Retirement Income

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Healthy humans drive the economy: we’re now witnessing one of the worst public policy failures in Australia’s history

<p>Australians are getting a stark reminder about how value is actually created in an economy, and how supply chains truly work.</p> <p>Ask chief executives where value comes from and they will credit their own smart decisions that inflate shareholder wealth. Ask logistics experts how supply chains work and they will wax eloquent about ports, terminals and trucks. Politicians, meanwhile, highlight nebulous intangibles like “investor confidence” – enhanced, presumably, by their own steady hands on the tiller.</p> <p>The reality of value-added production and supply is much more human than all of this. It is people who are the driving force behind production, distribution and supply.</p> <p>Labour – human beings getting out of bed and going to work, using their brains and brawn to produce actual goods and services – is the only thing that adds value to the “free gifts” we harvest from nature. It’s the only thing that puts food on supermarket shelves, cares for sick people and teaches our children.</p> <p>Even the technology used to enhance workers’ productivity – or sometimes even replace them – is ultimately the culmination of other human beings doing their jobs. The glorious complexity of the whole economy boils down to human beings, using raw materials extracted and tools built by other human beings, working to produce goods and services.</p> <h2>A narrow, distorted economic lens</h2> <p>The economy doesn’t work if people can’t work. So the first economic priority during a pandemic must be to keep people healthy enough to keep working, producing, delivering and buying.</p> <p>That some political and business leaders have, from the outset of COVID-19, consistently downplayed the economic costs of mass illness, reflects a narrow, distorted economic lens. We’re now seeing the result – one of the worst public policy failures in Australia’s history.</p> <p>The Omicron variant is tearing through Australia’s workforce, from <a href="https://www.smh.com.au/national/nsw/nurses-are-in-despair-as-staffing-shortages-bite-in-nsw-hospitals-20220103-p59ljc.html?fbclid=IwAR3obDpqk7Muu2xpOA1H7MH2D2TuxPIzMQrL_NKk2QoKHA2LriWoRcmRO8o">health care</a> and <a href="https://www.smh.com.au/national/nsw/hundreds-of-nsw-childcare-centres-shut-due-to-covid-20220104-p59ls4.html">child care</a>, to <a href="https://www.edenmagnet.com.au/story/7575635/knock-on-effects-through-supply-chain-despite-eased-covid-rules-for-workers/">agriculture</a> and <a href="https://www.freshplaza.com/article/9388733/omicron-has-now-put-us-in-a-desperate-situation-in-regards-to-workers-shortage-and-shipping-issues/">manufacturing</a>, to <a href="https://www.abc.net.au/news/2022-01-06/supermarket-shortage-supply-chain-truck-driver-covid/100741392">transportation and logistics</a>, to <a href="https://www.smh.com.au/national/surf-lifesavers-and-students-fill-paramedic-shifts-as-omicron-spreads-20220108-p59mrq.html">emergency services</a>.</p> <p>The result is an unprecedented, and preventable, economic catastrophe. This catastrophe was visited upon us by leaders – NSW Premier Dom Perrotet and Prime Minister Scott Morrison in particular – on the grounds they were protecting the economy. Like a Mafia kingpin extorting money, this is the kind of “protection” that can kill you.</p> <h2>Effect as bad as lockdowns</h2> <p>On a typical day in normal times, between <a href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/nov-2021/EM2b.xlsx">3% and 4% of employed Australians</a> miss work due to their own illness. Multiple reports from NSW indicate up to half of workers are now absent due to COVID: because they contracted it, were exposed to it, or must care for someone (like children barred from child care) because of it. With infections still spreading, this will get worse in the days ahead.</p> <p>Staffing shortages have left hospitals in chaos, supermarket shelves empty, supply chains paralysed. ANZ Bank data, for example, shows <a href="https://twitter.com/ANZ_Research/status/1479284711151345666?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Etweet">economic activity in Sydney</a> has fallen to a level lower than the worst lockdowns.</p> <hr /> <p><strong>Spending in Sydney and Melbourne now near lockdown conditions</strong></p> <p><a href="https://images.theconversation.com/files/440169/original/file-20220111-17-1jp9jpu.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/440169/original/file-20220111-17-1jp9jpu.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt="ANZ Bank data shows spending in Sydney and Melbourne has fallen to levels typical of lockdown conditions." /></a> <span class="caption"></span> <span class="attribution"><span class="source">ANZ Research</span></span></p> <hr /> <p>If relaxing health restrictions in December (as Omicron was already spreading) was motivated by a desire to boost the economy, this is an own-goal for the history books.</p> <h2>Relaxing isolation rules</h2> <p>Now the response to Omicron ravaging labour supply is to relax isolation requirements for workers who have contracted, or been exposed to, COVID-19.</p> <p>The first step was to shift the goalposts on “test, trace, isolate and quarantine” arrangements by redefining “close contact”.</p> <p>On December 29 <a href="https://www.pm.gov.au/media/press-conference-kirribilli-nsw-10">the Prime Minister said</a> it was important to move to a new definition “that enables Australia to keep moving, for people to get on with their lives”. The next day National Cabinet <a href="https://www.pm.gov.au/media/national-cabinet-statement-12">approved a definition</a> such that only individuals having spent at least four hours indoors with a COVID-infected person needed to isolate.</p> <p>Australians certainly want supply chains to keep moving. That won’t happen by simply pretending someone with three hours and 59 minutes of face-to-face indoor contact with Omicron is safe. Putting asymptomatic but exposed and potentially infected people back to work will only accelerate the spread.</p> <p>The second step has been to reduce the isolation period for those who do pass this tougher “close contact” test. At its December 30 meeting National Cabinet agreed to a standard isolation period of seven days (ten days in South Australia), <a href="https://www1.racgp.org.au/newsgp/gp-opinion/so-you-have-been-asked-to-self-isolate-or-quaranti">down from 14 days</a>.</p> <p>For “critical workers” in essential services including food logistics, the NSW and Queensland governments <a href="https://www.news.com.au/finance/work/at-work/isolation-rules-relaxed-for-critical-workers-as-nsw-battles-supply-chain-issues/news-story/2b97ef133f6c3caff9dcd5bc548cc58b">have gone even further</a>, allowing employers to call them back to work so long as they are asymptomatic.</p> <h2>Snatching defeat from the jaws of victory</h2> <p>This follows a <a href="https://www.cdc.gov/media/releases/2021/s1227-isolation-quarantine-guidance.html">US precedent</a>, despite <a href="https://www.nejm.org/doi/pdf/10.1056/NEJMc2102507?articleTools=true">scientific evidence</a> indicating contagion commonly lasts longer than 5 days.</p> <p>Employers will use this change to pressure exposed and even sick workers to return to work, risking their own health, colleagues, customers, and inevitably spreading the virus further.</p> <p>Copying US COVID protocols only guarantees US-style infection rates. In fact, since 5 January, Australia’s seven-day rolling average infections per million <a href="https://ourworldindata.org/explorers/coronavirus-data-explorer?zoomToSelection=true&amp;time=2021-03-30..latest&amp;facet=none&amp;pickerSort=desc&amp;pickerMetric=total_cases_per_million&amp;hideControls=true&amp;Metric=Confirmed+cases&amp;Interval=7-day+rolling+average&amp;Relative+to+Population=true&amp;Color+by+test+positivity=false&amp;country=USA%7EAUS">now exceed that of the US</a>.</p> <hr /> <p><a href="https://images.theconversation.com/files/440179/original/file-20220111-21-zzh3bj.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/440179/original/file-20220111-21-zzh3bj.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt="Daily new confirmed COVID-19 cases per million people, Australia compared to United States." /></a> <span class="caption"></span> <span class="attribution"><a href="https://ourworldindata.org/explorers/coronavirus-data-explorer?zoomToSelection=true&amp;time=2021-03-30..latest&amp;facet=none&amp;pickerSort=desc&amp;pickerMetric=total_cases_per_million&amp;hideControls=true&amp;Metric=Confirmed+cases&amp;Interval=7-day+rolling+average&amp;Relative+to+Population=true&amp;Color+by+test+positivity=false&amp;country=USA~AUS" class="source">Our Wold in Data</a>, <a href="http://creativecommons.org/licenses/by/4.0/" class="license">CC BY</a></span></p> <hr /> <p>From one of the best COVID responses in the world to one of the worst, Australia has snatched defeat from the jaws of victory.</p> <h2>It’s not too late to limit the carnage</h2> <p>The idea that health considerations <a href="https://www.theguardian.com/australia-news/2021/oct/07/its-an-economic-crisis-too-in-nsw-what-a-difference-a-new-premier-makes">had to be balanced with economic interests</a> was always a false dichotomy. A healthy economy requires healthy workers and healthy consumers.</p> <p>The Omicron surge has created an economic emergency that will be difficult to endure.</p> <p>But it’s not too late to limit further avoidable contagion. Infection prevention practices (including masks, capacity limits, prohibitions on group indoor activities, PPE and distancing in workplaces, and free and accessible rapid tests) must be restored and enforced.</p> <p>Income supports for workers who stay home must be restored. Staffing strategies need to emphasise steady, secure jobs, rather than outsourcing and gig arrangements which have facilitated contagion.</p> <p>Above all, our policy makers need to remember the economy is composed of human beings, and refocus their attention on keeping people healthy. Protecting people is the only thing that can protect the economy.<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;" src="https://counter.theconversation.com/content/174606/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines --></p> <p><span><a href="https://theconversation.com/profiles/jim-stanford-521684">Jim Stanford</a>, Economist and Director, Centre for Future Work, Australia Institute; Honorary Professor of Political Economy, <em><a href="https://theconversation.com/institutions/university-of-sydney-841">University of Sydney</a></em></span></p> <p>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/healthy-humans-drive-the-economy-were-now-witnessing-one-of-the-worst-public-policy-failures-in-australias-history-174606">original article</a>.</p> <p><em>Image: Shutterstock</em></p>

Retirement Income

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Should I pay off the mortgage ASAP or top up my superannuation? 4 questions to ask yourself

