28th Jan 2019
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The outlook in 2019 for the ‘Affluent’ retirement tribes
Author: YourLifeChoices

Chief economist and head of investment strategy and economics at AMP Capital, Dr Shane Oliver, explains the challenges that await the ‘Affluent’ tribes in 2019.

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As in 2018, this year is likely to present some challenges for YourLifeChoices’ Affluent Couples and Singles in managing their finances. Putting aside healthcare costs, which will continue to rise at a four to five per cent annual rate, there are five big areas to keep an eye on.

Housing
For those in Melbourne and Sydney, home prices are likely to remain under downwards pressure as tight credit conditions, rising supply, reduced foreign buying and possible tax changes continue to have an impact. Of course, this is a feel-bad factor for owners, but it is not really a problem unless you have to sell.

A consolation is that home prices had reached levels we never imagined in the first place. And outside Sydney and Melbourne, house prices should perform better.

Interest rates
Official interest rates are likely to stay depressingly low. They may even fall a little if the drop in house prices weakens consumer spending and there is an even longer period of low inflation. So, yet again, it will be difficult for retirees to rely on income from bank deposits and it could get even harder.

Exchange rates
With interest rates on hold and maybe even falling at a time when US interest rates are still rising, albeit more slowly than in 2018, the Australian dollar is likely to fall further. This, in turn, is likely to put more upwards pressure on the cost of overseas travel. Perhaps not dramatically (say by five per cent or so) and it will vary by destination – with the biggest risk being for US holidays, as the Australian dollar is unlikely to change much against the Japanese Yen and the Euro.

That, of course, provides an opportunity to target holidays to destinations where the Aussie dollar is holding up better – such as Europe and Japan.

Your shares
The share market should, hopefully, see a slight improvement after the messy ride of 2018 as profits continue to rise and interest rates remain low. The key here is to maintain a well-diversified portfolio of shares offering solid, sustainable dividends.

Taxation
And the final category is tax. A key event in 2019 will be the Federal Election, which may well result in a change of government. Labor’s tax policies – particularly in relation to franking credits, negative gearing and the capital gains tax – could have a significant impact on the finances of self-funded retirees.

These are the likely financial challenges for 2019. The good news, though, is that with inflation likely to remain low, price increases will remain modest for clothes, technology-based goods, household goods and services, motor vehicles and most types of recreation.

The keys to managing the financial challenges of 2019 for Affluent tribes will be to have a well-diversified portfolio of investments providing decent cash flow, to choose holiday destinations where the Australian dollar remains relatively strong, and to seek advice regarding the impact on your finances of any tax adjustments that may occur from a change of government.

Is the housing slump worrying you? Are you likely to tailor holiday plans according to where the dollar will deliver greatest value?

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    Disclaimer: All content on YourLifeChoices website 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.





