affect your retirement savings if the premiums aren’t being offset by contributions.
You might also be considering early access to super during COVID-19, where the Federal Government is allowing eligible people affected by the outbreak to access up to $10,000 of their super as a tax-free payout between 1 July and 31 December 2020.
There may be short-term advantages to this, but there may also be some disadvantages that you’ll want to make sure you’re across.
3. Create a plan for your return to work
You might have a bit of leeway to take some time off, but when you do look to join the workforce again, a good place to start will be your resume. Make sure your previous roles and responsibilities are up to date and that you’ve listed all your skills and achievements.
In the meantime, set up relevant online job searches, tidy up your LinkedIn profile, touch base with recruiters in your field and don’t be afraid to target companies directly.
4. Contemplate the benefits of training
Depending on whether you want to remain in your industry or make a career change, further training could help you gain new qualifications, keeping in mind this can still cost time and money.
A new education assistance package has recently been made available to help displaced workers upskill and retrain during COVID-19. A number of free online courses are also available from TAFE, while Open University offers a range of short and longer education courses for all levels.
5. Seek further support
There’s a range of support and resources available.
Talk to your financial adviser as they may pick up on things that could otherwise be missed
Check out AMP’s free webinar – Managing through a redundancy
Find a range of articles on AMP’s COVID-19 support hub
Check out our FAQs on ways AMP is helping clients experiencing financial hardship
Seek free financial counselling from the National Debt Helpline on 1800 007 007
Take a look at the government’s Moneysmart website for further financial education.
If you’re finding it difficult to cope and need to speak to someone, there’s a range of mental health and family support services available through:
Beyond Blue – 1300 22 4636
1800 RESPECT – 1800 737 732
Lifeline – 13 11 14
Source: AMP Insights
How to keep your super safe during COVID-19
By Robert Wright /October 16,2020/
If you’re feeling concerned about how the pandemic will affect your super balance, here are our tips to help protect and grow your super.
What can affect my super balance?
In Australia, your employer is required by law to pay a minimum percentage of your eligible income to a complying superannuation fund or retirement savings account. This is known as the Superannuation Guarantee and it’s currently set to 9.5%.
Your super contributions are then invested by your superannuation fund on your behalf, according to your chosen investment options. This means your super is subject to normal market fluctuations.
Your super is also exposed to a range of administrative fees, charges and premiums, which can eat away at your balance if you’re not vigilant.
Isn’t my super protected by law?
You might be surprised to learn that your superannuation savings are not protected by the government.
Last year, the federal government introduced a package of reforms to help stop low account balances from being eroded by unnecessary insurance premiums and fees. This was called the Protecting your Superannuation Package.
However, this protection only applies to accounts that meet certain criteria, such as having a balance below $6000, and not receiving any contributions for 16-months. These inactive or low-balance accounts are transferred to the ATO for administration. You can find out more about the reforms on the ATO website.
For everyone else, it’s up to you to keep an active eye on the health of your super.
So, here are five things you can do to help conserve and grow your superannuation, even during a global economic downturn.
1. Check your superannuation investment options
Because superannuation is a long-term investment, it’s important to check that your selected investment options are right for your age and stage of life.
Taking on the wrong level of risk at the wrong time in your life can erode your super balance. For example, when you’re starting out, there’s more time until retirement to ride out some of the ups and downs that come with higher levels of risk. But as you near retirement, you might want to focus on preserving your superannuation balance.
If you’re not sure how your super is invested, take the time to check your account either online or by contacting your super fund for advice. Be sure to find out whether they charge fees for advice, as these can be deducted from your super balance.
2. Switch to a low-cost superannuation provider
Fees and charges are deducted directly from your account, so they can quickly erode your super balance. Check your statements regularly and make sure you’ve compared your super fund with other providers.
3. Avoid withdrawing your super early
Most people can access their super once they reach the ‘preservation age’, which is between 55 and 65 years old, depending on when you were born.
There are also some special circumstances where you may be able to access your super early, such as severe financial hardship, including COVID-19.
While a cash injection of $10,000 or $20,000 might sound like a welcome relief when you’re struggling to pay your basic living costs, it’s important that you exhaust all other avenues first, because accessing your super early can have a significant impact on your retirement income.