<p>At a certain point in life, many wonder what’s better: to pay off the home loan ASAP or top up your superannuation?</p> <p>If your emergency cash buffer looks OK and you have enough to cover you for around three to six months if you lost your job, the super versus mortgage question is a good one to ponder. There’s no one-size-fits-all answer.</p> <p>On the face of it, there’s a compelling case for building up your super; you can take advantage of the <a href="https://moneysmart.gov.au/budgeting/compound-interest-calculator">magic of compound interest</a> (and, potentially, some <a href="https://moneysmart.gov.au/grow-your-super/super-contributions">tax breaks</a> as well) – all while interest rates on mortgages are low.</p> <p>If you’re getting <a href="https://www.superannuation.asn.au/media/media-releases/2021/media-release-29-june-2021">8% compound interest on super</a> and paying only 3% on your mortgage, building up super might seem a good option.</p> <p>But financial decisions are about psychology as well as numbers. Much depends on your debt comfort zone.</p> <p>It’s best to seek professional assistance from a <a href="https://moneysmart.gov.au/managing-debt/financial-counselling">financial counsellor</a> or adviser. But here are some questions to consider along the way.</p> <h2>1. Am I ‘on track’ to have enough super upon retirement?</h2> <p>Use the government’s Moneysmart <a href="https://moneysmart.gov.au/retirement-income/retirement-planner">retirement planners</a> or your super fund’s calculator to check.</p> <p>If it’s looking sparse – perhaps due to career breaks or part-time work – you might consider <a href="https://www.ato.gov.au/individuals/super/growing-your-super/adding-to-your-super/salary-sacrificing-super/">salary sacrificing</a> extra into your super (on top of what your employer already puts in there).</p> <p>An additional A$50 a week, for example – even just for a few years – can help remedy your meagre super projections.</p> <p>According to <a href="https://moneysmart.gov.au/grow-your-super/super-contributions">Moneysmart</a>:</p> <blockquote> <p>The payments, called concessional contributions, are taxed at 15%. For most people, this will be lower than their marginal tax rate. You benefit because you pay less tax while you boost your retirement savings […] The combined total of your employer and salary sacrificed concessional contributions must not be more than $27,500 per financial year.</p> </blockquote> <p>Try the <a href="https://www.industrysuper.com/understand-super/salary-sacrifice-calculator/">Industry Super</a> or <a href="https://moneysmart.gov.au/grow-your-super/super-contributions-optimiser">Moneysmart</a> calculators to see how much extra you’d have at retirement if you salary sacrificed into super for a few years. Consider seeking advice from your super fund on your super investment options and Age Pension entitlements.</p> <p>You might also consider an after-tax <a href="https://www.ato.gov.au/individuals/super/growing-your-super/adding-to-your-super/personal-super-contributions/">personal super contribution</a> (that is, putting extra money from savings or from your take-home pay into super). The contributions may be <a href="https://www.ato.gov.au/individuals/super/in-detail/growing-your-super/claiming-deductions-for-personal-super-contributions/">tax deductible</a>, but even if not, the returns in super are tax friendly.</p> <p><a href="https://images.theconversation.com/files/430652/original/file-20211107-9872-q6fqib.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/430652/original/file-20211107-9872-q6fqib.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt="A middle aged couple do financial planning together on a laptop." /></a> <span class="caption">Are you ‘on track’ to have enough super upon retirement? Use online calculators to find out.</span> <span class="attribution"><span class="source">Shutterstock</span></span></p> <h2>2. What about the pension?</h2> <p>Are you expecting a full Age Pension? To find out if you’re likely to qualify for one, use an <a href="https://www.superguide.com.au/in-retirement/age-pension-calculator">online calculator</a> or ask your super fund. People with “too much super” don’t get the pension (although most retirees get some part pension). For some, the more you put into super, the <a href="https://grattan.edu.au/wp-content/uploads/2020/03/Grattan-Institute-sub-balancing-act-retirement-income-review.pdf">less you get in Age Pension payments</a>.</p> <p>For single homeowners, the total asset threshold for a full Age Pension is $270,500 (including super but excluding your main residence), while the part-Age Pension threshold is $593,000. For couple homeowners, the combined total asset threshold for a part-Age Pension is $891,500 (also including super but excluding the main residence).</p> <p>If you’re on a median income and your super balance is predicted to land between the lower and upper asset thresholds for the pension, <a href="https://grattan.edu.au/wp-content/uploads/2020/03/Grattan-Institute-sub-balancing-act-retirement-income-review.pdf">some models predict</a> that for every extra $1,000 put into super at age 40, you would only be around $25 per year better off in terms of retirement income (due to the tapering off in eligible Age Pension income).</p> <p>For people on low incomes, extra super contributions may not be the answer at all if the result is more financial stress during your working life and immediate housing security risk.</p> <h2>3. If I retired with a mortgage, could I cope?</h2> <p>Many people end up retiring earlier than planned, due to health or other issues.</p> <p>If you were still paying off your mortgage at retirement, would you feel comfortable about that? Or would it be a source of worry?</p> <p>Traditionally, most people enter retirement having paid off their home loan but now <a href="https://theconversation.com/more-people-are-retiring-with-high-mortgage-debts-the-implications-are-huge-115134">more are approaching retirement</a> with some mortgage remaining. It might not be the end of the world if you had $100,000 left on the mortgage when you stop working. After all, you can draw out up to <a href="https://moneysmart.gov.au/retirement-income/super-lump-sum">$215,000 of your super tax free at retirement</a> to pay off debt. Doing so can also increase your Age Pension entitlement (as your primary residence is exempt from pension assets tests while super is not).</p> <p>The wealth accumulation in superannuation is going to outpace the interest on a mortgage in most cases for some time, even after you retire. Even so, you might feel it’s worth making the last vestiges of your debt go away in retirement so you can stop worrying about it.</p> <p><img src="https://images.theconversation.com/files/430653/original/file-20211107-10121-1tkhmjc.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt="An older same sex couple laugh together in the garden." /> <span class="caption">If you and your partner retired with a mortgage debt, would you feel OK about that or would it be a source of worry?</span> <span class="attribution"><span class="source">Shutterstock</span></span></p> <h2>4. Will the choices I make today cost me later – and am I OK with that?</h2> <p>Australian property values have skyrocketed and many have borrowed more to pay for renovations. The full “cost” of a renovation may not be apparent at first.</p> <p>The true cost of a $150,000 renovation over the next 20 years could be more like $700,000. How? Well, if that $150,000 was put into a balanced allocation in super for a couple of decades, it would likely grow to be about $700,000. That’s compound interest for you. You’d hope to get that in capital gains from the renovation.</p> <p>But it’s never just about the finances. The extra mortgage might be worth it because it paid for a home that brings comfort and joy (as well as the capital gains).</p> <p>Likewise, paying off your mortgage ASAP might mean forgoing the extra you’d get if you’d put it in super. But for some, wiping out a mortgage will be worth it to be debt-free. Perhaps after the mortgage is gone, you can maximise salary sacrificing into super until retirement, while also reducing your tax bill.</p> <h2>At least do the sums</h2> <p>There’s always more than one solution. To know what’s right for you, you’ll need to get advice for your personal circumstances.</p> <p>But it’s good to look at where your super is now and where it’s heading, and <a href="https://www.canstar.com.au/home-loans/debt-income-ratio/">calculate your debt-to-income ratio</a> (debt divided by income). It’s often used to guage how serious (or not) your debt is. Lenders and regulators might consider a debt-to-income ratio over <a href="https://www.apra.gov.au/sites/default/files/2021-09/Quarterly%20authorised%20deposit-taking%20institution%20property%20exposure%20statistics%20-%20Highlights%20June%202021.pdf">six times your income to be “high”</a>, but your personal debt comfort zone might be much lower.</p> <p>Emotions play a bigger part in financial planning than many like to admit. Desire to pay off a mortgage quickly can be influenced by how you were raised, feelings of anxiety and stigma that often come with debt, and Australia’s cultural bias toward debt-free home ownership.</p> <p>Depending on circumstances though, it may be time to rethink the bias to paying down housing debt over wealth accumulation in super. At least do the sums, so you can make an informed choice.<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;" src="https://counter.theconversation.com/content/170470/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines --></p> <p><span><a href="https://theconversation.com/profiles/di-johnson-1265246">Di Johnson</a>, Lecturer in Finance, <em><a href="https://theconversation.com/institutions/griffith-university-828">Griffith University</a></em></span></p> <p>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/should-i-pay-off-the-mortgage-asap-or-top-up-my-superannuation-4-questions-to-ask-yourself-170470">original article</a>.</p> <p><em>Image: Shutterstock</em></p>

Retirement Income

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Progressive in theory, regressive in practice: that’s how we tax income from savings

<p>We’re told Australia has a progressive tax system – the more you earn, the higher the rate.</p> <p>And that’s certainly the case for earnings from wages. An Australian on A$35,000 sacrifices 21 cents out of each extra dollar they earn whereas an Australian on $90,000 sacrifices 39 cents.</p> <p>That’s how it’s meant to be for income from savings, but in practice it isn’t.</p> <p>Fresh calculations released this morning by the <a href="https://taxpolicy.crawford.anu.edu.au/sites/default/files/uploads/taxstudies_crawford_anu_edu_au/2020-07/20271_anu_-_ttpi_policy_report-ff2.pdf">Tax and Transfer Policy Institute</a> at the Australian National University show that low income Australians in the bottom tax bracket pay a higher marginal rate of tax on income from savings than high earners in the top tax bracket.</p> <p>It is because of exemptions and special rates, and the alacrity with which high earners take advantage of them.</p> <h2>Super gives the most to the highest earners</h2> <p>The taxation of superannuation drives the results.</p> <p>Super contributions are generally taxed at a flat rate of 15%. For low earners on an income tax rate of zero, 15% would constitute a considerable extra impost did the government not refund the difference with a <a href="https://drive.google.com/file/d/1W9FN4deDYY9q0ooFDPNqq1CvYAUz90Ao/view">tax offset</a> that cuts the effective rate to zero.</p> <p>High earners on the 47% marginal rate do much better. The tax rate of 15% offers substantial tax relief. For them, it is an effective rate of minus 32%.</p> <p>Other tax concessions are directed at older Australians, who are often on higher incomes than younger Australians.</p> <h2>Highest bracket, lowest rate</h2> <p>Our calculation of the marginal effective annual tax rates actually paid on income from savings is published in a report entitled <a href="https://taxpolicy.crawford.anu.edu.au/sites/default/files/uploads/taxstudies_crawford_anu_edu_au/2020-07/20271_anu_-_ttpi_policy_report-ff2.pdf">the taxation of savings in Australia: theory, current practice and future policy directions</a>.</p> <p>It shows that the marginal tax rate high earners pay on additional savings held over a twenty year period is 5.3% of income, on average, whereas for low earners in the bottom (zero) tax bracket it’s 12.2%.</p> <p>Low earners in the second lowest tax bracket are paying 13.8%.</p> <hr /> <p><strong>Marginal effective tax rates actually paid on income from savings, by bracket</strong></p> <p><a href="https://images.theconversation.com/files/348198/original/file-20200718-15-e3c10t.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/348198/original/file-20200718-15-e3c10t.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt="" /></a> <span class="caption">Authors’ calculations using data from the Australian Survey of Income and Housing, 2019.</span> <span class="attribution"><a href="https://taxpolicy.crawford.anu.edu.au/" class="source">TTPI Policy Report 01-2020</a></span></p> <hr /> <h2>The way forward: a dual income tax system</h2> <p>Our report proposes taxing all types of saving at the same flat low rate.</p> <p>This dual income tax system (a progressive rate for wages and salaries, a flat rate for income from savings) has been used in Norway, Finland, Sweden and Denmark since the early 1990s. Elements of it are used in Austria, Belgium, Italy, Greece and the Netherlands.</p> <p>If the rate were 10%</p> <p>• all interest payments would be taxed at 10%</p> <p>• all dividends, both domestic and foreign, would be taxed at a rate of 10%</p> <p>• all capital gains (including owner-occupied housing) would be taxed at 10%</p> <p>• superannuation contributions would be made from after-tax income and then earnings in the accounts taxed at 10%</p> <p>• rent and capital gains on investment properties would be taxed at 10%</p> <p>• the imputed rent from owner-occupied housing (the benefit home owners get from not having to pay rent that is taxed) would be calcuated and taxed at a rate of 10%. An alternative would be to raise the same amount through a broad-based land tax.</p> <p>Our calculations suggest that if the tax were applied broadly at a rate of 6.2%, it would raise as much as is raised now from taxes on income from savings. If income from owner-occupied housing were excluded, the rate would need to be 10.2%.</p> <p>But there is no particular reason for the rate to be set to generate as much from savings income as it does now. It could be set to raise more, or to raise less.</p> <p>The design and implementation of a dual income tax should be considered alongside broader changes to the tax and transfer system. In particular, it should be combined with removing opportunities to re-classify income for tax minimisation purposes. We outline some of the considerations <a href="https://taxpolicy.crawford.anu.edu.au/sites/default/files/uploads/taxstudies_crawford_anu_edu_au/2020-07/20271_anu_-_ttpi_policy_report-ff2.pdf">in our report</a>.</p> <p>In the meantime, as steps towards a flatter fairer system of taxing income from savings, the government could consider better targeting superannuation subsidies, replacing real estate stamp duty with land tax and including the family home in the means tests for pensions and other age-related benefits.</p> <p>Our current approach to taxing income from savings is a mess at best and a serious driver of intergenerational inequality at worst. Some savings tax arrangements are progressive, taxing higher incomes more heavily, and some are regressive.</p> <p>We want to encourage and reward savings. But we also need to remove the crazy incentives that impel ordinary Australians to take part in distorting and costly tax planning schemes.</p> <p>Our report outlines a way forward, and steps to get there.<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;" src="https://counter.theconversation.com/content/142823/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines --></p> <p><span><a href="https://theconversation.com/profiles/robert-breunig-167291">Robert Breunig</a>, Professor of Economics and Director, Tax and Transfer Policy Institute, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em>; <a href="https://theconversation.com/profiles/kristen-sobeck-714969">Kristen Sobeck</a>, Senior Research Officer, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em>, and <a href="https://theconversation.com/profiles/peter-varela-1136772">Peter Varela</a>, Research Fellow, Tax and Transfer Policy Institute, <em><a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a></em></span></p> <p>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/progressive-in-theory-regressive-in-practice-thats-how-we-tax-income-from-savings-142823">original article</a>.</p> <p><em>Image: Shutterstock</em></p>

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The majority of Australians are not saving enough for retirement

<p>Only 53% of couples and 22% of single people are on track to achieve a comfortable level of retirement income, according to an in-depth study of the adequacy of retirement savings.</p> <p>The outcome of a collaboration between researchers at the University of Melbourne and Towers Watson, the <a href="http://www.melbourneinstitute.com/downloads/working_paper_series/wp2014n05.pdf">study</a> has found a significant number of Australians are not likely to achieve adequate retirement incomes, even when all sources of savings are considered.</p> <p>The research sought to address the considerable uncertainty among policy makers and the broader community about the extent and nature of retirement savings deficiencies in Australia. To do so, we developed a set of metrics indicating the adequacy of retirement savings and applied those metrics to a large representative sample of the Australian population.</p> <p>The clear finding is that most Australians are still not on track towards reaching a comfortable income during retirement, and will continue to draw a large part of retirement income from the age pension. The implication is that, despite superannuation reforms dating back over 20 years, the problem of inadequate retirement savings remains a significant public policy issue for Australia.</p> <p>An important innovation of our study is that the metrics we developed take into account not only superannuation holdings (and projected growth in superannuation holdings through investment returns and future contributions) and the projected age pension entitlement, but also a variety of other household assets that could be used to fund retirement, including various financial assets and property.</p> <p>Using this information, we are able to forecast a person’s expected income throughout retirement. We then compare this income to a “target” income, which is provided by the <a href="http://www.superannuation.asn.au/resources/retirement-standard">Association of Superannuation Funds in Australia (ASFA) Retirement Standard</a> for a “comfortable” lifestyle. The ASFA standard for a comfortable lifestyle is a widely used benchmark, and specifies a minimum income of A$57,665 for couples and $42,158 for single people.</p> <p>The ASFA benchmarks are very close to both current average income levels of retirees in Australia and the income levels that pre-retirement Australians on average believe they will need for a satisfactory lifestyle in retirement. While this concordance may seem reassuring, our findings for the projected retirement incomes of pre-retirement Australians were not.</p> <p>We projected retirement income levels for a large, representative sample of Australians aged 40 to 64 ­– drawn from the nationally representative <a href="http://www.melbourneinstitute.com/hilda/">Household, Income and Labour Dynamics in Australia (HILDA) Survey</a> – and compared our projections to the income required to sustain a comfortable lifestyle.</p> <p>Based on our calculations, only 53% of couples and 22% of singles are on track to achieve a comfortable level of retirement income.</p> <p>Our study also shows the relative importance of different sources of retirement income. If we ignore all sources of retirement income other than superannuation, only 15% of couples and 5% of singles are projected to achieve the target. Indeed, applying the <a href="http://www.oecd-ilibrary.org/sites/factbook-2010-en/11/02/02/index.html?itemId=/content/chapter/factbook-2010-89-en">OECD poverty benchmark</a> of half median income, most retirees would be living in poverty.</p> <p>Factoring in the age pension improves projected retirement incomes for many people, but still only 32% of couples and 11% of singles are on track to have a comfortable retirement income.</p> <p>Our calculations have several implications. First, they show that, for most people, superannuation is not sufficient to fund a comfortable retirement, even if they have contributed to superannuation for most of their working lives.</p> <p>Second, it is important to take into account all potential sources of retirement income, including non-superannuation assets, when computing the adequacy of retirement savings. Omitting any of these sources will likely lead to substantial under-estimation of adequacy.</p> <p>Third, single people are particularly under-prepared for retirement, being three times more likely than couples to have severely inadequate projected retirement incomes.</p> <p>Fourth, there is a gap between expectations about the importance of the different sources of retirement income and the likely reality. <a href="http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/4102.0Main+Features50March%202009">Data from the Australian Bureau of Statistics</a> show that over half of men and two-fifths of women expect superannuation to be the main source of retirement income. However, our projections show that the age pension will provide 61% of the retirement income of single people, and 39% of the retirement income of couples. Moreover, 96% of single people and 89% of couples aged 40 to 64 today are expected to receive at least a partial age pension at some stage during retirement.</p> <p>Our analyses show that most people need to think ahead to their financial situation in retirement and, if possible, make some changes – the sooner, the better. The first step is to find out whether your savings are likely to be adequate – and you can now do this easily on the <a href="https://www.moneysmart.gov.au/tools-and-resources/calculators-and-tools/retirement-planner">ASIC MoneySmart web site</a>.</p> <p>The site offers a calculator based on a simplified version of the algorithm we used in our study. It takes less than 10 minutes to enter the required information and obtain an estimate of the adequacy of your retirement savings.</p> <p>Knowing now whether you need to save more towards your retirement is an essential first step towards a retirement in which you don’t have to fear running out of money.</p> <p><em>Professor Kevin Davis contributed to this study, which began prior to his appointment as a panel member of the Financial System Inquiry.</em><!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;" src="https://counter.theconversation.com/content/24957/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines --></p> <p><span><a href="https://theconversation.com/profiles/roger-wilkins-95906">Roger Wilkins</a>, Principal Research Fellow and Deputy Director (Research), HILDA Survey, Melbourne Institute of Applied Economic and Social Research, <em><a href="https://theconversation.com/institutions/the-university-of-melbourne-722">The University of Melbourne</a></em> and <a href="https://theconversation.com/profiles/carsten-murawski-3627">Carsten Murawski</a>, Senior Lecturer in the Department of Finance and co-head of the Decision Neuroscience Lab, <em><a href="https://theconversation.com/institutions/the-university-of-melbourne-722">The University of Melbourne</a></em></span></p> <p>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/the-majority-of-australians-are-not-saving-enough-for-retirement-24957">original article</a>.</p> <p><em>Image: Shutterstock</em></p>