    COMMENTS

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    Blinky
    20th Jan 2019
    1:53pm
    People are asked to put money into super, but this money is taken as an asset and increases the threshold which means Centrelink will help itself to any money over that threshold. Tk u very much!!!. The way to resolve this is to a. Increase the threshold or, b) exempt the first $100k in super from the asset test. That way, people would be rewarded, rather than punished, for having saved a few dollars in super. Can anyone suggest this to the pollies??? An sure thiusands of pensioners would appreciate this!!!
    KSS
    20th Jan 2019
    2:32pm
    They just need to restore the levels to the previous amounts to restore the incentive to save for retirement, especially for the over 55s whose plan were thrown into disarray with the reduction in concessional savings.
    dmoore
    20th Jan 2019
    3:29pm
    How come there is never any mention of the upside to a falling Aussie dollar for the several hundred thousand ex Uk pensioners who benefit especially if the Pound strengthens!!
    almost a grey hair
    20th Jan 2019
    7:40pm
    Why exempt the first 100k. The fact is everything I have worked 40 yrs underground for should be exempt, it mine I've saved it. I should be entitled to the full age pension just like those who have had their hand out their whole lives and have contributed in some cases very little to the kitty in the form of tax. You ask can anyone suggest this to pollies, you haven't even bothered yourself, I take it ?
    Florgan
    24th Jan 2019
    8:50pm
    I agree
    Mad as hell
    21st Jan 2019
    5:56am
    The changes to the 2017 Pensioner Assets Test are stolen assets from retirees under the guise of a budget emergency. Only to have a proposed 5% corporate tax cut under the guise of trickle down economics. All stolen monies should be returned immediately.
    Cheezil61
    28th Jan 2019
    4:23pm
    Only a matter of time & they will find an excuse to steal more or all of our super as well!
    GeorgeM
    28th Jan 2019
    8:12pm
    That 2017 Assets Test change should have been the last straw - time to get rid of all currents MPs from Liberal, Labor and Greens to get the message home. The 3 Million+ Retirees have power, and now is the time to use it (should have happened in 2016 to prevent that change, but some silly people weren't paying attention).
    Mum
    28th Jan 2019
    11:37am
    If you want to travel to a specific destination, unfortunately you just have to wear the expense!
    floss
    28th Jan 2019
    11:39am
    A bit more grey power required but are we a bit on the lazy side.You only get what you put up with.Just another short term solution that will hurt us in the long term.
    Old Man
    28th Jan 2019
    12:07pm
    Perhaps the impact of a Labor government has been downplayed somewhat. There is the proposed 50% RET that will certainly mean an increase in electricity prices both for householders and businesses which will pass on the additional costs. There will be a carbon tax which will also increase the cost of living. Illegal immigrants will flood the country meaning the re-opening of untold detention centres which will be another drain on taxpayer funds. The family home will be included as an asset when calculating the eligibility for the age pension. More coal fired power stations will close putting unwanted pressure on the baseload power which will mean more blackouts and more businesses going offshore which will increase unemployment. All of these things will increase spending which will inevitably mean higher taxes which business will pass on to the consumer.
    Dave R
    28th Jan 2019
    12:49pm
    LOL is your post meant to be serious or tongue in cheek.
    Rae
    28th Jan 2019
    2:32pm
    Don't forget rising fuel prices and anything else imported as the dollar falls. Increased GST and possibly a land tax as well.

    Pensions could be cut too. They cut self funded pensions so obviously it's something they think about. Including the family home over a threshold is certainly being discussed. Anything to get hands on savings and "wealth".

    I'm in bunker mode and to me that seems the smartest thing to do. A buffer of savings for when the faeces finally hits the fan.

