Retirement Affordability Index June 2020 - Preparing for disaster

ISSUE 14 JUNE 2020

Retirement Affordability Index

™

Preparing for disaster

How to protect your nest egg – and your life – to limit the damage … next time. www.yourlifechoices.com.au

It’s difficult to be confident in uncertain times.

With less certainty in the world’s financial markets, making sure your money goes the distance is more important than ever.

Take a look at your retirement income with fresh eyes and download Challenger’s Guide to Income in Retirement today.

Visit challenger.com.au/incomeguide to get your guide.

Challenger Life Company Limited ABN 44 072 486 938, AFSL 234670 (Challenger), the issuer of Challenger Guaranteed Annuity (Liquid Lifetime). This information has been prepared without taking into account any person’s objectives, financial situation or needs. Because of that, each person should, before acting on any such information, consider its appropriateness, having regard to their objectives, financial situation and needs. Each person should obtain and consider the Challenger Guaranteed Annuity (Liquid Lifetime) Product Disclosure Statement (PDS) before making a decision about whether to acquire or continue to hold the annuity. A copy of the PDS can be obtained from your financial adviser, our Investor Services team on 13 35 66, or at www.challenger.com.au. All references to guaranteed payments refer to the payments Challenger promises to pay under the relevant policy documents. Neither the Challenger group of companies nor any company within the Challenger group guarantees the performance of Challenger’s obligations or assumes any obligations in respect of products issued, or guarantees given, by Challenger.

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Retirement journey in challenging times The world was caught unprepared when a virus, now known as COVID-19, escaped from Wuhan in China and wreaked havoc in countries across the globe. The challenges continue on many fronts – and will for decades: for fearful citizens, especially those most at risk, for businesses big and small and for federal and state governments digging deep to keep the hits to the economy as controlled as possible. Scientists say there will be another pandemic, so how can we best prepare? That is the purpose of this June edition of YourLifeChoices’ quarterly Retirement Affordability Index: Preparing for disaster. We hope the information in these articles, written by financial and legal experts, gives you a head start so you can prepare or settle back into retirement with as much confidence as possible.

Contents Published by: YourLifeChoices Pty Ltd Publisher: Leon Della Bosca Editor: Janelle Ward Copy Editor: Dairne John Writers: Matt Grudnoff, Noel Whittaker, Jeremy Duffield, Russell Markham, Adeline Schiralli, Janelle Ward Cover Design: Leon Della Bosca Designer: Word-of-Mouth Creative Email: admin@yourlifechoices.com.au Web: www.yourlifechoices.com.au Phone: 61 3 9081 9997 All rights reserved, no parts of this book may be printed, reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, recording or otherwise, without the permission in writing from the publisher, with the exception of short extractions for review purposes.

IMPORTANT DISCLAIMER No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publication is distributed on the terms and understanding that (1) the publisher, authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, financial, professional or other advice or services. The publisher and the authors, consultants and editors expressly disclaim all and any liability and responsibility to any person, whether a subscriber or reader of this publication or not, in respect of anything, and of the consequences of anything done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no publisher, author, consultant or editor shall have any responsibility for any act of omission of any author, consultant or editor.

Copyright: YourLifeChoices Pty Ltd 2020

Janelle Ward, YourLifeChoices editor

COVID-19 ushers in uncertainty Survey reveals we’ve had a major rethink about our retirement savings

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How changes in living costs affected you ‘Affluents’ untouched, ‘Cash-Strapped’ bear the brunt

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Budget your way to confidence Use our budget planner to get your finances in order

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A pandemic, a recession and deflation Australia Institute senior economist Matt Grudnoff explains what it means for retirees

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There’s worse to come Personal finance specialist Noel Whittaker tells how you can best prepare for more challenges

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Investing with purpose Financial services executive Jeremy Duffield outlines the pros and cons of two very different investment strategies

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When the market turns nasty Analyst Russell Markham reveals how he has learnt to read the markets and weather the bad times

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Estate planning is a priority 18 Estates specialist Adeline Schiralli tells how to get your affairs in order – and keep them that way Government update 20 Support payments, Age Pension updates, robodebt refunds, free travel and more

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YourLifeChoices Retirement Affordability Index™ June 2020

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COVID-19 ushers in new period of retirement income uncertainty A survey of YourLifeChoices members reveals a major rethink about retirement savings as a result of the coronavirus pandemic. Challenger presents the key findings.

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recent survey of more than 3000 YourLifeChoices members shows that falling equity markets have triggered a rethink about retirement savings.

Based on the first five months of the year, 2020 will be unlike any other. While the immediate impacts of the coronavirus pandemic have been felt by many, the secondary effects of falling world share markets and financial uncertainty have weighed on the minds of respondents to this year’s survey.

The April 2020 Ensuring Financial Security in Retirement survey provides a unique insight into the thoughts, concerns and hopes of retirees across Australia. The resilience of retirees is evident, and it’s encouraging to see they are still feeling confident about their futures, albeit cautiously.

The survey focused on three key areas: the impact of share market falls on savings, where financial advice is sought (and most valued) and, finally, whether retirees have fallen into any common income planning traps, such as over-confidence or aversion to loss.

Key findings The No.1 financial concern for retirees now is losing their savings as share markets fall According to the survey, shares were again the best performing investment asset. However, an increasing number of respondents also nominated equities as their worst performer, highlighting fears that investing in shares alone won’t always be enough to fund retirement.

Many believe that superannuation can provide guaranteed income for life, indicating that many don’t understand how super works in retirement.

While super is designed to pay income for life, it is highly dependent on markets and drawdown amounts. Only lifetime annuities and the Age Pension can offer a retiree guaranteed income for life.

People are worried about the impact of markets on their savings (after the event) The market volatility of early 2020 has reminded people that investing is not always a one-way bet. In the April 2020 survey, for the first time, the top fear among retirees was losing their retirement savings because of a fall in the market. It was the top-rated concern across all respondents and a total of 41 per cent said it was one of their top three financial concerns for retirement. Comparatively, in May 2019, market falls was the fifth most common concern.

Figure 1 details the changes in retiree concerns between 2019 and 2020. Worries about paying for long-term care remained relatively high, but the previous concerns over sustaining a comfortable retirement have declined. Broader concerns around living standards have all fallen, possibly as a result of the impact of self-isolation or because people are more worried about the falling market.

Living standards under the lockdown might be challenging retirees’ definition of ‘comfortable’ as they adjust to a ‘new normal’ that likely involves fewer social engagements, recreational activities and holidays.