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Finance drives everything — including your insecurity at work

<p>There’s a common link between the many things that have promoted insecurity at work: the growth of franchising; labour hire; contracting out; spin-off firms; outsourcing; global supply chains; the gig economy; and so on. It’s money.</p> <p>At first, that seems too obvious to say. But I’m talking about the way financial concerns have taken control of seemingly every aspect of organisational decision-making.</p> <p>And behind that lies the rise and rise of finance capital.</p> <p>Over the past three decades there has been a <a href="https://d3n8a8pro7vhmx.cloudfront.net/theausinstitute/pages/2838/attachments/original/1532441299/Labour_Share_Symposium_Peetz.pdf?1532441299">shift in resources from the rest of the economy to finance</a>. Specifically, to finance <em>capital</em>.</p> <p>One way to see this is in the chart below. It shows the income shares of labour and capital, and the breakdown for each between the finance and non-finance (“industrial”) sectors, in two four-year periods. They were 1990-91 to 1993-94 (when the ABS started publishing income by industry) and, most recently, 2013-14 to 2016-17. (I use four-year periods to reduce annual fluctuations and show the longer-term trends. <a href="https://d3n8a8pro7vhmx.cloudfront.net/theausinstitute/pages/2838/attachments/original/1532441299/Labour_Share_Symposium_Peetz.pdf?1532441299">Here</a> is more detail and explanation of methods.)</p> <h2>Income shares of labour and capital</h2> <p><img src="https://images.theconversation.com/files/231263/original/file-20180809-30464-pr7pkc.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt="" /> <span class="caption">Factor shares by industry, 1990-94 and 2013-17.</span> <span class="attribution"><span class="source">Source: ABS Cat No 5206.0</span></span></p> <p>The key thing to notice in the chart is that finance capital’s share of national income doubled (it’s the dark red boxes in the lower right-hand side of the chart), while everyone else’s went down.</p> <p>So, over that quarter-century, <a href="http://www.abs.gov.au/AUSSTATS/ABS@Archive.nsf/log?openagent&amp;5204046_factor_income_by_industry.xls&amp;5204.0&amp;Time%20Series%20Spreadsheet&amp;0B9214F6B9273E85CA2581C50014A63A&amp;0&amp;2016-17&amp;27.10.2017&amp;Latest">the share of labour income (wages, salaries and supplements) in national income fell</a>. In the early 1990s it totalled 55.02% — that’s what you get when you add labour income in finance, 3.21%, to labour income in “industrial” sectors, 51.81%. In recent years this fell to 53.58%. There were falls in both finance labour income (from 3.81 to 2.83% of national income) and industrial labour income.</p> <p>The total share of profits and “mixed income” accordingly rose from 44.99% to 46.42%. The thing is, all of that increase (and a bit more) went to finance capital. Profits in finance went from 3.16% to 6.16% of the economy.</p> <p>At the same time there has been a large increase in the share of national income going to the very wealthy — the top 0.1% — in <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1631072">Australia</a> and many <a href="https://www.parisschoolofeconomics.eu/en/news/the-top-incomes-database-new-website/">other countries</a>.</p> <p>This shift in resources does not reflect more people being needed to do important finance jobs. Nor is it higher rewards for workers in finance. The portion of national income, and for that matter <a href="http://www.abs.gov.au/AUSSTATS/abs@.nsf/ProductsbyCatalogue/5F60A449AE6DE5F6CA258090000ED52A?OpenDocument">employment</a>, devoted to labour in the financial sector actually fell from 3.21% to 2.83%.</p> <p>The economy devotes proportionately no more labour time now to financial services than it did a quarter century ago. Yet rewards to finance have increased immensely. The share of national income going to “industrial” sector profits and “mixed income” has declined.</p> <p>In short, the <a href="https://books.google.com.au/books/about/The_End_of_Laissez_Faire.html?id=GKAiBAAAQBAJ&amp;redir_esc=y">widely recognised</a> <a href="https://www.bis.org/publ/work231.htm">shift in income</a> from <a href="http://eprints.lse.ac.uk/83616/1/dp1482.pdf">labour to capital</a> is really a net shift in income from labour, and from capital (including unincorporated enterprises) in other industries, to finance capital.</p> <h2>Finance matters</h2> <p>You may have heard about “<a href="http://www.levyinstitute.org/publications/financialization">financialisation</a>”. It’s not really about more financial activity. It is about the growth of finance capital and its impact on the behaviour of other actors.</p> <p>Financialisation has led to finance capital taking the <a href="https://theconversation.com/who-owns-the-world-tracing-half-the-corporate-giants-shares-to-30-owners-59963">lead shareholdings in most large corporations</a>, not just in Australia but in other major countries (to varying degrees) as well.</p> <p>This role as main shareholder and, of course, chief lender to industrial capital has driven the corporate restructuring over the past three decades that has led to greater worker insecurity and low wages growth (as I recently discussed <a href="https://theconversation.com/self-employment-and-casual-work-arent-increasing-but-so-many-jobs-are-insecure-whats-going-on-100668">here</a>).</p> <p>When “industrial capital” has been restructured over recent decades — to promote franchising, labour hire, contracting out, spin-off firms, outsourcing, global supply chains, and even the emergence of the gig economy — it has been driven by the demands of finance capital. Casualisation is just one manifestation of this.</p> <h2>Short-term logic</h2> <p>Now there’s no conspiracy here (or, at least, the system doesn’t rely on one). There is actually a lot of competitive mindset in the financial sector. This is just the logic of how the system increasingly has come to work. Financial returns, particularly over the short term, have become the principal (really, the only) fact driving corporate behaviour.</p> <p>This has come at the expense of human considerations.</p> <p>That same logic is behind resistance to action on climate change. Continuing carbon emissions are the perfect, and deadly, example of short-term profits overriding longer-term interests.</p> <p>Yet even finance capital is not monolithic. There are <a href="https://theconversation.com/class-and-climate-how-financial-warfare-affects-the-air-23019">parts of finance capital</a> that have a longer-term perspective (“<a href="https://www.forbes.com/sites/85broads/2012/12/19/theres-no-business-on-a-dead-planet-green-business-is-good-business-the-necessity-of-paradigm-changes/#54d71e737547">there’s no business on a dead planet</a>”). So they are effectively in battle with those parts of finance capital for which the short term is everything. The former <em>want</em> governments to intervene in, for example, carbon pricing.</p> <h2>Policy questions</h2> <p>All this leaves some big questions for policymakers about how to redress the new imbalance of power.</p> <p>In part, it requires changing institutional arrangements (including industrial relations laws) that in recent years have made it much harder for workers to obtain a fair share of increases in national income. It requires rethinking of how we regulate work.</p> <p>But it also requires rethinking of how we regulate product markets and financial markets.</p> <p>The almost <a href="http://documents.worldbank.org/curated/en/235201468764398871/Financial-deregulation-and-the-globalization-of-capital-markets">global reduction in regulation</a> <a href="http://www.slate.com/articles/business/project_syndicate/2011/05/listen_to_the_imf_america.html">of the financial sector</a> over three decades ago has ultimately led to this imbalance. It is time to rethink all of that.<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;" src="https://counter.theconversation.com/content/101107/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines --></p> <p><span><a href="https://theconversation.com/profiles/david-peetz-4004">David Peetz</a>, Professor of Employment Relations, Centre for Work, Organisation and Wellbeing, <em><a href="https://theconversation.com/institutions/griffith-university-828">Griffith University</a></em></span></p> <p>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/finance-drives-everything-including-your-insecurity-at-work-101107">original article</a>.</p> <p><em>Image: jijomathaidesigners</em></p>

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Overhaul of payments system to cover digital wallets, buy now pay later, cryptocurrency

<p>Treasurer Josh Frydenberg will announce on Wednesday a comprehensive reform of regulations governing the payments system, to bring it up to date with innovations such as digital wallets and cryptocurrency.</p> <p>The government says without the changes – the biggest in 25 years – Australians businesses and consumers could increasingly be making transactions in spaces beyond the full reach of Australian law, where rules were determined by foreign governments and multinationals.</p> <p>It points out that in three decades payment methods have gone from cash to cheques, cheques to credit cards, credit cards to debit cards and now to “tap and go” via digital wallets on phones or watches.</p> <p>Around a decade ago, cryptocurrency was a concept. Currently, there are more than 220 million participants in the worldwide crypto market, including many in Australia.</p> <p>The planned reforms will centralise oversight of the payment system by ensuring government plays a greater leadership role. The treasurer will be given more power to intervene in certain circumstances.</p> <p>Consumer protection will be strengthened, and more competition and innovation will be promoted.</p> <p>The reform program will be in two phases. There will be consultations in the first half of next year on those that are most urgent and easy to implement. Consultations on the rest will be done by the end of the year.</p> <p>The government says the present one-size-fits-all licensing framework for payment service providers will be replaced graduated, risk-based regulatory requirements.</p> <p>There will be consideration of the feasibility of a retail central bank digital currency, and an examination of “de-banking” (where a bank declines to offer a service to a business or individual).</p> <p>Frydenberg says the comprehensive payments and crypto asset reform program would “firmly place Australia among a handful of lead countries in the world.</p> <p>"It is how we will capitalise on the opportunity for Australia to lead the world in this emerging and fast-growing area which has almost endless potential applications across the economy,” he says.</p> <p>“For businesses, these reforms will address the ambiguity that can exist about the regulatory and tax treatment of crypto assets and new payment methods.</p> <p>"In doing so, it will drive even more consumer interest, facilitate even more new entrants and enable even more innovation to take place.</p> <p>"For consumers, these changes will establish a regulatory framework to underpin their growing use of crypto assets and clarify the treatment of new payment methods.”<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;" src="https://counter.theconversation.com/content/173331/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines --></p> <p><span><a href="https://theconversation.com/profiles/michelle-grattan-20316">Michelle Grattan</a>, Professorial Fellow, <em><a href="https://theconversation.com/institutions/university-of-canberra-865">University of Canberra</a></em></span></p> <p>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/overhaul-of-payments-system-to-cover-digital-wallets-buy-now-pay-later-cryptocurrency-173331">original article</a>.</p> <p><em>Image: Shutterstock</em></p>

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Why happiness is becoming more expensive and out of reach for many Australians