How significant? Well, the FPA estimates, conservatively, every $1000 you have in super at age 30 is worth $4500 by the time you reach 60. Multiply that by $10,000 or $20,000 and you can see what you might be missing from your retirement nest egg.
For this reason, it’s really important to explore other options first and get expert advice from a financial planner before making a withdrawal.
4. Make regular contributions
One of the ways to protect and grow your super balance is to consider making regular contributions. You can do this by salary sacrificing a set amount every week. If that’s not possible, you could consider making extra contributions whenever possible, such as depositing your tax return, gifts or bonus.
5. Get professional advice
You can’t beat professional financial advice to help you reach your retirement goals. A financial planning professional can review your unique situation and goals and advise you on the right investment and contribution strategies for you. They can also advise you on the best forms of retirement income to conserve your super balance.
With the right superannuation investment strategies in place, you’ll be well prepared to weather the economic disruption brought about by COVID-19. It’s worth taking the time now to review and optimise each aspect of your super above to get the most from your investments.
Source: Money & Life
Investing during a recession
By Robert Wright /August 17,2020/
In times of uncertainty, when share markets and interest rates are falling, along with declines in consumer and business confidence, investors often question if their money is safe and if it’s still going to meet their long-term investment goals.
But whether it’s a period of sustained volatility due to a global financial crisis, a medical pandemic, or a recession, the basic rules of investing hold true.
- Set long-term investment goals
- Keep investing (if you can)
- Don’t try and time the market
- Spread your risk through diversification
- Don’t panic
Keep a level head
It’s almost thirty years since Australia last experienced a recession, so for many investors where to put money during a recession isn’t something they’ve had to think about before.
We understand you’re probably concerned about your investments and wondering what to invest in if Australia does enter a recession. Volatility isn’t something investors enjoy. The pain of losing is significantly more powerful than the pleasure of gaining, which makes us more likely to overreact during market downturns than when the market is booming.
To help your investments continue to work hard for you, we’ve outlined four simple strategies you could consider.
1. Invest for the long term
If you’re a long-term investor (with a time horizon of 10+ years), don’t let emotion get in the way of sensible decision making. Selling out of your investments and moving to cash may seem like a safe option, but you’ll potentially be crystallising your losses and missing out on any opportunities that could arise when the market rebounds.
We recommend you seek good advice at the start, so you have a plan to realise your investment dreams, leaving you to get on with enjoying your life. You’re not a professional investor, it’s not what you do for a living, so there’s no need to fear every daily movement in the share market.
2. Try to invest regularly
Volatility doesn’t necessarily result in poor investment outcomes. It can present opportunities. The principle of investing regularly, regardless of whether the market is rising or falling, allows you to buy more of an asset when prices are low and buy less when prices are high.
Known as “dollar cost averaging”, not only will this average out over the long term, resulting in a better average price for the assets, but you’ll also potentially hold more of an asset, which will be beneficial when prices rise again.
3. Be sensible and leave the decisions to the professionals
Market timing is an investment strategy used to try and ‘beat’ the share market by predicting its movements and buying and selling accordingly. It’s the exact opposite of the long term ‘buy-and-hold’ strategy, where an investor buys shares or assets and holds them for a long time, designed to ride out periods of market volatility.
According to Morningstar, investors would need to be correct 70% of the time to get any benefit from an active market timing strategy. This is almost impossible to achieve, even for market professionals. You’re more likely to miss some of the best days of the market rather than picking them correctly.
4. Allow diversification to spread your risk
Not only is it difficult to time the market correctly, but it’s also hard to predict which asset class will perform best in any given year. Last year’s best performing asset class can easily become next year’s worst, or vice versa.
Many investors choose to manage this by diversifying their investments across different asset classes (shares, bonds, cash etc.) and create a portfolio that’s based on their risk tolerance, time horizon and investment goals.
However, it’s important to understand that diversification doesn’t mean you’ll avoid market volatility completely. Even with a well-diversified portfolio, your investments could still potentially experience periods of what you’d probably deem underperformance.
Staying positive during market downturns
The most important thing you can do during market downturns is not panic.
Stay emotionally strong and ensure your investments remain aligned to your investment goals.
Source: BT