Figure 1: The key concerns of older Australians

85 per cent of retirees receiving advice from a financial adviser have been happy or very happy with the advice People value a good financial adviser, and those who use one understand the importance of financial advice. However, almost half of those surveyed did not receive financial advice and were also less likely to value advice from their super fund.

More than 40 per cent of people incorrectly believe that super offers guaranteed income for life 4

YourLifeChoices Retirement Affordability Index™ June 2020

The sharp increase in concerns over share market losses is reflective of the popularity of shares as an investment and source of retirement income. Share ownership increases with wealth, and a majority of the people who responded, and have more than $300,000 in total savings, reported holding shares.

More people have cash accounts, but otherwise shares are the most popular investment.

The popularity of shares was also reflected in a question on the best-performing investment, which is shown in figure 2.

Figure 2: Perception of best-performing investment

the small number of life insurance investors rated it as a high-performing investment.

Loss aversion One of the most intriguing issues of financial behaviour is the impact of loss aversion. The research shows that people dislike a loss more than twice as much as they like an equivalent gain. This aversion was evident in the way people reacted to recent share market volatility.

People concerned about the impact of share market falls, or not earning enough income, were also the happiest with the amount of income they have for retirement. Presumably, this was before the fall in markets, which has made them concerned that their income might not last.

Concerns over market volatility were also related to wealth. People with more savings tend to have more income for retirement and a greater chance of being happy with that income. Loss aversion is highlighted in the fear of losing some of that wealth or income.

This has been an issue for self-funded retirees, as the impacts of the COVID-19 pandemic include dividend cuts and low interest rates impacting their income in retirement.

Shares were considered the best-performing asset, just edging out cash accounts, even despite the recent volatility. The responses also highlighted investors’ passion for property. While a smaller proportion (19 per cent) of investors hold investment properties, in part due to the amount of money needed to buy an investment property, they viewed the performance favourably.

Almost three-quarters (14 per cent of the total) of investment property holders rated this as their bestperforming investment, compared to 55 per cent (22 per cent of the 40 per cent) of share investors.

Maybe that’s why you hear more about property around the barbecue. You don’t usually hear people talk about life insurance options. Only a minority of

At the other end of the spectrum, concerns about having money for an emergency fell as wealth increased. This concern was greatest for those with more limited wealth.

Retirees who are just getting by are more worried about being able to deal with the unexpected expenses that occur through retirement.

For the full report, and for information about setting up guaranteed income for life to help cover your living costs, visit challenger.com.au or speak to your financial adviser about Challenger lifetime annuities.

Methodology: The Financial Security in Retirement survey was conducted by YourLifeChoices in partnership with Challenger Limited in April 2020. The survey was conducted using SurveyMonkey and sent to YourLifeChoices’ database of 230,000 Australian members aged 50-75 years. The survey received 3007 responses to 41 quantitative and qualitative questions.

YourLifeChoices Retirement Affordability Index™ June 2020

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Affluents cruise, Cash-Strapped bear brunt of increases

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everal unusual factors affected prices in the March quarter. COVID-19 did have some impact, but shutdowns didn’t really begin until mid-March, which means only two weeks of the three-month quarter were affected. COVID-19 will have a very large impact on the next quarter (June 2020). However, bushfires raged through January and the drought continued to have an effect.

The biggest change in costs for the quarter were in food and non-alcoholic beverages, driven by a 6 per cent increase in fruit and vegetables and a 2 per cent increase in meat and seafood. The bushfires and drought had some effect, as did COVID-19 because, during the panic buying of essential products towards the end of the quarter, stores stopped discounting items.

The other big increase was in health, with 5.1 per cent increases in pharmaceutical products and

Weekly expenditure for retirees aged 54+ Expenditure items Housing As a percentage of expenditure Domestic fuel & power As a percentage of expenditure Food & non-alcoholic beverages As a percentage of expenditure Alcoholic beverages & tobacco products As a percentage of expenditure Clothing and footwear As a percentage of expenditure Household furnishings & equipment As a percentage of expenditure Household services & operation As a percentage of expenditure Medical & health care As a percentage of expenditure Transport As a percentage of expenditure Communication As a percentage of expenditure Recreation As a percentage of expenditure Education As a percentage of expenditure Personal care As a percentage of expenditure Miscellaneous goods & services As a percentage of expenditure Total weekly expenditure Total monthly expenditure Total annual expenditure 6

Affluent Couples

1.1 per cent increases in the cost of medical and hospital services. Transport costs fell 1.9 per cent, driven by a 6 per cent reduction in automotive fuel.

That’s a big drop, but fuel is still 5.9 per cent higher than it was a year ago. Recreation fell 1.7 per cent, driven by falls of 3.1 per cent in domestic holidays and 3 per cent in international holidays.

The impact on our tribes was quite different this quarter. Most affected were Cash-Strapped Couples and Singles, who saw an increase in their cost of living of 0.4 per cent, while Affluent Couples saw no change.

This is because Cash-Strapped tribes spend a larger proportion of their income on food (which increased), while Affluent Couples spend a larger proportion on recreation and transport (both fell). Constrained tribes’ cost of living increased 0.3 per cent.

Matt Grudnoff, senior economist, The Australia Institute

Constrained Couples

Couple Couple homeowners homeowners with private on Age income Pension $183 $108.16 12% 13% $45.39 $34.09 3% 4% $247.75 $174.49 17% 21% (-1%) $55.36 $28.94 4% 3% $30.81 $17.49 2% 2% $72.52 $31.47 5% 4% $42.85 $30.31 3% 4% $149.35 $106.45 10% 13% (+1%) $194.70 $126.39 13% 15% $35.01 $24.81 2% 3% $296.79 $100.79 20% 12% $0.62 $0.22 0% 0% $29.72 $18.03 2% 2% $90.11 $48.59 6% 6% $1,473.98 $850.25 +$0.74* +$2.52* $6,387.25 $3,684.42 +$3.21* +$10.91* $76,647.01 $44,212.98 +$38.54* +$130.90*

YourLifeChoices Retirement Affordability Index™ June 2020

CashStrapped Couples Couple who rent on Age Pension $204.85 29% $35.99 5% $157.78 22% $46.95 7% (+1%) $9.25 1% $19.14 3% $16.37 2% $36.86 5% $60.09 8% (-1%) $26.85 4% $65.53 9% $0 0% $12.53 2% $24.30 3% $716.51 +$3.17* $3,104.87 +$13.71* $37,258.44 +$164.53*