<p>One of the most well-known findings in the economic study of happiness is that, on average, happiness increases with income, but <a href="https://www.theguardian.com/money/2016/jan/07/can-money-buy-happiness">at a certain point diminishing returns set in</a>.</p> <p>In other words, money can only buy a fixed level of happiness, after which extra income and wealth doesn’t make much difference. Presumably after this point, happiness depends on other things, such as <a href="https://blogs.lse.ac.uk/behaviouralscience/2016/01/04/does-money-buy-happiness-it-depends-on-the-context/">health, leisure time, quality of friendships and close family</a>.</p> <p>Our new study, published in October, found the income level required to be happy in Australia <a href="https://www.sciencedirect.com/science/article/pii/S235282732100224X">has been increasing and moving out of reach of most Australians</a>.</p> <p>The happiness of increasing numbers of Australians has become more dependent on income than ever this millennium.</p> <h2>Happiness increases with income, to a point</h2> <p>Nobel prize winning psychologist Daniel Kahneman first described the change point where extra income begins to matter less for happiness. He found this change point <a href="https://www.pnas.org/content/107/38/16489.short">in the United States was US$75,000</a> in 2008.</p> <p>This was substantially more than the US median income of $52,000 in the same year.</p> <p>The difference revealed an unacknowledged inequity in the distribution of well-being in the US economy. The happiness of the poorest majority of the US population (<a href="https://dqydj.com/household-income-by-year/">68%</a>) was tied to marginal changes in income, while that of a richer minority (32%) wasn’t.</p> <p>But what about fairer, more egalitarian countries with a strong middle-class, like Australia? Since the start of the millennium, Australia has enjoyed a <a href="https://www.pc.gov.au/research/completed/rising-inequality">growing household real income and stable levels of income inequality</a>, better than the US and on <a href="https://data.oecd.org/inequality/income-inequality.htm">par with the OECD average</a>.</p> <p>And the average level of <a href="https://www.oecdbetterlifeindex.org/topics/life-satisfaction/">life-satisfaction</a> in Australia has been reliably higher than the OECD average, as well as the US.</p> <p>In terms of real income, income inequality and overall life satisfaction, Australia has a stable and solid record.</p> <p>However, life satisfaction isn’t the same as happiness.</p> <h2>What did we study?</h2> <p>We used data from the influential Household, Income and Labour Dynamics in Australia (HILDA) <a href="https://melbourneinstitute.unimelb.edu.au/hilda">survey</a>, provided by the Melbourne Institute.</p> <p>This data show Australia’s average happiness has been declining since 2009.</p> <p>The annual HILDA survey asks Australians to recall how often they felt happy, joyful, sad, tired or depressed in the last month, in each year since 2001.</p> <p>The frequency of these feelings is quite different from a single rating of how satisfied you are with your life.</p> <p>In <a href="https://www.sciencedirect.com/science/article/pii/S235282732100224X">our study</a>, we combined each person’s frequencies into a single <em>happiness score</em> to see how it changed between 2001 and 2019 in relation to household income.</p> <p>When people were asked to consider how often they experienced different emotions in the past month, rather than how satisfied they are with their life in general, the average happiness score peaked in 2009 and has declined every year since 2012.</p> <p><img src="https://images.theconversation.com/files/429661/original/file-20211101-19-1akyflf.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt="" /> <span class="caption">Household income and life satisfaction have been stable in Australia since 2009, while happiness has been decreasing.</span> <span class="attribution"><span class="source">HILDA survey</span></span></p> <h2>What did we find?</h2> <p>The change point at which the happiness of most Australians no longer strongly depends on income has almost doubled from A$43,000 to A$74,000.</p> <p>At the same time, the median income has lingered at less than A$50,000 per year since 2009.</p> <p>The number of Australians on an income below this change point has increased from around 60% to 74%.</p> <p>These changes have taken place after adjusting for inflation and cost-of-living increases.</p> <p><img src="https://images.theconversation.com/files/430696/original/file-20211108-10121-109l8gj.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt="" /> <span class="caption">Average happiness has declined as the population below the income change point has increased.</span> <span class="attribution"><span class="source">HILDA survey</span></span></p> <h2>So what does this trend over time mean?</h2> <p>Our work shows someone living in the average Australian household earning A$50,000 in 2001 and the equivalent amount in 2019 (adjusted for inflation) has become much less happy over the past two decades.</p> <p>On the other hand, the happiness of people living in a wealthier household (for example, $80,000 per household) has been largely preserved.</p> <p>Over the first two decades of this millennium, more and more Australians’ happiness has become dependent on their income, despite high life satisfaction ratings and stable income inequality across households.</p> <p>These measures of economic well-being and equity, typically published by economic wonks and government policy-makers, aren’t revealing potentially important changes in the underlying marginal return on income across the Australian economy.</p> <p>Income by itself doesn’t explain a large proportion of the variance in happiness, only around 5% (ranging between 1.6% to 14.8% in our study). But it’s still concerning because across the entire population these small changes can be expected to accumulate.</p> <p>Australians’ happiness is becoming more sensitive to income as the change point has increased. At the same time, incomes are stagnating and happiness levels are declining, which is likely to drive further inequities in well-being between the rich and poor in Australia.</p> <p>As Australia heads into a post-COVID world and deals with the economic after-effects of the pandemic, our government and its advisers need to pay attention to more than GDP and growth, and ask whether the distribution of well-being and happiness is improving for everyone.<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;" src="https://counter.theconversation.com/content/170877/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines --></p> <p><span><a href="https://theconversation.com/profiles/richard-morris-1123613">Richard Morris</a>, Research scientist, <em><a href="https://theconversation.com/institutions/university-of-sydney-841">University of Sydney</a></em> and <a href="https://theconversation.com/profiles/nick-glozier-94435">Nick Glozier</a>, Professor of Psychological Medicine, BMRI &amp; Disciplne of Psychiatry, <em><a href="https://theconversation.com/institutions/university-of-sydney-841">University of Sydney</a></em></span></p> <p>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/why-happiness-is-becoming-more-expensive-and-out-of-reach-for-many-australians-170877">original article</a>.</p> <p><em>Image: Shuttershock</em></p>

Retirement Income

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17 habits of people who are great at saving money

<h2 class="slide-title">Good savers don’t procrastinate</h2> <p>Good savers start early, say certified financial planners Janet Stanzak and Kristin Garrett. Many good money savers were taught as children to put away for a rainy day, but even those who weren’t have learned to jump on an opportunity. “Good savers don’t procrastinate financial decisions,” Garrett says.</p> <p>If your employer is not paying you Superannuation, a good rule of thumb is to put 10 and 15 per cent of your pay each month straight into a retirement or Super account.</p> <h2 class="slide-title">Good savers know the difference between wants and needs</h2> <div class="slide-image"> <div id="page2" class="slide-show"> <div id="test" class="slide listicle-slide"> <div class="slide-description"> <p>One of the biggest lies we’re sold today, Stanzak says, is that wants are actually needs. “I’ve had so many clients try and tell me that travel, new clothing, and eating out are real needs. They’re really not.” Instead, good savers actually write down a list of their basic needs, their wants, and their big wishes.</p> </div> </div> </div> <div id="page3" class="slide-show"> <div id="test" class="slide listicle-slide"> <h2 class="slide-title">Good savers don’t rely on autopay</h2> <div id="page3" class="slide-show"> <div id="test" class="slide listicle-slide"> <div class="slide-description"> <p>Autopay makes paying bills easier – in fact, it makes it too easy for money to flow out without you really registering what’s happening. Whether you pay by BPay or via another online transaction, intentionally paying your bills makes your brain note the expenditure. If you do set up autopay (no late fees, after all!), make sure you don’t just set it and forget it. Check the transactions at least once a month to make sure the charges are accurate and get a good sense of what you’re spending. Even better, Garrett adds, good savers write all those transactions down in their budget.</p> <h2 class="slide-title">Good savers make saving easy and automatic</h2> <div class="slide-image"> <div id="page4" class="slide-show"> <div id="test" class="slide listicle-slide"> <div class="slide-description"> <p>Autopay allows you to forget the pain of paying your bills, right? Well it works the other way too. Automating your savings account, either through an automatic transfer on a certain day each month or through using a savings apps, can take the sting out of saving, says Stanzak.</p> </div> </div> </div> <div id="page5" class="slide-show"> <div id="test" class="slide listicle-slide"> <h2 class="slide-title">Good savers have a budget</h2> <div class="slide-description"> <p>Yes, a real, honest-to-goodness written chart or spreadsheet that they update and balance regularly is one of the trademark money-saving tips from savvy savers. “The first clue you have that someone has a problem with money is when they can’t provide their monthly cash flow,” Stanzak says. You can’t save if you don’t even know how much money you have to begin with.</p> </div> </div> </div> </div> <div class="at-below-post addthis_tool" data-url="https://www.readersdigest.com.au/food-home-garden/money/17-habits-of-people-who-are-great-at-saving-money"> <h2 class="slide-title">Good savers use cash</h2> <div class="slide-image"> <p>This isn’t a hard-and-fast rule, Stanzak says, but good savers often tend to use physical types of money. Research shows that people can spend more money with credit cards versus paying with cash. Statistics show that the average non-cash transaction is $100 more than a cash transaction. If you’re trying to save, handing someone a wad of cash provides enough of a mental speed bump to slow down many impulse buys.</p> <h2 class="slide-title">Good savers prioritise saving</h2> <p><img class="size-full wp-image lazyloaded" src="https://3erc1e4bvanrdzas82cngnw1-wpengine.netdna-ssl.com/wp-content/uploads/2021/09/working-out-bills-on-laptop-GettyImages-1150533155-770.jpg" alt="Good savers prioritise saving" data-src="https://3erc1e4bvanrdzas82cngnw1-wpengine.netdna-ssl.com/wp-content/uploads/2021/09/working-out-bills-on-laptop-GettyImages-1150533155-770.jpg" data-portal-copyright="Getty Images" /></p> <div class="slide-image"> <div id="page7" class="slide-show"> <div id="test" class="slide listicle-slide"> <div class="slide-description"> <p>It sounds simple, but one of the best money-saving tips is simply making saving a priority in your life, says Andrea Woroch, a consumer-finance expert. “Before spending on anything else, they pay themselves first by putting savings into a retirement account or other self-directed savings account,” she says.</p> </div> </div> </div> <div id="page8" class="slide-show"> <div id="test" class="slide listicle-slide"> <h2 class="slide-title">Good savers keep track of the little things</h2> <div class="slide-image"> <p>What’s a cup of coffee here or a $2 app there? Little things can add up to big expenses quickly, Garrett says, often before you even realise what’s happening. Good savers will write down, in their ledger or budget, all their expenses, even the tiniest ones. Doing this can also help you track down hidden fees you had no idea you were paying.</p> </div> </div> </div> </div> </div> </div> </div> </div> </div> <div class="slide-image"> <h2 class="slide-title">Good savers look for deals</h2> <div class="slide-image"> <div id="page9" class="slide-show"> <div id="test" class="slide listicle-slide"> <div class="slide-description"> <p>Being frugal is a big part of saving money. And good savers are not too proud to use coupons, hunt down the best deals, or research all possible options before buying. “Good savers think through each purchase and research alternatives like used options, compare competitor prices, look for coupons, and read reviews in detail to make the best buying decision,” Woroch says.</p> <div class="at-below-post addthis_tool" data-url="https://www.readersdigest.com.au/food-home-garden/money/17-habits-of-people-who-are-great-at-saving-money"> <h2 class="slide-title">Good savers adjust for life changes</h2> <div class="slide-image"> <div id="page10" class="slide-show"> <div id="test" class="slide listicle-slide"> <div class="slide-description"> <p>“You’d be amazed at how many people get divorced but keep living their married lifestyle,” Stanzak says. Big life changes, like job layoffs, divorce and illness, inevitably affect our budgets. Good savers amend their spending to reflect their new earning or income status regardless of how painful it is to acknowledge.</p> <div class="at-below-post addthis_tool" data-url="https://www.readersdigest.com.au/food-home-garden/money/17-habits-of-people-who-are-great-at-saving-money"> <h2 class="slide-title">Good savers take free money</h2> <div class="slide-image"> <div id="page1" class="slide-show"> <div id="test" class="slide listicle-slide"> <div class="slide-description"> <p>Does your employer give you a discount on your health insurance for getting an annual check-up? Does your company have employee stock options or offer to match your retirement savings? Do you have flight miles or hotel points accrued that you’re not using? Many people leave this so-called ‘free money’ on the table, Woroch says. It may take a little extra effort to fill out the paperwork, but it’s worth the time.</p> </div> </div> </div> <div id="page2" class="slide-show"> <div id="test" class="slide listicle-slide"> <h2 class="slide-title">Good savers have three to six months of expenses saved</h2> <div class="slide-image"> <div id="page2" class="slide-show"> <div id="test" class="slide listicle-slide"> <div class="slide-description"> <p>Many people live pay to pay, which means millions of people are just one bad car accident or layoff away from financial ruin. It may sound obvious, but good savers save. How much savings you need depends entirely on your lifestyle, but Garrett and Stanzak recommend having enough money to cover at least three to six months of basic expenses like mortgage, insurance, utilities and food.</p> <div class="at-below-post addthis_tool" data-url="https://www.readersdigest.com.au/food-home-garden/money/17-habits-of-people-who-are-great-at-saving-money"> <h2 class="slide-title">Good savers are honest with themselves</h2> <div class="slide-image"> <div id="page3" class="slide-show"> <div id="test" class="slide listicle-slide"> <div class="slide-description"> <p>None of us are getting any younger. Yet so many people live in denial of this fact, Stanzak says. The truth is that each of us has risk factors that could affect financial security. Good savers are honest about their particular risks – advancing age, tenuous job security, chronic health problems, family issues,  – and plan their savings to account for them.</p> <div class="at-below-post addthis_tool" data-url="https://www.readersdigest.com.au/food-home-garden/money/17-habits-of-people-who-are-great-at-saving-money"> <h2 class="slide-title">Good savers do not feel entitled</h2> <div class="slide-image"> <div id="page4" class="slide-show"> <div id="test" class="slide listicle-slide"> <div class="slide-description"> <p>“Too many people have this attitude of entitlement,” Stanzak says. “They get caught up in ‘I work hard, so I should have this because I earned it’.” But if you can’t afford a nice car or a day at the spa, you shouldn’t buy it, no matter how hard you work or how strongly you feel you deserve it.</p> </div> </div> </div> <div id="page5" class="slide-show"> <div id="test" class="slide listicle-slide"> <h2 class="slide-title">Good savers live below their means</h2> <div class="slide-image"><img class="size-full wp-image lazyloaded" src="https://3erc1e4bvanrdzas82cngnw1-wpengine.netdna-ssl.com/wp-content/uploads/2021/09/woman-checking-price-tag-on-clothing-GettyImages-1174172845-770.jpg" alt="Good savers live below their means" data-src="https://3erc1e4bvanrdzas82cngnw1-wpengine.netdna-ssl.com/wp-content/uploads/2021/09/woman-checking-price-tag-on-clothing-GettyImages-1174172845-770.jpg" data-portal-copyright="Getty Images" /></div> <div class="slide-description"> <p>Just because you have money to spend doesn’t mean you should spend it. Good savers know that living below their means can help them save more for the future. For instance, just because you can afford a new car doesn’t necessarily mean you should buy one. If your car is in good shape, use it for as long as you can. Another way to live below your means may be to downsize your home.</p> </div> </div> </div> </div> </div> </div> </div> </div> </div> </div> </div> </div> </div> <div id="page3" class="slide-show"> <div id="test" class="slide listicle-slide"> <h2 class="slide-title">Good savers know when it’s time to pick up a side gig</h2> <div class="slide-image"> <div id="page6" class="slide-show"> <div id="test" class="slide listicle-slide"> <div class="slide-description"> <p>Good savers are brutally honest about their income. They know how much they can afford to put away each month, and if they need to make more money to reach their savings goals. If need be, they pick up side gigs to help them meet their goals.</p> </div> </div> </div> <div class="ad-slug text-center"> <h2 class="slide-title">Good savers start small</h2> <div class="slide-image"> <p style="text-align: left;">It can be easy to read lists of money-saving tips like this and feel completely overwhelmed and throw in the towel. But saving doesn’t have to be a huge change, Woroch says. “If you’re new to saving, start small. It’s easier to adapt to a small change than a complete life overhaul,” she explains. “So begin by automating a small amount each week and when you become accustomed to saving that amount and living off what you have left, increase it by a little. You’ll continue creating a better savings habit each time.”</p> <p style="text-align: left;"><em>This article was originally published on Reader's Digest. Click <a href="https://www.readersdigest.com.au/food-home-garden/money/17-habits-of-people-who-are-great-at-saving-money">here</a> to read the original article.</em></p> <p style="text-align: left;"><em>Image: Getty Images</em></p> </div> </div> </div> </div> </div> </div> </div> </div> </div> </div> </div> </div> </div> </div> </div> </div> </div> </div> </div> </div> </div> </div> </div>

