Rask - How to protect your super from a market
The podcast hosts engage in a Q&A session addressing various retirement financial strategies. They discuss the benefits and considerations of making superannuation contributions, particularly concessional contributions, to reduce taxable income. They highlight the importance of understanding tax implications, especially when income is below certain thresholds, and the potential benefits of contribution splitting between spouses to optimize tax outcomes and superannuation balances. The hosts also explore the concept of upsizing versus downsizing in retirement, emphasizing the need to balance lifestyle desires with financial sustainability. They caution against complex ownership structures with children due to potential future complications. Additionally, they discuss strategies to mitigate financial risks during market downturns, such as adjusting asset allocations to balance growth and defensive investments, and the psychological importance of maintaining investment discipline during market volatility.
Key Points:
- Consider concessional super contributions to reduce taxable income, but be aware of the 15% contributions tax.
- Contribution splitting can help balance superannuation between spouses and optimize tax outcomes.
- Upsizing in retirement requires careful planning to ensure long-term financial sustainability.
- Avoid complex property ownership structures with children to prevent future complications.
- Maintain a balanced investment portfolio to withstand market downturns and avoid panic selling.
Details:
1. 🎙️ Introduction & Podcast Format
- The podcast provides general financial information and advises consulting a financial planner for personalized guidance.
- Part of the RAS Network, it airs every Thursday and focuses on financial retirement.
- The hosts, Drew Meredith and his co-host, will introduce a 'ninja retirement Q&A' format, offering spontaneous Q&A sessions to improve listener engagement and challenge the hosts.
- This new format encourages genuine reactions as hosts respond to questions without prior notice, creating a dynamic and engaging experience.
2. 🤔 Q&A: Super Contributions and Tax Strategies
- A 54-year-old listener inquires about tax reduction strategies using super contributions, having an inheritance and super balance under $150,000.
- Super contributions are categorized into non-concessional and concessional types:
- Non-concessional contributions are made with after-tax money, and no tax deduction is available for these contributions, suitable for those who wish to increase their super balance without immediate tax benefits.
- Concessional contributions allow individuals under 67 years to reduce taxable income through salary sacrifice, savings, or super guaranteed contributions, while a 15% superannuation contributions tax applies, providing immediate tax deduction benefits.
- For example, if the listener contributes $10,000 as a concessional contribution, they can reduce their taxable income by this amount, potentially lowering their tax bracket, despite the 15% tax on contributions.
3. 💡 Super Splitting and Retirement Strategies
- For individuals with taxable income below $18,200, interest income is effectively tax-free as it falls within the 0% tax bracket.
- Those earning between $18,200 and $45,000 face an 18% tax rate, including the Medicare Levy, meaning Super contributions at a 15% tax rate offer minimal benefit.
- Significant tax benefits from Super contributions are realized when taxable income surpasses $45,000, due to larger tax savings compared to higher personal tax rates.
- Utilizing carry forward contributions can enhance tax deductions, especially if previous years' contribution limits were not met.
- To justify Super contributions, aim for a tax rate advantage of at least 10% over personal tax rates.
- Higher tax savings occur when comparing personal tax rates of 30% or 45% to the Super fund's 15% rate, highlighting substantial benefits for high-income earners.
4. 📈 Investment Decisions: Super vs Outside Super
- Superannuation splitting allows transferring concessional contributions from one spouse's super fund to the other without tax consequences, facilitating equalization of super balances.
- For example, if $20,000 was contributed to a super fund with a 15% tax, $17,000 can be transferred to a spouse's super fund without tax impact.
- Strategically, contribution splitting can be used when one spouse is significantly older, allowing them to qualify for age pension benefits by transferring funds to the older spouse's super fund.
- Contribution splitting is beneficial in managing tax liabilities and optimizing retirement benefits, especially when aiming to maximize the older spouse's superannuation balance.
- Potential drawbacks include the complexity of rules and the need for careful planning to ensure compliance and maximize benefits.
5. 🏠 Upsizing, Downsizing, and Family Real Estate Dynamics
5.1. Super Splitting Strategy for Age Pension
5.2. Avoiding Transfer Balance Cap Penalties
5.3. Legislative Changes Impacting Superannuation
6. 💰 Managing Super Contributions and Financial Balance
6.1. Equalizing Super Contributions
6.2. Investing Post-Business Sale
6.3. Superannuation vs. Non-Super Investment
7. 🏡 Real Estate Ownership with Family: Considerations and Risks
- When planning to upsize in retirement, assess the net assets available post-transaction to ensure self-funding capabilities.
- Individuals often upsize for better living conditions, such as moving closer to urban amenities.
- Expect to downsize again within a decade if upsizing now, due to market dynamics and life stage changes.
- Invest in assets with similar growth potential; mismatched growth can result in financial loss when selling larger properties to buy smaller ones.
8. 🎯 Retirement Planning: Investment Strategies and Risks
8.1. Tax Benefits of Renting Property
8.2. Risks of Multigenerational Home Ownership
8.3. Investment Transition from Income-Generating to Lifestyle Assets
8.4. Retirement Planning and Superannuation Contributions
8.5. Tax Strategy for Superannuation Contributions
9. 💼 Financial Advice: Handling Market Crashes & Retirement Stability
9.1. Key Strategies for Retirement Stability During Market Crashes
9.2. Psychological Preparation for Market Volatility
10. 😂 Closing Remarks & A Dad Joke
- The host concludes with a niche Star Wars-themed dad joke: 'What do you call a Sith Lord with achy joints? Darthritis.'
- Encouragement for audience interaction by asking them to keep questions coming, indicating engagement and a willingness to continue the conversation.
- Expresses gratitude to the audience for their participation, fostering a sense of community and appreciation.
- Promotion of the RAS Network, urging viewers to like and subscribe for daily content on business, finance, and investing, which suggests a strategic move to increase subscriber base and engagement.