Affluent Singles

Constrained Singles

CashStrapped Singles

Single Single Single who homeowner homeowner rents on Age with private on Age Pension income Pension $122.96 $90.75 $161.38 15% 19% 36% $32.83 $29.38 $24.94 4% 6% 6% $124.47 $87.49 $78.40 15% 19% (+1%) 17% $28.60 $16.66 $23.09 3% 4% (+1%) 5% $20.50 $8.89 $7.33 2% 2% 2% $39.69 $18.43 $14.70 5% 4% 3% $38.66 $21.85 $11.61 5% 5% 3% $85.75 $37.98 $22.47 10% 8% 5% $103.14 $52.60 $35.47 12% (-1%) 11% 8% $33.88 $17.49 $13.65 4% 4% 3% $138.23 $52 $31.38 16% (-1%) 11% 7% $0.13 $0.12 $0.01 0% 0% 0% $18.51 $9.77 $8.66 2% 2% 2% $54.69 $26.62 $16.58 6% 6% 4% $842.04 $470.02 $449.68 +$1.19* +$1.56* +1.86* $3,648.84 $2,036.74 $1,948.63 +$5.15* +$6.74* +$8.06* $43,786.08 $24,440.92 $23,383.52 +$61.84* +$80.52* +$96.69*

*Percentage and dollar changes compared with December quarter figures

Retirement tribes explained Affluent Couples and Singles Homeowners with private income.

How does your spending compare?

Constrained Couples and Singles Homeowners on full or part Age Pension.

Expenditure items

Affluent Couples

Constrained Couples

CashStrapped Couples

Cash-Strapped Couples and Singles Renters on Age Pension.

Affluent Singles

Constrained Singles

CashStrapped Singles

Housing Rent, interest, home repairs and maintenance & body corporate fees As percentage of expenditure Domestic fuel & power Electricity, gas & oil As percentage of expenditure Food & non-alcoholic beverages Includes meals in restaurants As percentage of expenditure Alcoholic beverages & tobacco products Alcohol consumed at licensed premises As percentage of expenditure Clothing and footwear Dry cleaning, repairs & alterations As percentage of expenditure Household furnishings & equipment Outdoor furniture, floor and window coverings, linen and bedding, appliances, glassware, tableware and cutlery, tools & mobile phones As percentage of expenditure Household services & operation Cleaning and garden products, phone charges (including mobile), pest control & home cleaning services As percentage of expenditure Medical & health care Health insurance, doctor and dental fees, medicines and pharmaceutical products, prescriptions & hospital and nursing home charges As percentage of expenditure Transport Purchase, maintenance and insurance of vehicles, fuel & public transport fares As percentage of expenditure Communication Spending on telephone (including fixed line and mobile) Spending in internet services As percentage of expenditure Recreation AV equipment including TVs and pay TV, books, newspapers and magazines, camping and fishing equipment, sports equipment, internet charges, holidays & animal expenses As percentage of expenditure Education Primary and Secondary school fees (including school sport fees) TAFE and University fees (including HELP) Fees to all other private education institutions As percentage of expenditure Personal care Toiletries, cosmetics & hairdressing As percentage of expenditure Miscellaneous goods & services Stationery, watches and jewellery, interest payments on credit cards and all loans (excluding home loans), education, rates and charges on investment properties, accountant and tax fees & cash gifts As percentage of expenditure Total weekly expenditure Total monthly expenditure Total annual expenditure

YourLifeChoices Retirement Affordability Index™ June 2020

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Is deflation good news for your living costs?

A pandemic, a recession and deflation … what does it all mean for retirees? Matt Grudnoff, senior economist with The Australia Institute, explains.

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ith the economy shrinking, there has been talk about deflation. Deflation is where average prices go down, not up. You might think that deflation is good for people’s cost of living. If the products you’re buying are going down in price, that’s a good thing, right?

Next quarter’s CPI will capture a full three months of the pandemic shutdown and that has had a big effect on some prices. This means that the CPI and our Retirement Affordability Index might be a less accurate measure of inflation.

Again, it depends. First, some retirees’ incomes are safe, others are not. If you get most of your income from superannuation or other investments, then you’re at risk of going down in a recession. Business profits are likely to fall, and even rents will be under pressure to drop. Either retirees will need to use up more of their savings to maintain their income or they will have to take a cut to income.

households to find a spending pattern that more closely matches their own and thus gives them the most accurate inflation rate.

That’s because the increase in prices that you Well the standard answer from an economist is, face is dependent on the sorts of things you buy. ‘that depends’.

For example, if one household spends more on health and another spends more on transport, and Deflation occurs when the economy is doing very healthcare and transport go up at different rates, badly. We have Consumer Price Index (CPI) data then those households will have different inflation going back to 1948 and over those 70-odd years rates. If health goes up faster than transport, there have been only 10 quarters of deflation. then the health household is Almost all were when the more likely to have a higher economy was in recession. inflation rate than the transport But there is a problem at Deflation often happens when household. a significant proportion of the heart of all attempts businesses are worried they’re Of course, it will also depend to measure inflation and going to lose customers and start on all the other things the cutting prices in order to limit the household buys. Every cost of living. losses. household spends its money on different things. Your If deflation happens mainly during household’s inflation rate will be recessions, then it is also happening when people higher if you spend more on things that are seeing are losing their jobs. Things might cost less, but large increases in prices and your inflation will be fewer people have income to make purchases. less if you’re spending more on things that aren’t increasing as much.

But if you’re a retiree and your income is largely shielded from falls, such as someone on an Age The Retirement Affordability Index – and its six tribes Pension, are you better off? with six different spending patterns – allows retired

Second, measures of inflation work best when people’s spending doesn’t change radically. The problem with a recession, and particularly for one caused by a pandemic lockdown, is that many people’s spending patterns have been upended.

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But there is a problem at the heart of all attempts to measure inflation and cost of living. The measurements become less accurate if there is a sudden change in households’ spending patterns and the changes in spending are on items that have seen big changes in price.

The COVID-19 lockdown has changed spending patterns. People stuck at home are spending less on eating out at restaurants, but more on takeaway foods. People are spending less on entertainment

YourLifeChoices Retirement Affordability Index™ June 2020

that involves going out, such as movie tickets, but more on entertainment that involves staying in, such as jigsaw puzzles. And because people are going out less, they’re spending less on transport.

People are spending less on transport all over the world. More people are working from home and not going out to see family and friends. This has pushed down world oil prices, which in turn has led to a big fall in petrol prices. In some places in Australia, they’ve fallen below a dollar a litre.