Retirement Income

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Indigenous Australians retire with 27% less savings

<p>Indigenous people will retire with 27% less income than non-Indigenous Australians, according to new research by Griffith Centre for Personal Finance and Superannuation. *</p> <p>People who identify as being of Aboriginal and Torres Strait Islander (ATSI) origin make up <a href="http://www.abs.gov.au/ausstats/abs@.nsf/mf/3238.0.55.001">2.5% of Australia’s population</a>. Australia’s indigenous people have a younger age distribution compared to non-indigenous Australians, with a median age of 21 years compared to 38 years for the non-indigenous population.</p> <p>Superannuation is a highly researched area - however, very little attention has been given to understanding the retirement outcomes associated with indigenous Australians.</p> <p>Researchers at the Griffith Centre for Personal Finance and Superannuation (GCPFS) have examined the retirement gap between the “typical” worker and other disadvantaged socio-economic segments (such as indigenous Australians) given the effects of time, asset returns and contribution rates.</p> <p><a href="http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/2076.0main+features602011">The median indigenous income</a> (for an employed person) is approximately 23% lower than the non-indigenous income per week.</p> <p>A possible explanation for the income gap between Indigenous and non-Indigenous Australians is the level of education of the two populations. <a href="http://www.pc.gov.au/research/ongoing/overcoming-indigenous-disadvantage/key-indicators-2014/key-indicators-2014-report.pdf">The evidence</a> shows that Indigenous Australians have a substantially lower level of education than their non-Indigenous counterparts.</p> <p>Around 59% of ATSI people aged 20-24 in 2012-2013 have completed year 12 or equivalent. For the non-Indigenous population aged 20-24 in 2010-2012 the proportion was 86-88%.</p> <p><a href="http://www.pc.gov.au/research/ongoing/overcoming-indigenous-disadvantage/key-indicators-2014/key-indicators-2014-report.pdf">Reports</a> show strong correlations between lower educational attainments, low incomes, unemployment and income support across both groups. Studies by <a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1759-3441.2008.tb01040.x/epdf0">Leigh 2008</a> show that non-completers earn lower wages, by as much as 8-11% for each year of non-attainment among other disadvantages.</p> <p>This evidence can be seen in the <a href="http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/2076.0main+features802011">distribution of occupations</a>. At the low end of the pay scale, about 18% of employed indigenous Australians work as labourers and 17% as community and personal service workers compared to 9% and 10% for non-indigenous employees, respectively.</p> <p>On the other hand, professionals and managers make up close to 20% of the indigenous workforce while the non-indigenous workforce comprises around 34% in these occupations. <a href="http://www.lsay.edu.au/publications/2308.html">Improving literacy and numeracy levels and increasing year 12 completion rates</a> could significantly improve education and employment outcomes for ATSI Australians. This is important as the level of income directly impacts on superannuation contributions and retirement savings.</p> <p>Our study simulates the retirement outcomes of two individuals, an indigenous and non-indigenous Australian, both aged 25 years and in some form of full-time employment, under similar contribution and returns assumptions. The two full-time workers are assumed to contribute 9.5% of their pre-tax annual income into their superannuation fund.</p> <p>This fund is invested in different strategies and we report the results based on a balanced 70/30 superannuation fund (that is, a fund has 70% invested in assets such as domestic and international shares, infrastructure and property and 30% in cash).</p> <p>Our findings show that the non-indigenous full-time worker accumulates approximately 30% more superannuation wealth, on average, than the indigenous worker across all percentiles. This translates to about $165,000 (in today’s dollars) in extra superannuation savings, on average. Is this level of savings able to generate income to support a comfortable retirement?</p> <p>We estimate how much guaranteed income one is able to derive from their superannuation at retirement and compare it to the <a href="http://www.superannuation.asn.au/resources/retirement-standard">Association of Superannuation Funds of Australia (ASFA) estimates</a> for a comfortable retirement.</p> <p>While the presence of the age pension complements the superannuation balance and may propel one to reach the comfortable retirement estimates, we investigate how close retirees are to being self-sufficient - that is, attaining comfortable income levels in the absence of pensions.</p> <h2>Increase contributions or work longer?</h2> <p>For these two populations, we find that for one to be self-sufficient in retirement, the non-indigenous worker will require an 11 per cent annual contribution rate into superannuation to reach the ASFA comfortable retirement income estimate. For the indigenous worker, a superannuation contribution of 14.3% will enable him to attain this retirement estimate.</p> <p>While the ASFA estimate may not be a silver bullet in determining what makes a comfortable retirement, we believe it is a good anchor to inform and compare income levels in retirement.</p> <p>If superannuation contributions remain at the current rate of 9.5 percent, both populations will need to delay retirement in order to accumulate wealth to sustain a comfortable income level in retirement. The non-indigenous Australian is able to retire with an adequate income at age 68 years.</p> <p>The indigenous Australian who wants to retire comfortably on a 9.5% annual contribution must work until age 71.5 years, 6 and half years more than the current retirement age.</p> <h2>Lifetime impact of the difference in incomes</h2> <p><img src="https://images.theconversation.com/files/110931/original/image-20160210-12185-136andj.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt="" /> <span class="caption"></span> <span class="attribution"><span class="license">Author provided</span></span></p> <p>In summary, differences in current incomes have a significant impact on retirement outcomes. For about a $300 gap in weekly income (pre-tax), the male indigenous worker has a mean retirement outcome which is 27% lower than the male non-indigenous Australian over 40 years. This translates into a difference of approximately $250,000 in today’s dollars.</p> <p>The average retirement balance of the non-indigenous female sits at 1% lower than the indigenous male. We use optimistic assumptions for non-indigenous women including no career break or other disturbances to their working pattern. The inclusion of these real-life parameters will further reduce these retirement outcomes. The mean superannuation balance of female indigenous workers is 64 percent lower than non-indigenous males.</p> <p>This difference equates to approximately $350,000 in today’s dollars. There is significant variation in retirement outcomes from the “typical” Australian and while we consider ways to improve the gender balance, the story for indigenous Australians is equally important. <!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;" src="https://counter.theconversation.com/content/50840/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines --></p> <p><span><a href="https://theconversation.com/profiles/osei-k-wiafe-160104">Osei K. Wiafe</a>, Research Fellow, Griffith Centre for Personal Finance and Superannuation (GCPFS), <em><a href="https://theconversation.com/institutions/griffith-university-828">Griffith University</a></em></span></p> <p>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/indigenous-australians-retire-with-27-less-savings-50840">original article</a>.</p> <p><em>Image: <span class="attribution"><span class="source">Flickr/Michael Coghlan</span></span></em></p>

Retirement Income

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I chose the electricity retailer offering the best deal for my home. That’s not what I got

<p>Households in most of Australia have been able to choose between electricity retailers for more than a decade. The main reason is to <a href="https://www.accc.gov.au/publications/restoring-electricity-affordability-australias-competitive-advantage">reduce their bills</a>.</p> <p>But past research by the <a href="https://www.vepc.org.au/">Victoria Energy Policy Centre</a> (at Victoria University) has found only marginal benefits in switching retailers. Our study of more than 48,000 bills from Victorian households in 2018, for example, found households typically saved <a href="https://theconversation.com/victorians-who-switched-energy-retailers-only-save-45-a-year-leaving-hundreds-on-the-table-122786">less than A$50 a year</a> by switching energy providers.</p> <p>Has anything improved since then? A few weeks ago I decided to test the market for my own household supply. To guide my choice, I evaluated 357 competing offers from 30 retailers using my half-hourly consumption and solar export data for the last year.</p> <p>The 357 offers came from the Victorian government’s price comparison <a href="https://compare.energy.vic.gov.au/">website</a>, the only comprehensive source of all commonly available offers. After having found the deal I wanted, it was a painless and quick online process to switch to the new retailer.</p> <p>Two weeks later I checked what had actually happened.</p> <p>I discovered my new retailer had not switched me to its cheapest offer, but to one of its most expensive. I estimate I’ll still save about $143 for the year. But I would have saved about $100 more if the company had put me on its cheapest advertised offer (which, after all, was the reason I chose this retailer).</p> <p>These numbers might not be large, but I have a small bill because I have solar panels and consume much less electricity than typical customers. For the typical customer, the differences would be bigger.</p> <p>I have asked my new retailer to explain, but am yet to receive a reply.</p> <h2>How I worked out my (lack of) savings</h2> <p>My electricity bill has several elements: a daily charge, two consumption rates and a solar feed-in rate. You might note such elements in the offer you choose and then compare them to the offer the retailer actually puts you on. But you’d need to be highly motivated with time on your hands to do so.</p> <p>To do my sums I used special software to scrape and price all competing offers. This software, developed over several years and used in our previous research, is not publicly available.</p> <p>The outcome of my test is broadly consistent with the findings of our previously mentioned research.</p> <p>That analysis – <a href="https://link.springer.com/article/10.1007%2Fs11149-020-09418-9">using more than 48,000 bills</a> voluntarily uploaded to the Victorian government’s price comparison website in 2018 – found typical households could theoretically save A$281 a year, or about 20% of their bill, by switching to the best possible advertised deal.</p> <p>In reality, however, customers who switched retailers saved only A$45 a year – or about 3% of their annual bill.</p> <p><img src="https://images.theconversation.com/files/431880/original/file-20211115-13-1wdrcv4.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt="Child using light switch" /> <span class="caption">In theory customers who switch electricity retailers should be able cut their annual bill by 20%. In reality it turns out to be about 3%.</span> <span class="attribution"><span class="source">Shutterstock</span></span></p> <p>I cannot be sure my recent experience is typical. But I think it likely other switchers will have had a similar experience. My study of the 357 competing offers available to me suggests many retailers seem to use “bait and switch” – or “tease and squeeze” – marketing strategies to attract new customers.</p> <h2>What should be made of this?</h2> <p>Choice can be valuable. Competition can lead to innovations – such as solar and battery packages with zero upfront payment that are now appearing in the the market. But the benefit of reforms making it easier to choose and switch between electricity retailers are not being fully realised.</p> <p>The more complex the market becomes as electricity generation is progressively decentralised and electricity buyers also become sellers, the harder it becomes to assess the merits of the complicated offers from energy retailers. Or even to know if what you signed up for is what you are actually getting.</p> <p>Had I known my new retailer would not switch me to its best offer (the one that attracted me in the first place), I wouldn’t have switched.</p> <p>This underlines the need for governments and regulators to look at how the market is working in practice, not just in theory.</p> <p>Examples of this approach are the 2017 independent review of Victoria’s electricity and gas retail markets <a href="https://www.energy.vic.gov.au/about-energy/policy-and-strategy">chaired by former deputy premier John Thwaites</a> and the Australian Competition and Consumer Commission’s <a href="https://www.accc.gov.au/publications/restoring-electricity-affordability-australias-competitive-advantage">2018 inquiry into electricity affordability</a>. But these are exceptions.</p> <p>The devil lies in the detail of how customers search for better offers and then switch to retailers in pursuit of those better offers. Regulations to clean up possibly misleading advertising and “sharp” business practices should flow from that.<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;" src="https://counter.theconversation.com/content/171676/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines --></p> <p><span><a href="https://theconversation.com/profiles/bruce-mountain-141253">Bruce Mountain</a>, Director, Victoria Energy Policy Centre, <em><a href="https://theconversation.com/institutions/victoria-university-1175">Victoria University</a></em></span></p> <p>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/i-chose-the-electricity-retailer-offering-the-best-deal-for-my-home-thats-not-what-i-got-171676">original article</a>.</p> <p><em>Image: Shutterstock</em></p>