    The impact of decades of LNP government killing rivers , selling off our assets and rewarding business mates while stagnating wages can't be discounted either.
    arbee
    28th Jan 2019
    2:39pm
    You haven't even mentioned half of what labour will do if elected. There are massive changes to the superannuation industry proposed. Apart from the hit from the franking credits, there will be an all out push to destroy self managed funds because the unions want everyone in an industry fund, Then there are the proposed changes to negative gearing as well. Remember last time they tried that, people couldn't afford the increased rent charges and were left homeless. They also want to get rid of owner drivers in the transport industry so as to have all transport carried out by large companies who will only be allowed to employ drivers who are in the TWU. This will cause tens of thousands of bankruptcy's and loss of their family homes, as well as drastically increasing transport costs which will in turn have a large impact ion the cost of living. All of this for the cause of socialism of the highest order. Shorten is the union's puppet on a string.
    Sundays
    28th Jan 2019
    3:36pm
    Yes, I think it’s better to support Morrison and projects like $48.7 million to commemorate Captain Cook’s voyage around parts of Australia
    Old Man
    28th Jan 2019
    4:27pm
    Well spotted Dave R.
    1984
    28th Jan 2019
    4:50pm
    Wow doom & gloom awaits, fear factor already being touted if we dare look at changing the current inept, corrupt & top end of town government.
    It's not that we can't feed the poor but it's because we can't satisfy the rich.
    MICK
    28th Jan 2019
    6:02pm
    More of the same from you OM. I would have thought the trolls have given up as the election has been decided. Certainly many have been taken off the payroll but not apparently you.
    Keep it going mate but keep in mind you have no credibility. Cheers
    arbee
    29th Jan 2019
    1:17pm
    Hey Mick, you just lost another 2 points in the latest newspoll and are no-where near as big a certainty as you would like to think. As more and more pensioners and retirees learn exactly what shorten has in store for them, then the polls will get even closer. By the way, Old Man's little finger has more credibility than all of your body would have.
    Greg
    29th Jan 2019
    11:50pm
    arbee - that poll had 1,600ish people in it....an extremely small sample and not worth a mention.
    bob menzies
    3rd Feb 2019
    8:42am
    Old man - the one that bothers me is the borders situation-last time under Rudd 17 detention centres were opened and the cost was just short of $11b. All closed now and over $10b saved (some extra money was put into border protection). This is a cost Australia cannot afford. We have been told there are 30,000 waiting in Indonesia and more in Malaysia and Sri Lanka. The country has much to fear from a Shorten led government - he is no Hawke and Bowen is no Keating.
    Magic Touch
    3rd Feb 2019
    10:09am
    RAE Land tax is already there that why the retirees find it so hard to get end meet. This are the hard working Australian who work so hard and try to save for the retiement are been punish by this Government, also their pcc card are taken away and replace with a shc card. Don,t you know that.
    Cheezil61
    28th Jan 2019
    12:46pm
    Well I guess I'm not affluent enough for any of this to worry me- no capital gains tax, no overseas holis (Aust is my cup of yea anyway!), no health insurance (can't afford it), no franking whatever whatevers, share market (what that-only have shares if you got spare money to hide haha), investments & cash flow (who has that?) Winning all round I'd say -no money=no stress! Guess ill have to work my manual labour job til im 90 & see if I can put some savings away to stress over! Oh no that's right working will probably kill me off so still no stress & save the govt a fortune to boot!
    Sundays
    28th Jan 2019
    3:44pm
    Yes Cheryl. I’ve read some of the submissions to the Parliamentary Commitee on Franking Credits. Some genuine concerns but lots of people worried about selling the holiday house, cutting back overseas holidays. They wouldn’t have a clue how hard battlers such as yourself are doing it.
    Cheezil61
    28th Jan 2019
    4:27pm
    Sundays thanks but I'm not sure I'm a battler, jus not & never will be wealthy (thsnk goodness!) There are plenty people worse off than me!
    Misty
    29th Jan 2019
    12:37am
    Well some will really be up in arms now as the Coalition has asked the ATO to target Negative Gearing this year, especially aimed at people renting out their investment houses, apparently they suspect people are getting relies and friends in to stay but not really renting as they say they are on their tax return.
    Rae
    29th Jan 2019
    2:05pm
    Misty if they took a look at just addresses and low income tax forms it would soon become obvious just who is not paying taxes as they should. Even ownership of luxury cars and boats would give it away. You can't declare $18 000 income for years and drive a luxury car while living on the harbour and claiming for kids at private schools.