The table below shows the proportion of total spending that each tribe makes on transport.

Transport includes such things as fuel, the purchase and maintenance of a vehicle, as well as bus, train and taxi expenses.

Tribe

Proportion spent on transport

Cash-Strapped Couples

8.2%

Cash-Strapped Singles

7.8%

Constrained Couples

14.6%

Constrained Singles

11.0%

Affluent Couples

12.9%

Affluent Singles

11.9%

Ordinarily, lower petrol prices help to contain living costs, but that is only the case if you continue to use your car as normal. With the lockdown in place, people have been going out less often, so the proportion of their spending on transport has

gone down. But the Retirement Affordability Index doesn’t account for this. If instead of spending on transport, households spent more on other things that didn’t fall in price, then the index would show a bigger decrease in their cost of living than was actually the case.

So why not just adjust the Retirement Affordability Index for the new spend on transport? The problem with that is we don’t have up-to-the-minute data on exactly how much households spend on different things. We use Australian Bureau of Statistics (ABS) data from the Household Expenditure Survey and that comes out only every five years.

There is another price change that will have a big impact on the CPI – childcare – but that will not impact our tribes.

The outcome of all of this is that next quarter we might see a big fall in the cost of living for each of our tribes, but because of the chaos of the recession and how we measure inflation, the real impact on cost of living might be smaller than the Retirement Affordability Index shows. The same will be true of the official CPI inflation numbers. The drop in inflation won’t be as big as the numbers show.

DISCLAIMER: All content in the Retirement Affordability Index™ is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance.

Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

YourLifeChoices Retirement Affordability Index™ June 2020

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Be prepared: things will get worse before they get better

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Get ready for more challenging times, says personal finance specialist Noel Whittaker, who offers these insights into how older Australians should prepare.

une 2020 was the month when Australia officially entered recession, but given that the numbers were based on data for the quarter ending 31 March, expect the figures from the quarter ending 30 June to be much worse. That’s when we’ll all suffer the brunt of the COVID-19 lockdowns.

Remember, ‘holidays’ are not gifts. Even though the banks are happy to waive six months’ interest repayments – during which time borrowers will be charged interest on interest – normal repayments will almost certainly be required when the holiday ends.

We were all shocked by how fast stock markets fell, heartbroken by the queues at Centrelink offices and frustrated at being confined to our homes.

Unfortunately, we humans have short memories – we are now enjoying the stock market bounce, loving the fact that many of the restrictions have been lifted and looking forward to life returning to normal.

The COVID-19 crisis, and all its associated damage, is further widening the gap between savvy money managers and those who live for the moment.

The opportunity to withdraw up to $10,000 from superannuation in the 2019-20 financial year and again in 2020-21 is a great example.

Some of our biggest sources of employment are in sports and the arts, but large events such as football matches won’t work well as long as social distancing is enforced and numbers are restricted.

It’s the same with limits on clubs and restaurants.

And, of course, the biggest loser is the tourism industry, which absolutely depends on both local and international borders being freed up. At the date of writing, interstate travel was still a controversial topic and international travel is certainly at least a year away. Unemployment will continue to be widespread in these areas.

The next issue is government budgets. Both federal and state governments have been throwing money at the crisis. Eventually, the cost of doing so will be immense. To make matters worse, income tax receipts are going to be way down. Most professionals I know have had their income fall by at least 35 per cent, a lot of landlords have been receiving no income at all, and many employees scraped by on JobKeeper.

And it gets worse. In September, JobKeeper is set to finish up, JobSeeker payments return to preCOVID levels, loan repayment holidays will end and concessions such as the payroll tax holiday for businesses will be no more.

Unemployment will continue at record levels, many businesses will close down, never to reopen, and government budgets will be under serious pressure due to a combination of declining tax receipts and the cost of the stimulus packages.

A friend tells me his 55-yearThe COVID-19 crisis, and all its old house cleaner withdrew Well, normal may be a long $10,000 just to accessorise associated damage, is further way away yet. Despite the his motor vehicle, and a car welcome announcement widening the gap between savvy dealer who specialises in that homeowners doing cheap used cars tells me the money managers and those who under-$10,000 market has renovations and some home builders will get help from the never been busier. Think of live for the moment. government, the building trade the long-term implications of is in serious trouble, with a this – taking money that was massive drop in demand predicted as immigrant quietly growing in a low-tax area just to get some numbers tumble. cash for consumer spending.

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When you take all the above into account, the inescapable conclusion is that things will get worse before they get better.

YourLifeChoices Retirement Affordability Index™ June 2020

I guess the only good news for borrowers is that interest rates will stay at record low levels, which gives them the perfect opportunity to get way ahead on their loan repayments. This is not a time for rash spending – it’s a time to hunker down and get your finances in order, to build the safety buffer that you may well need.

Earnings from super and shares A feature of the COVID-19 crisis has been the volatility of stock markets. In the last week of May, we saw bank shares rise more than 8 per cent in a single day and, by the end of the first week in June, the Australian stock market was up 31 per cent from its low point for the year – 23 March.

This proves the folly of trying to time the markets.

During the early part of March, I was bombarded with emails either asking whether it’s appropriate to move your superannuation to cash immediately, or else to say they had already done that, and were waiting for a clear signal to move it back when the downturn was ‘over’.

Anybody who invests in shares should understand that timing the market is an impossibility, and it’s made much more difficult by the fact that the biggest upturn usually comes very rapidly after the biggest downturn. Unfortunately, in these present uncertain times, many long-term investors start to behave like traders, and decide to cash in a lot of their investments once they start to fall in value.

Their reasoning is that they will come back into the market when the recovery is up and away. There is one major flaw in that thinking – by the time they believe the market has turned, it’s too late.

Warren Buffett put it perfectly: “If you wait for the robins to appear, spring will be over.”

The Age Pension might kick in sooner rather than later Thanks to the coronavirus crisis, there have been some benefits to pensioners. These include cash payments of $750, and a reduction in the deeming rates that came into effect on 1 May. Although deeming rates affect only income-tested pensioners, it may mean that certain people who are not pensioners are now eligible for the Commonwealth Seniors Health Card (CSHC).

The criteria are simple. You must be of Age Pension age but not eligible to claim an Age Pension, and you must pass an income test. There is no assets test. The amount of income you can have and be eligible for a CSHC is $55,808 per year if you are single, $89,290 per year (combined) for couples and $111,616 per year (combined) for couples separated due to ill health or respite care.