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There’s an easy way to figure out if you’ll have enough money to retire

<p><span style="font-weight: 400;">The Association of Superannuation Funds of Australia estimates that the lump sum needed for a couple to retire comfortably is $640,000, or $545,000 for a single person - far from the $1 million that’s often cited. </span></p> <p><span style="font-weight: 400;">If you aren’t sure if you have enough money to retire, there are a couple of online tools that will help you figure it out quick smart. One is </span><a href="https://www.superguru.com.au/"><span style="font-weight: 400;">ASFA’s Super Balance Detective</span></a><span style="font-weight: 400;">. To use it, you simply enter your year of birth, and the calculator shows you how much super you should have today. </span></p> <p><span style="font-weight: 400;">Naturally, there are many underlying assumptions behind that number, but it is primarily based on average investment returns and average fees. It’s also based on how much the ASFA Retirement Standard calculates you need to live on after retiring at the age of 67. </span></p> <p><span style="font-weight: 400;">So how much super should you have by now? If you were born in 1970, you should have about $285,000; for those born in 1965, it’s $360,000; for those born in 1960, it should be around $449,000. Those born in 1955 should have about $535,000 saved up, putting them just $10,000 from retiring comfortably (assuming they’re single). </span></p> <p><span style="font-weight: 400;">Another handy calculator is the government’s </span><a href="https://moneysmart.gov.au/how-super-works/superannuation-calculator"><span style="font-weight: 400;">moneysmart super calculator</span></a><span style="font-weight: 400;">. Enter your specific super balance, along with your age and income/super contribution details. The calculator will then give you a forecast balance at the retirement age of your choosing, based on achievable investment assumptions (the default settings are for an investment return of 7.5 per cent annually, but you can adjust this number as you see fit). </span></p> <p><span style="font-weight: 400;">There are several things you can do to boost your super. Ensuring your fees are low is one way to get the most out of your super fund’s investment performance. The government’s moneysmart calculator uses investment fees of 0.85 per cent and an administration fee of $74; using these as a guide, if you’re paying more than that, make sure your returns are higher to match. </span></p> <p><span style="font-weight: 400;">Checking in your fund’s performance is also a good idea, and can be done using the ATO’s </span><a href="https://www.ato.gov.au/Calculators-and-tools/YourSuper-comparison-tool/"><span style="font-weight: 400;">YourSuper comparison tool</span></a><span style="font-weight: 400;">. It ranks MySuper products on both fees and returns, and now labels underperforming super funds as such. It will also prompt you to resolve the problem if your super is leaking money because you have multiple accounts and thus, multiple sets of fees. </span></p> <p><em><span style="font-weight: 400;">Image: Marko Geber/Getty Images</span></em></p>

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What is Bitcoin’s fundamental value? That’s a good question

<p>As it hits new highs, there is no shortage of bold predictions about Bitcoin <a href="https://www.forbes.com/sites/billybambrough/2021/11/02/crypto-price-prediction-bitcoin-could-hit-100000-before-the-end-of-2021-but-lacks-ethereum-intensity/?sh=392b38e96b7d">reaching US$100,000</a> or more.</p> <p>Often these are based on not much more than extrapolations by people with vested interests: the price has gone up a lot so it will keep going up. If it gets above its previous high, it must keep going up.</p> <p>There is also “charting” or “technical analysis” – looking at graphs and seeing patterns in them. There may be fancy terms such as “<a href="https://cointelegraph.com/news/analysts-expect-parabolic-bitcoin-price-move-after-the-last-resistance-at-67k-falls">resistance levels</a>” and “<a href="https://www.investopedia.com/terms/t/tenkansen.asp#:%7E:text=Tenkan-sen%2C%20or%20conversion%20line%2C%20crates%20a%20moving%20average,information%20in%20a%20single%20view%20for%20technical%20analysts.">Tenkan-Sen</a>”. There is talk about “<a href="https://seekingalpha.com/article/4459569-bitcoin-fundamentals-and-technicals-tell-the-same-story">fundamentals</a>”.</p> <p>Let’s examine this last idea. Does Bitcoin have a fundamental value?</p> <h2>Calculating fundamental values</h2> <p>A fundamental value in traditional financial-speak means a value based on what return (or cash flow) is generated by an asset. Think of an apple tree. To an investor its fundamental value is in the apples it produces.</p> <p>In the case of company shares, the fundamental value is the dividend paid from profits. A standard measure used by investors is the price-to-earnings ratio. In property, the fundamental value reflects the rent the investor earns (or the owner-occupier saves). For a bond, the value depends on the interest it pays.</p> <p>Gold has a fundamental value also, based on its use for jewellery or dental fillings or in electronics. But this value is not why most people buy gold.</p> <h2>Fundamentals for cryptocurrencies</h2> <p>National currencies are different. Their value is in being a trusted and accepted unit of exchange.</p> <p>In the past coins made with gold and silver had a fundamental value because they could be melted down for their precious metals. That’s no longer the case with fiat currencies, whose value depends solely on people trusting that others accept them at face value.</p> <p>Most cryptocurrencies, such as Bitcoin, Ethereum and Dogecoin are essentially private <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3888752">fiat currencies</a>. They have no corresponding assets or returns. This makes it hard to determine a fundamental value.</p> <p>In September analysts with Britain’s Standard Chartered Bank <a href="https://www.nasdaq.com/articles/%24789-billion-standard-chartered-sees-bitcoin-hitting-%24100000-by-early-next-year-2021-09-08">argued</a> Bitcoin could peak at about US$100,000 by the end of 2021. “As a medium of exchange, Bitcoin may become the dominant peer-to-peer payment method for the global unbanked in a future cashless world,” said the head of the bank’s crypto research team, Geoffrey Kendrick (a former Australian Treasury official).</p> <p>Theoretically this could be possible. Globally an estimated <a href="https://www.brinknews.com/bridging-the-digital-divide-to-widen-financial-services-in-central-asia/">1.7 billion people</a> lack access to banking services. But Bitcoin has been spruiked as the future of payments since its invention in 2008. It has made little progress.</p> <p>There are at least two significant barriers. First is the computational grunt needed to process payments. Technology may overcome this. The second obstacle is harder: the volatility of its price.</p> <p>Digital currencies that can maintain a stable value are more likely to become payment instruments. These include the existing stablecoins, <a href="https://www.reuters.com/technology/facebook-backed-crypto-project-diem-launch-us-stablecoin-major-shift-2021-05-12/">Meta’s mooted Diem</a> and <a href="https://www.bis.org/publ/work976.pdf">central bank digital currencies</a>, already <a href="https://www.sanddollar.bs/">operational</a> in some Caribbean economies.</p> <p>So far the only significant company to have accepted payments in Bitcoin is Tesla, which announced this policy in March only to reverse <a href="https://www.bbc.com/news/business-57096305">it in May</a>.</p> <p>The only country to adopt Bitcoin as an approved currency is El Salvador (which also uses the US dollar). But it is far from clear what benefits there are. The laws forcing businesses to accept the cryptocurrency have also led to protests.</p> <h2>Bitcoin as digital gold</h2> <p>If Bitcoin has no real value as a widespread means of payment, what about as a store of value, like digital gold? It does have this advantage over most of the “altcoins”. Its supply, like gold, is (arguably) limited.</p> <p>One tool used by crypto enthusiasts to compare Bitcoin’s scarcity with gold is called the <a href="https://www.cointree.com/learn/bitcoins-stock-to-flow-model/">“stock-to-flow” model</a>. This approach claims gold holds its value because the existing stock of gold is 60 times more than the amount of new gold mined each year. The stock of Bitcoin is more than 50 times than the new coins “mined” annually.</p> <p>But this does not explain why Bitcoin’s price halved earlier this year. Nor does it have any theoretical basis in economics: prices don’t depend just on supply.</p> <p>Some <a href="https://markets.businessinsider.com/news/currencies/cathie-wood-bitcoin-price-prediction-jump-500000-ether-confidence-high-2021-9">Bitcoin promoters</a> predict higher prices on the assumption funds managers will eventually invest an abritrary proportion, say 5%, of their funds in Bitcoin.</p> <p>But such predictions implicitly assume Bitcoin, as the largest and best-known cryptocurrency, will continue to maintain its dominant position in the crypto market. This is not guaranteed. And there is no limit to the number of cryptocurrency alternatives.</p> <p>Remember Bankcard? This credit card company once had 90% of the Australian market in the early 1980s. It was defunct by 2006. What about MySpace? Before 2008 it was a bigger social networking site than Facebook.</p> <h2>Here we go again</h2> <p>In September <a href="https://www.economist.com/leaders/2021/09/18/the-beguiling-promise-of-decentralised-finance">The Economist</a> argued Bitcoin “is now a distraction” to the future of decentralised finance, with rival blockchain cryptocurrency Ethereum “reaching critical mass”.</p> <p>There are parallels between the Bitcoin bubble and the dotcom bubble of 2000, driven by overly optimistic assumptions about new technologies – and human greed.</p> <p>Just as a few stars such as Amazon emerged from the wreckage of the dot.com bubble, so it is possible some applications of the block-chain technology underlying Bitcoin have enduring utility. But I doubt Bitcoin will be one of them.<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;" src="https://counter.theconversation.com/content/171387/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines --></p> <p><span><a href="https://theconversation.com/profiles/john-hawkins-746285">John Hawkins</a>, Senior Lecturer, Canberra School of Politics, Economics and Society and NATSEM, <em><a href="https://theconversation.com/institutions/university-of-canberra-865">University of Canberra</a></em></span></p> <p>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/what-is-bitcoins-fundamental-value-thats-a-good-question-171387">original article</a>.</p>

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90-year-old mechanic retires after 75 years at same company

<p><span style="font-weight: 400;">A 90-year-old Vauxhall mechanic has finally hung up his tools after working for the same company for 75 years, saying continuing to work there helped keep him young.</span></p> <p><span style="font-weight: 400;">Bryan Webb was presented with a ceremonial spanner by colleagues at his farewell, where a plaque made in his honour was also unveiled.</span></p> <p><img style="width: 500px; height: 281.25px;" src="https://oversixtydev.blob.core.windows.net/media/7845385/mechanic1.jpg" alt="" data-udi="umb://media/b753b75e25a34e5689dfa5942d387d79" /></p> <p><em><span style="font-weight: 400;">Bryan Webb (left) with local branch director Julian Bawdown (right) after his plaque was unveiled. Image: Vauxhall</span></em></p> <p><span style="font-weight: 400;">Mr Webb said he would miss working but looked forward to having a cup of tea and a sleep in the afternoons.</span></p> <p><span style="font-weight: 400;">“I always thought if you kept working it kept you young,” he told the </span><em><a rel="noopener" href="https://www.bbc.com/news/uk-england-gloucestershire-59070753" target="_blank"><span style="font-weight: 400;">BBC</span></a></em><span style="font-weight: 400;">.</span></p> <p><span style="font-weight: 400;">“If you work it keeps you going, it gets you up in the morning to get out.”</span></p> <p><span style="font-weight: 400;">Mr Webb started at the company in 1946 as a mechanical apprentice after walking into Hough &amp; Whitmore garage in Gloucester.</span></p> <p><img style="width: 500px; height: 281.25px;" src="https://oversixtydev.blob.core.windows.net/media/7845386/mechanic2.jpg" alt="" data-udi="umb://media/641a77c432d845ed92362d65b684b26a" /></p> <p><em><span style="font-weight: 400;">Bryan Webb (third from left) pictured shortly after starting work as a mechanical apprentice in 1946. Image: Vauxhall</span></em></p> <p><span style="font-weight: 400;">Since then he has gone on to hold several other roles, including a 34-year stint as a warranty administrator. </span></p> <p><span style="font-weight: 400;">“I was in workshop control and working with trucks and cars,” he said.</span></p> <p><span style="font-weight: 400;">“You had to wash engines off out in the cold and it was hard work in the early days but things change, cars change, and when you strip an engine now it’s clean rather than being full of muck.</span></p> <p><span style="font-weight: 400;">“The biggest change I’ve seen in my career is new technology coming in,” he </span><a rel="noopener" href="https://www.media.stellantis.com/uk-en/vauxhall/press/master-and-apprentice-vauxhall-stalwart-retires-after-clocking-up-75-years-of-service?utm_source=vauxhallsocial&amp;utm_medium=SOC-CON&amp;utm_campaign=OV_UK_28102021_vn_AlwaysOnCorsa-e_1GJOA5FESF_OnGoing_SOC-CON_A_TF&amp;ddm1_psa_ovuk=HashedMail" target="_blank"><span style="font-weight: 400;">added</span></a><span style="font-weight: 400;">.</span></p> <p><span style="font-weight: 400;">In 1970, Mr Webb was recognised for 25 years of service and was handed a commemorative watch, which he still wears today.</span></p> <p><img style="width: 500px; height: 281.25px;" src="https://oversixtydev.blob.core.windows.net/media/7845387/mechanic3.jpg" alt="" data-udi="umb://media/87a17fbefa114cf6a961a5628effa9e8" /></p> <p><em><span style="font-weight: 400;">Mr Webb received a ceremonial spanner from his colleagues at his farewell party. Image: BBC</span></em></p> <p><span style="font-weight: 400;">He said that when he turned 65 he would stay on “for a couple of years, and it turned into 25”.</span></p> <p><span style="font-weight: 400;">Local branch director Julian Bawdon - who joined the company in 2008 - said he asked Mr Webb how much longer he would stay with the company.</span></p> <blockquote class="twitter-tweet"> <p dir="ltr"><a href="https://twitter.com/hashtag/Vauxhall?src=hash&amp;ref_src=twsrc%5Etfw">#Vauxhall</a> wishes one of its longest-serving staff members a happy retirement, ending a 75-year career with the company. Bryan Webb began work for <a href="https://twitter.com/vauxhall?ref_src=twsrc%5Etfw">@Vauxhall</a> in 1946, after walking into his local garage &amp; by the age of 26, he was already workshop foreman. 👉<a href="https://t.co/e4zCDuiPGD">https://t.co/e4zCDuiPGD</a> <a href="https://t.co/JwjgKI5Zvr">pic.twitter.com/JwjgKI5Zvr</a></p> — Vauxhall PR (@VauxhallPR) <a href="https://twitter.com/VauxhallPR/status/1453714486959947783?ref_src=twsrc%5Etfw">October 28, 2021</a></blockquote> <p><span style="font-weight: 400;">“I said to him as long as he can still do the job he can carry on, and here we are today with 75 years service,” he said.</span></p> <p><span style="font-weight: 400;">“He’s bright as a button. Bryan’s a character and we’ll all miss having him around.”</span></p> <p><em><span style="font-weight: 400;">Image: Vauxhall</span></em></p>

