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The in’s and out’s of asset allocation

Deciding where to allocate your assets can be confusing and even daunting, particularly if you aren’t confident in your knowledge of the current financial sphere.

Consider the following in’s and out’s of asset allocation to make the process much easier:

Set goals

Goal-setting is extremely important, particularly when it comes to your money. When deciding out where to allocate assets, you should set both short-term and long-term goals. If you are planning to save for a vacation or a new car, this would be a short-term goal, a mortgage would be a medium-term goal and your nest egg would be a long-term financial goal. The goals you set should be SMART; specific, measurable, achievable, realistic and timely. You should also revisit your SMART goals and assess how well you are doing, thus allowing you to make appropriate adjustments if need be.

Risks

The more open an individual is to risk, the greater the opportunities for where they allocate their assets. If an individual is open to investing in higher-risk assets, they can consider options such as investing in shares. If they are more attracted to low-risk assets, options such as a term deposit are more suitable.

Speak to a professional

If you make it known to friends and family that you are deciding where to allocate your assets, you will become inundated with tips and advice of what and where you need to invest. This can become overwhelming and more of a hindrance than a help. The best person you can talk to is a professional you trust, such as your financial advisor. They will be able to give you all the information you need, they will be able to answer all your questions, and they will be unbiased.

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News

Expert advice on early superannuation access as a result of COVID-19

April 2, 2020

Under the coronavirus stimulus package released and revised by the Australian Federal Government on 22 March 2020, individuals in financial trouble due to the negative economic impacts of COVID-19 will be able to access their superannuation funds early. However, while the option is available, it is recommended that individuals only consider withdrawing from their super in the case of absolute emergencies and treat it as a last resort.

With the new rules on superannuation, workers whose incomes are reduced by at least 20% due to the COVID-19 outbreak are allowed to take $10,000 out of their super for the 2019-20 financial year and another $10,000 for 2020-21. Individuals will also not need to pay tax on any withdrawn amounts and existing welfare payments will not be affected either.

While the introduced early access to superannuation funds may be inviting for newly unemployed workers, it is important to consider whether the temporary relief is necessary and worth foregoing super funds available for long term investment. For example, even when accounting for Australia’s slowing economy in the coming years, $10,000 is predicted to be worth over $65,000 in another 30 years.

Especially for younger workers who are less likely to have access to other savings, the choice to give up future savings for current comfort is a difficult one. Experts instead are recommending Australians to apply for the other payments and benefits made available to vulnerable Australians through the coronavirus stimulus package, such as added $550 fortnightly supplements to Australians on JobSeeker payments and other welfare recipients and pensioners.

Experts also predict that the Australian Government will introduce more stimuli for increased cash flow in the Australian economy and more payments for unemployed, struggling and vulnerable Australians in the case of COVID-19 becoming more of a serious economic issue. Hence, withdrawing funds from your superannuation account should be considered a last resort and not for the sake of unnecessary temporary relief.

In addition to being allowed early access into individual super funds, superannuation minimum drawdown rates will also be temporarily reduced by 50% for account-based pensions and others similar until 2021.

The Government has also reduced the upper and lower social security deeming rates by a further 0.25 percentage points, with upper at 2.25% and lower at 0.25% which will come into effect on 1 May 2020.