Thanks to the latest changes in the deeming rates, a couple with almost $4 million in financial assets may be eligible for the CSHC and all the benefits that go with it.

YourLifeChoices Retirement Affordability Index™ June 2020

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pension by almost $12,000 a year. Just bear in mind it would take 12 years to recover that expense by way of increased pension, so people thinking of using this strategy should ensure that it adds value both to their home and to their lifestyle.

And be aware that certain eligibility criteria apply before getting too enthusiastic about it.

One item on the agenda is scary for retirees.

There is now a push to replace stamp duty with a universal land tax on the family home. Will this mean that retirees will face an extra outgoing for their property, on top of the normal rates and maintenance? If so, will it be treated like Labor’s plan for franking credits and exempt pensioners?

Or will the system once again be skewed so that getting a part Age Pension is more important than being self-sufficient? Watch this space and be on your guard.

Real estate implications for owners and investors The easy way to check if you qualify, is to go to my website and use the deeming calculator. You will discover that assets of $2.5 million for a single person will provide a deemed income of $55,214 a year, which is just under the cut-off point, and for a couple it is just on $4 million.

The obvious question is whether the CSHC is worth having. It varies somewhat from state to state, but one benefit to all holders is that medicines listed on the Pharmaceutical Benefits Scheme (PBS) are supplied at the concessional rate. Once you reach the PBS safety net, you will usually be supplied further PBS prescriptions without charge for the remainder of the calendar year.

It may also be possible to save on your medical consultations if your doctors are happy to bulk bill.

And, depending on where you live, there could be a regional travel card and a rebate on your energy costs.

The cream on the cake is that applicants who receive the card before 10 July will receive a oneoff $750 stimulus payment. If the economy tanks in October – as many economists are predicting due to the planned cut-off of JobKeeper, the JobSeeker changes and the end of all the repayment holidays – there may well be more stimulus payments.

Pensioners who are assets tested, and who are keen to renovate, could take advantage of the government’s renovation package, HomeBuilder, and spend $150,000 to improve their homes.

Because home renovations are not assets, the expenditure of $150,000 could increase their 12

Interest rates are at record lows, but evidence suggests that demand for loans is not strong, and the banks are applying stricter lending criteria in view of the uncertainty of employment. Also, given that many people who may have moved house will now decide to stay and renovate, it’s hard to be optimistic. But, of course, having said that, there is a basic investment principle that it’s never a bad time to grab a bargain.

So, if property is your thing and something great comes your way, it could be well worth investigating. But retirees should be aware of the limitations that go with the lack of liquidity in property. Just this month, I spoke to a couple with $2 million worth of non-residential property. These properties are now vacant, yet they are still liable for ongoings such as land tax and rates, and can get no benefits from government because they are way over the assets test.

Let’s face it, the demand for vacant non-residential properties is very small, and you can’t sell half a shop. In contrast, many shares offer franked dividends, the income usually continues irrespective of the value of the share, and there is never a bill for upkeep.

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. For more information, visit his website noelwhittaker.com.au DISCLAIMER: All content in the Retirement Affordability Index™ is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance.

Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

YourLifeChoices Retirement Affordability Index™ June 2020

What COVID-19 has taught us about investing for retirement income Financial services executive Jeremy Duffield tells how ‘two couples’ weathered the pandemic and what we can learn from their strategies.

I

t had been more than 10 years since the bottom of the market in the global financial crisis (GFC) and it looked as if the bull market would just keep on going. Share markets around the world were booming to record highs well into February and then, ‘kaboom!’, the coronavirus was recognised as a global pandemic, lockdowns began and share markets plummeted. Australian shares overall dropped 37 per cent from high to low, in less than a month.

For anyone with a substantial share market investment or a growth-oriented super fund, the decline in value was fast and deep.

Case study: The Bears and the Goldilocks

To illustrate, let’s look at two retired couples and examine their choices. See how they did during the pandemic – but also before and after.

We’ll start with the Bears, Ben and Belinda. They’re both 70, held $500,000 in cash in February, owned their home, and on a part Age Pension. They’d gone conservative five years before, taken their money out The Bears looked like the of super and put it into a cash account when they retired winners – no losses in the at 65. They were not too pandemic. The Goldilocks comfortable with the share market and wanted ‘safety’. took a big hit to their assets. their Age Pension But were the Bears really better Between and their assets, they’d positioned? hoped for a $50,000 annual income.

Were Australian retirees’ portfolios positioned too aggressively going into the pandemic? Did we get too greedy thinking good times would roll on and so position our portfolios too heavily in growth assets for retirement income?

What has been the impact of COVID-19 on Australian retirees? And what do we learn about setting up our retirement portfolios for anything that might happen in future? How worried should retirees be? Does a 37 per cent drop in share markets mean a 37 per cent drop in retirement income?

Retirement Essentials’ research shows that retirement incomes are usually much more stable than investment markets. Forecasts based on thousands of simulations revealed that if you receive the Age Pension, your sustainable level of retirement income is really quite steady.

Furthermore, even if you weren’t on the Age Pension and were 100 per cent invested in shares, your retirement spending doesn’t have to fluctuate as much as the market.

The Bears sailed through the pandemic. Their portfolio of deposits didn’t flinch when markets plummeted in March. They breathed easily, barely noticing that their interest income had dropped again as banks cut their deposit rates after the Reserve Bank reduced official interest rates.

By contrast, their friends, Jenny and George Goldilocks, were the same age and had the same $500,000 in assets, but they’d kept their money in superannuation – in a growth portfolio (80 per cent shares). They hadn’t actually looked at it, just left it there, and started to take out the money to supplement their part pension.

The Goldilocks found that their growth portfolio declined by 15 per cent, or about $75,000. Did they have to drop their retirement spending 15 per cent, too? As they, like the Bears, were targeting $50,000 in spending, that would have been a drop of $7500 per year.

YourLifeChoices Retirement Affordability Index™ June 2020

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No, they didn’t have to do anything quite so drastic.

First, the Goldilocks began receiving a higher Age Pension rate. Due to the taper rate that goes with the means test, a $75,000 decline in their portfolio would result in an Age Pension increase of $78 per year per thousand dollars of reduced assets – or $5850 per year. That increase would offset a huge amount of any decline they might expect in drawdowns from their super assets.

Second, the Goldilocks could reasonably expect their super to recover over time – that is to have higher expected returns going forward since the values were reduced so much. As long as they didn’t have to sell large parts of their portfolio to fund their retirement, they could expect to keep drawing good funding from their super and be supported by the Age Pension.