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Australia’s Reserve Bank signals the end of ultra-cheap money. Here’s what it will mean

<p>The Reserve Bank of Australia had a Cup Day surprise in store for the country, announcing it was abandoning its policy of “<a href="https://www.rba.gov.au/media-releases/2021/mr-21-24.html">yield curve control</a>”, meaning it was no longer going to defend any particular interest rate for borrowing over any particular duration.</p> <p>Until today it had a formal target for the three-year bond yield of 0.10%, enabling banks to provide three-year fixed mortgages very cheaply, and indicating the cash rate wouldn’t climb above 0.10% until the most recent three-year bond expires in <a href="https://www.rba.gov.au/media-releases/2021/mr-21-22.html">April 2024</a>.</p> <p>But it has now abandoned the target, a full two years early.</p> <h2>Why control the yield curve in the first place?</h2> <p>When COVID hit last year, the bank announced it would buy enough government bonds to keep the yield on the three-year bond at <a href="https://theconversation.com/more-than-a-rate-cut-behind-the-reserve-banks-three-point-plan-134140">0.25%</a>, as good as guaranteeing money would be cheap for years to come.</p> <p>Later, it cut the target for three-year bond yields (and the target for its cash rate) to a near-zero <a href="https://theconversation.com/5-ways-the-reserve-bank-is-going-to-bat-for-australia-like-never-before-149311">0.10%</a>, further lowering the cost of borrowing.</p> <p>Responding to an improving economy, the bank decided at its July 2021 meeting not to extend the program bond target beyond <a href="https://www.rba.gov.au/media-releases/2021/mr-21-13.html">April 2024</a>.</p> <p>The decision created a reasonable expectation the cash rate would remain close to zero until 2024.</p> <h2>What did yield curve control achieve?</h2> <p>Yield curve control achieved a lot. It took the bank just 11 days and A$27 billion dollars of bond purchases to achieve its first target, establishing ultra-low interest rates for years into the future.</p> <p>After that, it didn’t need to spend much. The new three-year rate became the new norm. Markets believed it would do whatever was needed to defend it.</p> <p>Over the next 18 months it intervened in the market only occasionally, and only in small amounts. That all changed last week.</p> <p>On October 15, the three-year bond rate started to climb above the bank’s target of 0.10%. It initially bought enough bonds to defend the rate and then, without warning, <a href="https://www.rba.gov.au/media-releases/2021/mr-21-24.html">capitulated</a> last Thursday, as good as withdrawing from the market and allowing the rate to climb to a high of 0.70%.</p> <p>By Monday the rate had climbed to more than 1.00% — more than ten times the Reserve Bank’s target.</p> <p><img src="https://images.theconversation.com/files/429689/original/file-20211102-23-1wn4prr.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt="" /> <span class="caption"></span> <span class="attribution"><a href="https://tradingeconomics.com/gacgb3y:ind" class="source">Trading Economics</a></span></p> <p>Today’s announcement merely <a href="https://www.rba.gov.au/media-releases/2021/mr-21-24.html">made formal</a> what was apparent on Thursday: the bank is no longer going to spend public funds defending a line that might eventually be crossed.</p> <p>Bond traders thought the improving economic outlook meant the bank would have to lift its record low cash rate sooner that it had said it would. It lost the will to disagree.</p> <p>In a <a href="https://www.rba.gov.au/speeches/2021/sp-gov-2021-11-02.html">4pm</a> press conference Governor Philip Lowe said that to maintain the target would have been <a href="https://www.rba.gov.au/speeches/2021/mp3/sp-gov-2021-11-02.mp3">untenable</a>. Eventually the bank would have owned all the three-year bonds on offer.</p> <h2>What will this do to the housing market?</h2> <p>Today’s decision is a sure sign interest rates are going to start to rise. Not today, or even for the rest of this year, but sooner was previously expected.</p> <p>For what it is worth, Lowe said the latest data and forecasts did “not warrant an increase in interest rates in 2022”.</p> <p>For now, sub-2% fixed-rate mortgages are a thing of the past. The last were withdrawn this week.</p> <p>The decision means the booming housing market will start to crest. Low interest rates sparked the boom as renters flocked to become first-homebuyers and investors jumped in to catch rising prices.</p> <p>The prospect of higher mortgage payments is going to dent this enthusiasm, perhaps quickly. Prices are set to stabilise, before edging, <a href="https://www.afr.com/wealth/personal-finance/house-prices-could-fall-as-much-as-20pc-after-rate-increases-20211027-p593mw">or sliding</a> down .</p> <p>We don’t yet know how quickly variable interest rates will start to rise, but given the Reserve Bank has walked away from a battle to defend yield curve control, we do know it’ll be a long time before it even considers doing it again.<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;" src="https://counter.theconversation.com/content/170928/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines --></p> <p><span><a href="https://theconversation.com/profiles/isaac-gross-737430">Isaac Gross</a>, Lecturer in Economics, <em><a href="https://theconversation.com/institutions/monash-university-1065">Monash University</a></em></span></p> <p>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/australias-reserve-bank-signals-the-end-of-ultra-cheap-money-heres-what-it-will-mean-170928">original article</a>.</p> <p><em>Image: Shutterstock</em></p>

Retirement Income

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How much do you need to retire comfortably?

<p><span>Calculating how much money you’ll need for your retirement can be difficult because you need to take a number of factors into account including how much money you have now, how long it will last you and what your plans are for your future.</span></p> <p>The other factors you need to take into account include your lifestyle and the number of years you’ll spend retired.</p> <p>Additionally, estimating how much you’ll have when you plan to retire depends on factors such as your current salary, super balance and assets. With so many factors, it’s easy to see why you might need a retirement calculator to get an idea of your retirement savings needs.</p> <p>Companies such as AMP have <a href="https://www.amp.com.au/retirement/calculator/retirement-calculator">retirement calculators</a> on their sites and you can use these to get an indication of whether there’s a shortfall between how much you are estimated to have and how much you’ll need in retirement, and put a plan in place to address the situation.</p> <p><strong>How much is enough for retirement?</strong></p> <p>The Association of Superannuation Funds of Australia (ASFA) estimates that Australians aged around 65 who own their own home and are in relatively good health, will need between $535 and $837 per week for one person and between $774 and $1186 per week for a couple.</p> <p>The lower amount will be for a more modest lifestyle but this is still better than living on the <a href="https://www.amp.com.au/retirement/prepare-to-retire/retirement-pension-types">age pension</a>. While the higher amount would be for a more comfortable lifestyle with a broad range of leisure and recreational activities – including domestic and international travel.</p> <p>For Australians on above-average incomes, another rule of thumb to estimate how much money you’ll need in retirement is to assume you will require 67% (two-thirds) of your pre-retirement income to maintain the same standard of living.</p> <p><strong>What are your retirement lifestyle expectations?</strong></p> <p>Ultimately, how much money you'll need for your own retirement is very personal, and will depend on your own situation, wants, needs and lifestyle expectations. It may help to factor in your day-to-day spending habits, your recreational activities and hobbies and whether you’ll be entering retirement debt-free.</p> <p><strong>How long will you work for?</strong></p> <p>The age at which you retire can have a significant impact on how much money you have and how much money you need in retirement. It can depend on factors such as your health, debts, super balance, age you can access your super, whether you have dependants and your partner’s retirement plans (if you have one).</p> <p><strong>How long will you be retired?</strong></p> <p>Keep in mind if you're planning to retire at around the age of 65, it’s likely you’ll live for another 20 years or so. Men aged 65 can expect to live to 84.6 years, while women can expect to live to 87.3 years.</p> <p><strong>How much money will you have in retirement?</strong></p> <p>The money you use to fund your life in retirement will likely come from a range of different sources including the following:</p> <p><strong>Superannuation</strong></p> <p>Knowing your super balance is a crucial part of planning for retirement because it's likely to form a substantial part of your retirement savings.</p> <p><strong>The age pension</strong></p> <p>Depending on your circumstances and assets, you could be eligible for a full or part age pension or alternatively, you may not be eligible for government assistance at all. Check up on this by <a href="http://www.yourpension.com.au/APCalc/">visiting this age pension site</a> which has a calculator and you can ascertain your eligibility.</p> <p><strong>Investments, savings and inheritance</strong></p> <p>You may be planning to downsize your house, sell shares or an investment property, or use money you’ve saved in a savings account or term deposit to contribute to your retirement. Or perhaps an inheritance or the proceeds from your family’s estate may help you out in your later years. So these will all need to be taken into account.</p> <p><strong>How retirement calculators can help</strong></p> <p>If you use one of the <a href="https://secure.amp.com.au/ddc/public/ui/retirement-needs/">retirement calculators</a> available online, you can work out how much you’ll need in your retirement.</p> <p>Often when you go through all the steps of using a retirement calculator, it shows you how much you’ll need to fund your entire retirement and sometimes this points to a shortfall.</p> <p>While this news may seem scary, it’s not an uncommon situation. Luckily, finding out about the possible shortfall now means there may still be ways to boost your savings before retirement.</p> <p><span><strong>What do you do if you won’t have enough to retire?</strong></span></p> <p>If you find you’re facing a shortfall in retirement, there are several things you can do to get your retirement on track. You could consider boosting your super through additional contributions, delaying your retirement, adjusting your retirement lifestyle expectations, or selling other assets.</p> <p>Simply by having an idea of your current and projected retirement savings, thanks to using retirement calculators, you can work out a plan to improve your situation. The earlier you start, the easier it may be for you to reach your retirement goals.</p> <p><em>Image: Getty Images</em></p> <p><em> </em></p> <p><em> </em></p> <p><em> </em></p> <p><em> </em></p>

Retirement Income

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The biggest rip offs in retirement and how to avoid them

<p>Despite millions of Australians having super in their savings, it also means that there are scammers eager to take your fortune away.</p> <p>Superannuation has revolutionised the way people retire.  Many ordinary, working Australians are finding themselves entering retirement with more than a million dollars in retirement savings.</p> <p>While this should set them up for a long and happy life, living with financial security, sadly it means many will become the victims of various rip-off schemes. Rip off schemes that can be easily avoided with a little bit of knowledge.</p> <p><strong> Online Scams</strong></p> <p>The most obvious are on-line scams. ASIC estimates Australians lose some $30 million to online scams every year and sadly, once your money is lost, there is very little that can be done to get it back.</p> <p>Online scams come in many forms, from bogus emails just appearing on your computer requesting you to send money to clear a tax debt or outstanding judgement, to the infamous on-line love affair scams.</p> <p>The best advice is just don’t. Don’t send money to an online bank account and never give your bank account details or identification documents like your driver’s license to anyone online without knowing exactly who you are dealing with.</p> <p><strong>Simplistic Investments</strong></p> <p>The next biggest scam to avoid is investments that are simply too good to be true. The most common, are companies promoting investments they describe as being like term deposits or secured against property, but which offer a much higher return.</p> <p>Typically, if you dive into these investments you will learn your funds are being used to provide ‘mezzanine’ finance to property developers and instead of being secure, usually, they are totally at risk should the development not prove profitable.</p> <p><strong>Watch out for family</strong></p> <p>Unfortunately, another keyway retirees end up losing money is at the hands of their family or loved ones. Too often on entering retirement, people will discuss with their loved ones just how much money they have in superannuation.</p> <p>In doing so, it is easy for family members to think you can or should spare just a little of it and give it to them. This can be as simple as making you feel guilty if you don’t, through to actually breaking the law to get their hands on your precious savings.</p> <p>The best way to avoid all of this is to never discuss your finances in detail with family members or loved ones. Unless you are very confident about your financial situation, you should keep every cent of retirement savings to provide for you in retirement.</p> <p>While many will argue this is not strictly a rip-off, I believe maintaining a self-managed super fund, or do-it-yourself super fund, in retirement is.</p> <p><strong>Self-managed super</strong></p> <p>Self-managed super funds can be a great vehicle for creating wealth but typically, they lose their reason for being in retirement and just become a time consuming and costly way of keeping your superannuation savings.</p> <p>They require your accountant to lodge reports and tax returns for the fund, which in turn means accounting and compliance bills of several thousand dollars each year.</p> <p>This money can be saved by simply closing the SMSF and moving your savings into a quality retail fund. Typically, you will have the same level of control over your savings as you do with an SMSF but at a fraction of the cost.</p> <p><strong>Be wary of retirement homes</strong></p> <p>Finally, many people choose to move into retirement homes for the easier lifestyle they offer and for the support and comfort of having a strong community around them. However, this can often end in tears. Make sure you find a good solicitor to review any paperwork and ensure your financial rights and obligations are fully explained to you before you sign on the dotted line so you know exactly what you can expect in the future.</p> <p>Patricia Howard, author of <em>The No-Regrets Guide to Retirement: how to live well, invest wisely and make your money last (Wiley)</em>, is a licenced Australian financial adviser. She has a Commerce Degree from the University of Melbourne, holds her own Australian Financial Services Licence and recently passed the FASEA Financial Adviser exam. Find out more at <a href="http://www.patriciahoward.com.au">www.patriciahoward.com.au</a></p> <p><em>Note this is general advice only and you should seek advice specific to your circumstances.</em></p> <p><em>Written by Patricia Howard</em></p> <p><em>Image: Reader’s Digest</em></p> <p><em>This article originally appeared on </em><a href="mailto:https://www.readersdigest.com.au/food-home-garden/money/the-biggest-rip-offs-in-retirement-and-how-to-avoid-them"><em>Reader’s Digest.</em></a></p> <p> </p>

Retirement Income

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How do you know when it’s time to retire?