    The ATO needs to lift their game a tad.
    Older lady
    28th Jan 2019
    2:13pm
    Labour is going to affect every superannuation fund with its silly changes. Potentially this could mean they have to pay more pensions out. Stupid labour. Never has been good with financial decisions.
    Rae
    28th Jan 2019
    2:36pm
    Those changes may not get through the Senate. If they do investors will simply change strategies. Being in the ASX or Australian Superannuation may take a bit of a hit but you get that when governments start stuffing around in markets trying to create winners and losers.
    arbee
    28th Jan 2019
    2:44pm
    Rae, do you really think that the loony left wing independent Senators who are already there and not up for re-election wont back these policies. We only have to look at some of the Senators currently there who have got in one way or another on a handful of votes, and who collectively would not have enough brains to fill a handful.
    1984
    28th Jan 2019
    4:56pm
    oh I'm sure there must be a least half a handful of brains within the collective LNP lol. At least the independents are free to speak & vote as THEY believe because they DON'T have to tow any party line line even if they totally disagree. Let's get rid of ALL the ALP & LNP senators & replace them with independants who will vote for the people.
    Misty
    29th Jan 2019
    12:29am
    Well you won't have to worry about the Coalition Older Lady and aebee, at the rate the Liberals are resigning, rats leaving a sinking ship comes to mind there won't be enough of them left to form a government.
    bob menzies
    3rd Feb 2019
    8:44am
    Misty - there have been more labor retiring than libs so fat
    Misty
    3rd Feb 2019
    9:51am
    Maybe bob menzies but they are not running as Independents against their former mates.
    1984
    28th Jan 2019
    2:22pm
    Australia needs to introduce a universal pension end of story. AOP is to complex even for Centrlink to administer efficiently. If you have investments etc then you pay tax on any income it generates. Not rocket science but the current system is even to complex for even a rocket scientist to understand fully.
    Rae
    28th Jan 2019
    2:38pm
    Exactly and nothing deemed or made up. Just call the figures as they actually exist. Deeming allows a whole new level of corruption and manipulation that shouldn't be allowed.
    GeorgeM
    28th Jan 2019
    8:16pm
    Exactly, time to implement Universal Age Pension (with NO tests except Age 65 and Residency of say 15 years) to replace the Broken Age Pension system and also give all Retirees a fair go! Thus, also get rid of Centrelink from it's administration, as the ATO can send out the payments quite easily. Even the dumbos in Canberra can implement that as it will be far simpler than the current mess.
    Sceptic
    28th Jan 2019
    2:27pm
    Warning. YLC is using or allowing Phishing on all of its links.
    arbee
    28th Jan 2019
    2:45pm
    Why does this not surprise us one little bit.
    Misty
    29th Jan 2019
    12:23am
    Have all you people commenting here actually rung your local federal member, LNP, Labor erc and found out just exactly what their policies are? or are you just going on what you have read in newspapers, internet or heard on TV and Radio?, you might have a different opinion if you took the trouble to really find out.
    johnp
    3rd Feb 2019
    9:43am
    Agree with most here. If I had my time over again before retirement came around would have had just say $380K and spend the rest or luxury home. $380K is the sweet spot !! Pollies rip off every one else for their own benefit !!
    MarkAdel
    3rd Feb 2019
    3:30pm
    Why is it that people who paid taxes throughout their life suddenly think that they are entitled to a Govt pension? I saved all my life and live comfortably on a private pension and will never get a Govt pension and accept that. Pensions are for people who have not been able to save due to their low salary or other economic reasons. You socialists out there live in a dream world. This Govt are doing a good, not great, job. Under Labour, we will see it all turn to shit.
    Misty
    3rd Feb 2019
    5:44pm
    What rot,the Drover's Dog could do as good a job, if not better, then this Coalition, who seem intent on tearing themselves apart internally with so much infighting, no wonder so many of them are turning Independent.
    MarkAdel
    3rd Feb 2019
    7:03pm
    You do have that Union dog as head of your party. Wasn’t your party engaged in infighting a while back? Just wait and see how the country subsides if Labour get in. More refugees=less money for Centrelink and pension payments, higher electricity prices etc etc.
    Misty
    3rd Feb 2019
    7:41pm
    Yes MarkAdel, the Labor Party were involved in infighting, big time, but they , wisely, have learned their lesson not like the mob supposedly running this country, oh and btw LABOR is spelled LABOR, no U in it.
    MarkAdel
    4th Feb 2019
    1:31am
    There currently is no infighting in both parties. The extreme right in the LNP have gone into the hole they deserve to be in. Even Abbott has been quiet. Labour is the correct spelling. The ALP changed it to Labor in 1912, probably because their supporters couldn’t spell labour correctly
    Misty
    5th Feb 2019
    12:29pm
    Not correct MarkAdel, labour is what women go through giving birth and also refers to manual work, Labor is the way the Labor Party is spelled in Australia, the UK and Ireland may spell it differently to us.


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