Who had the better strategy?

The Bears looked like the winners – no losses in the pandemic. The Goldilocks took a big hit to their assets. But were the Bears really better positioned?

Let’s extend the story to consider before and after.

Five years ago, the Bears actually began their retirement with more money in super than the Goldilocks. But because they put their money in cash and interest rates have been so low (less than 2 per cent), they had to use quite a bit of capital to supplement their Age Pension to fund their target spend. The Goldilocks had less to start with, but had earned considerably more on their growth super investments and were able to catch up to the Bears

by February 2020.

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When the stock market bit in March, the Goldilocks looked bad on paper (a 15 per cent decline in their portfolio), but the Age Pension really helped buffer their income prospects.

Who will look better five years from now? The Bears’ reliance on cash investments, with interest rates now around 1 per cent, will give them little chance to keep up with inflation. They’ll have to draw down significant amounts of their deposits, while their part Age Pension will rise to offset that somewhat.

The Goldilocks, meanwhile, have a reasonable chance to regain their lost assets and keep earning mid-single digit percentage returns beyond that (i.e. returns well above cash rates). But, as their assets recover, their Age Pension income may decline or not rise as much as the Bears’, who’ll become increasingly dependent on the Age Pension.

Here are some reasonable retirement income forecasts for the Bears and the Goldilocks – both before and after the COVID shock. How much are they likely to be able to spend and not run down to just the Age Pension with a planning horizon till age 100?

Bears family

Goldilocks family

Likelihood income will last to 100?

Before COVID

After COVID

Before COVID

After COVID

Highly likely

$48,100

$48,400

$47,400

$48,400

Likely

$50,600

$51,200

$52,300

$52,300

Somewhat likely

$52,600

$53,200

$56,600

$55,400

YourLifeChoices Retirement Affordability Index™ June 2020

The results forecast what the couples might be able to spend based on different market results given the two couples’ asset allocations. The ‘highly likely’ result shows the level of spend possible even in poor investment markets. The ‘likely’ shows the results in the worst 25 per cent of market scenarios and the ‘somewhat likely’ the results in the average market.

What is clear is that forecasts before and after the COVID shock aren’t too different for each couple.

In very poor markets, the Bears hold up, but in better markets, the Goldilocks, with their higher allocation to growth assets do better by taking more investment risk.

Conclusion Our two couples took different portfolio paths to target a similar retirement income, reflecting their different attitudes and the Goldilocks’ sheer inattention. The Bears’ approach was probably not the best approach; being all in cash at a time when interest rates were at record lows – below the inflation rate – and typically not a good idea for funding retirement.

The Goldilocks, on the other hand, decided March’s 15 per cent drop was a bit of a shock and beyond their risk tolerance. And they remembered the family motto: always look for the ‘just right’.

Jenny and George would now be rethinking their portfolio choices. Is their growth super fund too risky at their age and stage? Should they go a bit more conservative as they get older? Should they consider an investment in a lifetime annuity to lock in some income above and beyond the Age Pension? And should they switch from their accumulation super to an account-based pension with tax-free earnings?

The lesson this example offers is that, for most Australian retirees, the impact of down markets on retirement incomes ends up being much less than initially feared – for several reasons.

1. Most retirees get their income from a number of sources • The foundation layer for 70 per cent of retirees is the Age Pension.

• The Age Pension is rock solid as a source of income with a government guarantee and twice-yearly increases tied to living costs.

• For part pensioners, the Age Pension acts as a ‘buffer’ during bad times. Declines in asset values can translate into increases in the Age Pension due to the taper rate, which gradually decreases/increases your Age Pension benefit the higher/lower your assets are. So, lousy markets have led to higher pensions for many part pensioners.

• The next layer is typically a super account or an account-based pension. Members have choice on what investments to use, but many continue in growth-oriented investments.

• Other investments, including shares, bonds, investment property and cash.

2. Share markets tend to revert back after losses, eventually • As the economy gets over its difficulties, growth begins again, and profits and dividends rise, along with confidence and hopes. So, retirement incomes look better again.

3. Fixed income investments act differently to shares • So holding a mix of bonds and cash along with shares reduces the risk of the overall portfolio.

Moral Most retirees should diversify, ignore the short-term noise of markets as much as they can, and not take more investment risk than they’re comfortable with, while recognising that taking some investment risk can be rewarded over time with higher incomes.

Jeremy Duffield is a senior executive in the Australian and international financial services sectors. He is the chairman of Retirement Essentials, which assists people to apply for the Age Pension, and of SuperEd, which is focused on helping super fund members plan for their retirement.

DISCLAIMER: All content in the Retirement Affordability Index™ is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance.

Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

YourLifeChoices Retirement Affordability Index™ June 2020

15

How to protect your portfolio when the market turns nasty Could we have foreseen the devastating effects of COVID-19?

Could we have prepared better? Financial analyst Russell Markham tells how he weathers such storms.

C

ould you have foreseen the spread of COVID-19 back in January this year and the impact it would have on the market?

I, for one, could not. In fact, I haven’t met anyone who clearly saw the disaster coming. It was a totally unpredictable event.

Over the years, we have seen time and time again, companies with falling earnings result in falling share prices.

There were warnings of a pandemic. Bill Gates briefed US President Donald Trump back in 2016 about that very likelihood. But did anyone really take any notice? Is it not fair to say that a pandemic is always a threat and the possibility is always out there, along with fires, floods, earthquakes and the like?

The key is to know when such an event is likely to take place and prepare accordingly.

Unless you are watching every news item closely and constantly living your life in anticipation of the next market disruption, how do you protect your portfolios for an unforeseen market disruption?

One way I like to keep my portfolio safe is to look at what my stocks’ earnings are doing. Companies that are growing their earnings, year in and year out, are companies that are more likely to weather storms and give me more time to move to the sidelines, if required. Take for example Northern Star Resources:

A lot of share investors note: “I do not want to sell my stocks as I need the dividends and franking credits.” At VectorVest, we never advocate a buy, hold and hope-type strategy. Such a strategy can result in significant losses. However, we do appreciate the need for retirees to earn dividends and franking credits.

As such, which types of companies will typically pay consistent dividends? Are these companies earning more and more money each year, or are they losing more and more money each year? A rhetorical question, right?

We want to back companies that have a track record of making more money each year. In addition, we would no doubt like companies that are paying more and more dividends each year.

Finally, our last key requirement is to find companies that are growing their earnings each year, because they are likely to be companies growing their dividends and share prices.