<p>If you’ve been working hard for many years and you’d like a bit more time to yourself so you can do some of those things you’ve always wanted to but never had the time, then this could be a sign that it’s getting close to the right time for you to retire.</p> <p>Or you could be getting sick of constantly working on your family home and you’d like someone else to help with some maintenance for a change! If you’re thinking along these lines then that’s another sign it could be the right time to retire.</p> <p>We all used to think we’d retire at 65 but that’s all changed and these days, many people prefer to retire earlier. Recent figures from the Australian Bureau of Statistics show the average retirement age of men and women is now 54.4 years old.</p> <p>So, it’s really an individual choice but if you give this life-changing decision the time it deserves, you can retire in the best way for you and achieve the retirement of your choice.</p> <p>To find out if it’s the right time for you to retire, here are some key things to consider:</p> <p><strong>Are you ready emotionally?</strong></p> <p>You need to feel emotionally ready if you’re going to retire. Take some time to think about how your life will change and how you can adjust to those changes.</p> <p>Before you retire, you should ask yourself three key questions: What do I want to do? Where do I want to do it? Who do I want to do it with? When you know the answers to these questions, you’ll have a plan for your life in retirement.</p> <p><strong>You're ready to relax and already making plans</strong></p> <p>If you’ve found yourself dreaming of relaxing and unwinding as you take part in a whole range of leisure activities, this is a good indication you’re ready to relax – and retire.</p> <p>As well, you could find yourself creating endless bucket lists of things you want to do and places you want to see. This is also a sign it could be a good time for you to retire. So, don’t ignore your wanderlust and your yearning to do some of those things you’ve always wanted to. As you plan for your retirement, write down a list of all the things you want to do with your time and this way, you’ll know what you want to do with your time as soon as you retire.</p> <p><strong>How’s your health?</strong></p> <p>If you’re in excellent health it’s still OK to retire because this will give you the time to enjoy those things you’ve always wanted to and you haven’t got round to them yet. But if you or your spouse are in poor health, then it’s important not to delay retirement because you don’t want to miss out on doing some of your exciting ‘bucket list’ items together.</p> <p>The best idea is to take an honest look at your health – and those close to you - and weigh this in to your decision about when’s the best time for you to retire.</p> <p><strong>Check in With Your Spouse and Friends</strong></p> <p>It’s interesting but many couples have different ideas about how they want to retire so this is definitely something you should talk about. Often one partner wants to stay working and the other wants to retire earlier. There’s really no problem with this because you can still move to a retirement village if one of you is working and the other one has stopped.</p> <p>But it’s a good idea to check in and see if you’re on the same page with your spouse. Make sure you do some planning together so you can work through any differences early and work it all out as a team.</p> <p>It also helps to check in with your friends who you might play sports with or do various activities with such as fishing. Find out what your friends’ plans are for their retirement. You’ll find if your friends are retiring around the same time as you it can make everything a lot easier and this will lead to a long and healthy retirement.</p> <p><strong>Your children are financially independent</strong></p> <p>You may want to retire but you feel you can’t because you still have children living at home. You could be worried if you sell the family home, they won’t be able to find other accommodation.</p> <p>The best thing to do is to sit down with your children and work out a plan where they can work towards becoming financially independent and you can work towards your retirement. It’s important to work on this together so in the end, everyone benefits.</p> <p><strong>Plan your retirement so it doesn’t take you by surprise!</strong></p> <p>Deciding when’s the best time to retire is all up to you but it’s a good idea to give this major decision the time and attention it deserves. Take some time out and consider all the factors we’ve listed and this way, you’ll set yourself up for a long and happy retirement.</p> <p><em>Photo: Shutterstock</em></p>

Retirement Income

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The biggest rip offs in retirement and how to avoid them

<p><span style="font-weight: 400;">Superannuation has revolutionised the way people retire, as many ordinary, working Australians are finding themselves entering retirement with more than a million dollars in retirement savings.</span></p> <p><span style="font-weight: 400;">While this should set them up for a long and happy life, living with financial security, sadly it means many will become the victims of various rip-off schemes. </span></p> <p><span style="font-weight: 400;">Rip off schemes that can be easily avoided with a little bit of knowledge.</span></p> <p><strong>Online Scams</strong></p> <p><span style="font-weight: 400;">The most obvious are on-line scams. ASIC estimates Australians lose some $30 million to online scams every year and sadly, once your money is lost, there is very little that can be done to get it back.</span></p> <p><span style="font-weight: 400;">Online scams come in many forms, from bogus emails just appearing on your computer requesting you to send money to clear a tax debt or outstanding judgement, to the infamous on-line love affair scams.</span></p> <p><span style="font-weight: 400;">The best advice is just don’t. Don’t send money to an online bank account and never give your bank account details or identification documents like your driver’s license to anyone online without knowing exactly who you are dealing with.</span></p> <p><strong>Simplistic Investments</strong></p> <p><span style="font-weight: 400;">The next biggest scam to avoid is investments that are simply too good to be true. </span></p> <p><span style="font-weight: 400;">The most common are companies promoting investments they describe as being like term deposits or secured against property, but which offer a much higher return.</span></p> <p><span style="font-weight: 400;">Typically, if you dive into these investments you will learn your funds are being used to provide ‘mezzanine’ finance to property developers and instead of being secure, usually, they are totally at risk should the development not prove profitable.</span></p> <p><strong>Watch out for family</strong></p> <p><span style="font-weight: 400;">Unfortunately, another keyway retirees end up losing money is at the hands of their family or loved ones. Too often on entering retirement, people will discuss with their loved ones just how much money they have in superannuation.</span></p> <p><span style="font-weight: 400;">In doing so, it is easy for family members to think you can or should spare just a little of it and give it to them. </span></p> <p><span style="font-weight: 400;">The best way to avoid all of this is to never discuss your finances in detail with family members or loved ones. Unless you are very confident about your financial situation, you should keep every cent of retirement savings to provide for you in retirement.</span></p> <p><strong>Self-managed super</strong></p> <p><span style="font-weight: 400;">Self-managed super funds can be a great vehicle for creating wealth but typically, they lose their reason for being in retirement and just become a time consuming and costly way of keeping your superannuation savings.</span></p> <p><span style="font-weight: 400;">This money can be saved by simply closing the SMSF and moving your savings into a quality retail fund. Typically, you will have the same level of control over your savings as you do with an SMSF but at a fraction of the cost.</span></p> <p><strong>Be wary of retirement homes</strong></p> <p><span style="font-weight: 400;">Finally, many people choose to move into retirement homes for the easier lifestyle they offer and for the support and comfort of having a strong community around them. </span></p> <p><span style="font-weight: 400;">However, this can often end in tears. Make sure you find a good solicitor to review any paperwork and ensure your financial rights and obligations are fully explained to you before you sign on the dotted line so you know exactly what you can expect in the future.</span></p> <p><em>Image credit: Shutterstock</em></p> <p><em>This article first appeared in <a rel="noopener" href="https://www.readersdigest.com.au/food-home-garden/money/the-biggest-rip-offs-in-retirement-and-how-to-avoid-them" target="_blank">Reader’s Digest</a>. </em></p>

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Aussies warned to start Christmas shopping early

<p><span style="font-weight: 400;">Australians are being urged to start preparing for the festive season earlier than ever before. </span></p> <p><span style="font-weight: 400;">Retailers are encouraging Aussies to start purchasing Christmas gifts now to avoid disappointment this December. </span></p> <p><span style="font-weight: 400;">With the world of online shopping seeing an astronomical boom due to the pandemic, global retailers are struggling to get items to people on time. </span></p> <p><span style="font-weight: 400;">This high demand has seen international supply chains experience massive delays in shipping goods around the country, as they battle to stay on top of the market.</span></p> <p><span style="font-weight: 400;">Electronics and home goods are most likely to be affected by the ongoing backlog, with a slim chance of the issues being resolved by December.</span></p> <p><span style="font-weight: 400;">Super Retail Group CEO Anthony Heraghty, whose company runs stores like Supercheap Auto, Rebel and BCF, says shoppers should be “getting in early” to guarantee their gifts arrive in time.</span></p> <p><span style="font-weight: 400;">When speaking with the Sydney Morning Herald, he said large retailers have been forced to order stock eight to twelve months in advance to meet demand.</span></p> <p><span style="font-weight: 400;">“If it’s not in the shed or on the shelf today, for Christmas this year I think the chances of it being [in stock] come that peak time is incredibly remote,” he said.</span></p> <p><span style="font-weight: 400;">The limited stock and shipping congestion is being blamed on border closures, COVID-19 lockdown restrictions, freighter scarcity and a surge in online shopping during the pandemic.</span></p> <p><em><span style="font-weight: 400;">Image credit: Shutterstock</span></em></p>

Retirement Income

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How I mastered baking a yeast bread from scratch, and saved money doing it

<p><span style="font-weight: 400;">By Jeanne Sidner</span></p> <p><span style="font-weight: 400;">My introduction to baking started with the home-kitchen classic that cracks open the oven door for so many – chocolate chip cookies. It was the 1970s, and most of the mums in our largely Catholic neighbourhood were busy raising big families. For the girls in my house, that meant our mother made sure we knew our way around the kitchen. At the flour-dusted table, Mum taught eight-year-old me how to make the cookies perfectly chewy with a crispy exterior. (The big secret: Always chill your dough.)</span></p> <p><span style="font-weight: 400;">So from a young age, I was crystal clear on the power of a baked-to-perfection cookie to make people happy. Baking cookies – then brownies, cakes and pies – became my hobby and a tasty form of social currency. First I used my skills with butter and sugar to impress a series of teenage boyfriends. In time, the fresh goodies were left on doorsteps to welcome new neighbours and set out in the break room for co-workers. Baking was my superpower.</span></p> <p><span style="font-weight: 400;">A few years ago, I became the content director for Taste of Home, Reader’s Digest’s sister magazine and website that celebrates the treasured recipes of home cooks. I’d never been more excited for a new job, but privately I worried that my baking chops wouldn’t measure up. Why? I had a secret as dark as an oven with a burned-out light bulb: While I had baked sweets my whole life, I’d never made a yeast bread from scratch.</span></p> <p><span style="font-weight: 400;">Still, this was no time for excuses. I was a baker, now one with Taste of Home attached to my name. I may have been intimidated by bread, but it was time. I wanted in.</span></p> <p><span style="font-weight: 400;">Getting started, I found Instagram to be a friend. A basic no-knead bread was the one I was seeing online overlaid with dreamy filters. People described it as easy, and to be honest, the thought of removing even one intimidating variable – kneading – was enough to get me to buy two kilograms of bread flour and dive in.</span></p> <p><span style="font-weight: 400;">I gathered everything I’d need (“be prepared” is the first rule of any baking), including my mum’s trusty Pyrex. It had seen me through my first days as a baker, so I was counting on it to work its magic. I had an easy Taste of Home recipe all set on my iPad. I mixed the flour, salt, and yeast and made sure the water temperature was just right – 38 to 46 degrees – before pouring it in.</span></p> <p><span style="font-weight: 400;">And then it happened – or didn’t happen. I followed the instructions to the letter, but my dough didn’t rise. Somehow, impossibly, it looked smaller. Sludgy, gooey, wet with a few bubbles. Sad.</span></p> <p><span style="font-weight: 400;">Three hours later, after I’d resisted the urge to keep checking on it like a nervous mum with a newborn, a puffy dough filled the bowl. I hadn’t killed it; it was just … sleeping. A quick fold, a second rise, and then my bread went into my Dutch oven and off to bake.</span></p> <p><span style="font-weight: 400;">Thirty minutes later, I took it out. Sure, it was slightly misshapen, but in my eyes, it was golden-brown, crusty perfection, right down to the yeasty-sweet hit of steam coming from its top.</span></p> <p><span style="font-weight: 400;">Naturally, the first thing I did was grab my phone and hop on Instagram, positioning my beautiful bread just so in a shining stream of daylight on a wooden cutting board. No one needed to know it was my first yeast bread ever – or how close it came to getting scraped into the garbage can. The online reactions started almost immediately – heart emojis and comments like “This looks DELISH!” from my friends.</span></p> <p><span style="font-weight: 400;">Finally I cut into that lovely brown crust and doled out slices to my husband and kids. Those slices led to seconds, then thirds, each piece slathered with softened butter and a little sprinkle of salt. I made my family perhaps happier with slices of warm, buttered homemade bread than I had with all the sweets combined. </span></p> <p><span style="font-weight: 400;">At last, I was a bread baker – despite yeast’s best attempts to intimidate me on this first try. No more feeling inferior or afraid. Now I make bread and homemade pizza crust regularly. And I have enough confidence to start thinking (and stressing!) about my next difficult baking challenge: homemade croissants.</span></p> <p><em>Image credit: Shutterstock</em></p> <p><em>This article first appeared in <a rel="noopener" href="https://www.readersdigest.com.au/food-home-garden/home-tips/how-i-mastered-baking-a-yeast-bread-from-scratch-after-years-of-failure" target="_blank" title="Mastering yeast bread">Reader’s Digest</a>. </em></p>

Retirement Income

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