Death by a thousand cuts for Australian retirees’ savings

AUSTRALIANS could be forgiven for thinking their finances are suffering another well-known torture with changes put in place. This is how it affects your savings.

Nest eggs have been cracked open by government rule changes in recent times.

TORTURE methods from world history were horrific for those who dared try to overthrow empires or simply annoyed the wrong person.

From strapping them to boats and allowing the elements and animals to slowly eat them, to killing their kids in front of them and cutting out their eyes so it was the last thing they saw, it was brutal stuff.

Today’s retirees and other older Australians could be forgiven for thinking their finances are suffering another well-known torture, death by a thousand cuts, even though they haven’t tried to overthrow anyone.

Small painful slices have been taken from their superannuation, pension payments and investments, often under the guise of the politicians saying it makes the system fairer and stops the rich rorting it.

Changes to rules around retirement are damaging many Aussies’ nest eggs.

Last year we saw age pensions cut for more than 330,000 retirees as the assets test got tougher, and about 100,000 lost their pension entirely.

A flood of new super rules started, mainly hitting wealthy retirees but also slashing the amount of tax-deductible contributions everyday Aussies could put into super ahead of retirement.

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Property investors suffered a couple of tax hits that reduced real estate’s attractiveness, while the Labor Party wants increase capital gains tax that’s slapped on any profits people make from investments.

Seniors who rely on bank deposits have watched their interest payments sink by two-thirds in less than a decade, and last week Labor inflicted another cut with its plan to axe cash refunds for unused tax credits that retirees receive through share dividend payments.

It all seems like slow torture, but retirees can fight back. Here are some ideas.

DIVERSIFY

Lumping all your money in cash, shares, or super, or property can be dangerous in these dark times, so spread it around.

That way, the targeted tax attacks won’t wipe out all of your benefits.

LOOK FOR LOOPHOLES

Financial strategists used transition to retirement pensions to save many pre-retirees thousands of dollars in tax over many years until the government shut the door on that last July. There are still ways to creatively maximise pension payments. For example, retirees with a younger spouse can effectively hide their money from Centrelink testing until their spouse reaches pension age too.

GO GLOBAL

Lumping all your financial risk in Australia is dangerous. Seasoned investors and super fund members are increasingly eyeing offshore opportunities as global markets open up through things such as exchange traded funds.

Rather than see it as risky foreign stuff, international assets add diversity and reduce risk.

GET ADVICE

You’ll probably have to pay for great personal advice, but it can easily be worth the money.

Good advisers can help retirees avoid Australia’s de facto death tax on super payouts, structure assets so an eventual move into aged care is less stressful, and deliver better incomes than paltry bank deposits.

Death by a thousand cuts was only banned in China in 1905, and although retirees may think it’s been reinstated in financial form, there are ways to resist.

@keanemoney