The blue area line represents the earnings for Northern Star Resources. Rising earnings, rising share price. Now if an unforeseen event takes place, would you rather have a set of shares in your portfolio with rising earnings or a set of stocks with falling earnings?

Case in point, look at the earnings profile for Reece Ltd. 16

YourLifeChoices Retirement Affordability Index™ June 2020

Take the example of National Australia Bank.

For many months now, its earnings profile has deteriorated. As a result, the dividends were cut.

This is a pattern that plays out time and time again What other proactive measures could we have taken to protect ourselves in an uncertain market?

Here are three additional measures:

Apply ‘stop losses’ But, you say, stop losses will potentially sell my shares and I will not get my dividends. Yes, that could happen, but what if your stock drops by more than your dividends? Then you will have lost more than you made.

Chances are, without stop losses, you will lose significantly more than you will make from dividend and franking credits. Once your stop loss is triggered, and you sell out, you can always buy back in. Think of this as having the option to buy in at a lower price to be in the running for those great dividends you’re after.

Buy inverse or contra-ETFs Contra exchange-traded funds (ETFs) are designed to perform the inverse to what the market is doing.

For example, BEAR is a listed ETF on the Australian market. It is designed to seek returns that are negatively correlated to the ASX 200 index. As the ASX 200 index falls, BEAR is set up to benefit from this and rise in price.

Buy ‘puts’ Buying a ‘put’ entails buying an option, that being a ‘put option’. At this point, most people look uncomfortable. You may be thinking, “options are super risky, and I am not interested in options”.

Do not let the negative media articles on options distract you. Yes, plenty of options trades can be highly risky. Too many investors out there take the get rich quick type of options trades that invariably end badly, and these stories are the ones you typically read about. However, if used correctly, options can protect your portfolio.

Investors can consider inverse ETFs in their portfolios to soften the impact of falling markets.

As the market rallies, the inverse ETFs, by nature, typically do not perform well. So this may be a strategy you only consider in a bear market. Two other inverse ETFs you may consider for the Australian market are BBUS and BBOZ.

Go to cash

A put option can be compared to buying insurance.

No-one likes to pay their insurance premiums, but when something bad happens and we are insured, we are pleased to have it.

Cash is a position. It is not ideal if you are after dividends and franking credits. But again, one must weigh up the possibility of losses exceeding dividend yields.

A put contract gives you the right, not the obligation, to sell your shares at a certain price at a certain time. One contract controls 100 shares. If you own 100 BHP shares, for example, and you were concerned the price could fall in the near future but you wanted to hold on to BHP to receive your dividends, you could consider buying one put contract on BHP.

Although I was unable to give you insight on how to identify the next unforeseen market disruption, I was able to show you how to correctly analyse and prepare your portfolio. You should note whether your share earnings are rising, ensure you have stop losses in place, and consider inverse ETFs or cash as a position for the next downturn.

Put contracts go up in price as the price of a given stock (e.g. BHP) goes down in value. The contract becomes more valuable the lower the price falls on BHP. You can, of course, buy more than one contract. And no, buying a put contract does not mean you have to sell your shares, you simply sell your put contracts to another buyer.

Russell Markham has more than 22 years’ commercial experience in financial analysis, marketing, education and training and, at VectorVest, has been helping retirees with stock selection and trading plan optimisation for the past 10 years.

DISCLAIMER: All content in the Retirement Affordability Index™ is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance.

Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

YourLifeChoices Retirement Affordability Index™ June 2020

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Pandemic proves why estate planning must be a priority Wills and estates specialist Adeline Schiralli tells why we must not delay when it comes to getting our affairs in order – and keep them that way.

B

usy, demanding and relentless – this can be said of life as we know it. Between work, family and other commitments, it is not uncommon for people to put tasks that they perceive as difficult, such as estate planning, in the ‘too hard’ basket.

Most people believe they will have plenty of time ‘later on’ to deal with their estate planning affairs.

However, quite often disaster strikes when least expected and, unfortunately, some people leave it too late and fail to leave an estate plan. This creates a mess for their loved ones to clean up, often leading to family disputes, irreparable disharmony and hard-earned money being poured down the drain in court and legal fees.

The COVID-19 pandemic has wreaked havoc on our society as a whole. From being fearful of contracting the illness to panic buying toilet paper and hand sanitiser, it is clear that we’ve entered a brave new world.

The pandemic has also created many obstacles to estate planning. From aged care facilities and workplaces going into lockdown overnight to movement and gathering orders being enforced, access to a lawyer for estate planning purposes in many circumstances has become difficult. Prior to some of the various state governments enacting emergency regulations to allow the witnessing of estate planning documents by audiovisual means during the pandemic, for most estate planning documents to be valid, a person needed to meet face-to-face with a lawyer (or other prescribed witness) in order to execute their documents.

notion has certainly shown a lot of merit, particularly in light of this pandemic.

What is estate planning and why is it so important?

Estate planning is the process by which a person plans and documents how they wish their estate to pass or be controlled in the event of their death and/ or incapacity. Estate planning takes into account your particular circumstances, your objectives as well as the law, and involves a holistic approach that quite often requires the involvement of you, your financial advisers and legal advisers. A properly drafted and considered estate plan may provide both asset protection and taxation benefits for your beneficiaries.

The process involves the discovery of your assets and whether they form part of your estate, the identification of possible risks and the design and implementation of an estate plan that incorporates all your assets and meets your objectives.

It is extremely important that the right amount of time is spent on your estate plan, as this is the only documentation that distributes and protects all of your assets in the event of your death or incapacity.

An ineffective or incomplete estate plan may leave certain assets in the wrong hands or expose them to potential creditors, or create substantial and unnecessary tax bills.

For those who were unfortunate enough to have contracted COVID-19 and were incapacitated by it, or for those who were terminally ill in hospital or in a residential aged care facility, this may not have been possible.

While, for many, restrictions are lifting and there is a light at the end of the tunnel, the pandemic has highlighted the need for proper and early estate planning. Benjamin Franklin purportedly once said: “If you fail to plan, you are planning to fail.” That 18

YourLifeChoices Retirement Affordability Index™ June 2020

It is a myth that estate planning is only for the elderly. As long as you are over the age of 18, it is never too early to put in place an estate plan – but it can quite often be too late. Once a person has lost mental capacity, in most circumstances, they are no longer able to update or put in place an estate plan.

What does estate planning involve?

Contrary to popular belief, estate planning involves more than just a will. Although having a will is no doubt an important part of the estate planning process, it relates only to your death and is activated only after you pass away.

Given our ageing population, but also due to accidents and illnesses at younger ages (including potential complications from COVID-19), it is quite common for temporary or permanent mental incapacity to affect people in our society. It is important to be aware that a will does not assist your loved ones to manage your finances, or make medical decisions for you, if you are alive but have lost mental capacity.

• the consideration of a range of critical events, for you and/or your beneficiaries, including mental and/or physical incapacity; bankruptcy or business failure; family law issues; your retirement; changes in your assets; remarriage, and the potential for disputes between beneficiaries over your estate and how these issues may affect your estate plan now and into the future • ensuring that it is as flexible as possible to accommodate changes in the law or changed circumstances that may exist at the time of your death or incapacity.

There are also many assets (such as superannuation, jointly held assets, assets owned by trusts and companies or assets subject to preexisting contractual arrangements) that may not form part of a person’s estate and, therefore, may not be distributable by a will.

Accordingly, an estate plan needs to be tailored for each individual’s circumstances – it is certainly not one size fits all. A tailored estate plan may include: • making a will that appoints an executor and distributes your estate assets in the event of your death. A will may distribute your estate assets directly to your beneficiaries or to a testamentary trust for their benefit. A testamentary trust can take a variety of forms, including a beneficiary-controlled trust or a more protective trust, if the need arises. A testamentary trust may provide added protections for beneficiaries in relation to asset protection and taxation if suited to your circumstances • appointing an enduring power of attorney to manage your legal and financial affairs if you are unable to, or don’t wish to, manage them yourself • appointing an enduring guardian to manage your health, medical and lifestyle issues if you can’t make decisions for yourself • putting in place an advanced healthcare directive in order to document what medical treatment you do or don’t wish to have if you have lost capacity • the synchronisation of company, trust and superannuation structures in line with your overall estate planning objectives to ensure that control is passed to the appropriate person(s) to manage in the event of your incapacity or death

It is also critical that your estate plan is reviewed and kept up to date either as circumstances change, or at the very least, every two to three years. It is also important to keep your estate plan stored in a safe place (most law firms can store your estate planning documents in their safe custody) and advise your executors, attorneys and guardians that they have been appointed in those roles, and the location of the original documents.

Conclusion The COVID-19 pandemic has taught us all some tough lessons and made us more conscious of planning in our everyday lives. In the same way that we should plan for our retirement or even our weekly grocery shop, regular and proper estate planning should be at the forefront of our minds and the pandemic has certainly brought these issues into light.

So, don’t fail to plan by planning to fail – make your estate plan a priority. Your family will thank you for it.

Adeline Schiralli is an accredited specialist in wills and estates in New South Wales and is a consulting principal in the wills and estates team of the award-winning law firm, Keypoint Law. She also holds a Masters of Law (Applied Law) and majored in wills and estates.

DISCLAIMER: The information contained within this article is general in nature only and does not take into account personal situations. You should consider whether the information is appropriate to your situation, and where appropriate, seek professional advice from an estate planning adviser.

All assumptions and examples are based on current laws (current as at June 2020) and the continuance of these laws. The author does not undertake to notify the readers of this article of changes in the law or its interpretation. All examples are for illustration purposes only and may not directly apply to your individual circumstances.

YourLifeChoices Retirement Affordability Index™ June 2020

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Government update YourLifeChoices keeps you up to date with government changes that could affect your retirement.

Age Pension changes

Travel vouchers

Revised income and assets test thresholds for the Age Pension took effect from 1 July. The new disqualifying income limit for singles is $2066.60 per fortnight (up from $2062.60); for couples combined $3163.20 per fortnight (up from $3155.20) and for illness-separated couples combined $4093.20 per fortnight (up from $4085.20).

Each year, the Victorian Government issues free travel vouchers to eligible seniors. You are eligible if you: • are a Victorian resident and • hold a Victorian Seniors Card, a Centrelink or DVA pensioner concession card or a Victorian Carer (‘We Care’) card.

The new disqualifying asset limits are: single homeowners are $583,000 (up from $578,250); single non-homeowners $797,500 (up from $788,750); couple combined homeowners $876,500 (up from $869,500); couple combined non-homeowners $1,091,000 (up from $1,080,000). Age Pension rates are next due to be adjusted from 20 September 2020.

COVID-19 support payment The government announced in March that it would provide a second economic support payment of $750 to about five million recipients under the same eligibility criteria as the first economic support payment, provided the recipient does not receive the coronavirus supplement with their payment. If recipients are eligible at 10 July 2020, this second economic support payment will be automatically paid via Services Australia or the Department of Veterans’ Affairs. Payments will be made from 13 July onwards.

Visit Services Australia for more information.

Accessing your super You may be able to access a second super payment of up to $10,000 if you’re under financial stress due to COVID-19.

From 1 July until 24 September 2020, you are able to access $10,000. For more information, go to the Australian Taxation Office (ATO).

Telehealth options As a result of COVID-19, if you are over 70, you can access bulk-billed medical consultations by video conference or telephone. It can be with any of the following health professionals: GP, specialist, allied mental health professional, or nurse practitioner.

JobKeeper and JobSeeker The COVID-19 JobKeeper wage subsidy and the extended JobSeeker payment are set to end in September.

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Depending on where you live, you can receive two or four off-peak free travel vouchers each year.

However, the government is no longer sending the vouchers automatically. Instead, you need to register for the new system by 31 July 2020. There are three ways to opt in: • Register online on the PTV website.

• Pick up a registration form at any staffed train station and post it back to PTV (completed forms cannot be left at staffed stations).

• Visit a PTV Hub in Geelong, Bendigo or Melbourne CBD with your eligible concession card.

Eligible card holders who are self-isolating can instead call PTV Customer Service on 1800 800 007 (or 9321 5450 for other languages). For more information about the changes to free travel vouchers visit the PTV website.

Robodebt repayments From July, you may get a refund on repayments made on your income compliance debts (robodebt).

This is if the debt was raised in full or in part using averaging of ATO income information. All unpaid debts using averaged ATO income information will be revised to zero.

Tax time Tax returns completed by individuals need to be lodged by 31 October, or later if completed by a registered tax agent. To work out whether you need to complete a tax return, visit the ATO.

Retirement income inquiry The results of the government’s Retirement Income Review are set to be unveiled on 24 July.The aim is to “establish a fact base to help improve understanding of how the Australian retirement income system is operating and how it will respond to an ageing society”. You can read YourLifeChoices’ submission here.

YourLifeChoices Retirement Affordability Index™ June 2020