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Message YourAutumn 2025PERSONAL WEALTHWelcomeIn February 2025, the Reserve Bank ofAustralia (RBA) cut rates for the firsttime in 5 years and in this edition welook at what this could mean for you. As we head into Autumn, Trump hassurprised the world with the speed ofimplementation of his agenda.Following an excellent year forinvestors, while there are considerable uncertainties for 2025, the key is toremain invested. While short-termvolatility can be uncomfortable,maintaining a long-term perspectiveand diversified approach remains thebest strategy for most investors.We also take a look at what happens toyour super if life gets in the way, and 5great tips to thrive in ‘unretirement’.Happy reading!Following an excellent year for investors, we expect lowerreturns in 2025, with increasing opportunities for activemanagers.The major themes dominating markets:US stocks continue to dominate global markets, at 74%of global market capitalisation. The ‘Magnificent 7’ nowequates to an unprecedented 34% of the US market andover 50% of the S&P 500 returns.Australian share market returns have been dominatedby Bank and Technology stocks, however, the sharemarket faces headwinds from weak economic growthand falling productivity.Continued weakness in the economies and markets ofEurope and the UK. China’s economy continues to suffer from a cautiousconsumer and weak property market.While short-term volatility is likely, active managementopportunities are emerging outside the mega-caps.Where are we now andwhere are we heading?ContentsWhere are we now andwhere are we heading?5 ways to build a successfulunretirementInterest rate reliefWhat happens to mysuperannuation if...?134CONTINUED ON PAGE 2Global central banks reduced interest rates in 2024, with Australia being an exceptionSources: Federal Reserve Economic Data (FRED), St Louis Fed and LSEG DataStream
Similarly, the outlook remains difficult for Europe, theUK, and China. Australia is in a more difficult positionbecause, despite some evidence that we have hit thebottom, our economic outlook is uninspiring, withGDP growth and productivity continuing to fall.Investment opportunitiesThe good news is that there are positive signs for abroadening out of returns beyond the large capstocks globally (especially for the US). Likewise forAustralia, as interest rates are cut and the ChineseGovernment stimulates the economy. This providesopportunities for active managers to find stocks,especially in the mid and small cap sectors.We think Australian bonds could provide good returnsat current income levels of 4.5-5% with the potentialfor capital gains when long-term rates fall. Likewise,investment-grade credit provides good returns for thelow level of riskConclusionWhile headline index returns may be modest, weremain positive as there are increasing opportunitiesfor active managers who look beyond the obviousmega-cap names. However, the combination of highstarting valuations and economic uncertainty meansdiversification is crucial.Our preferred approach is:Quality stocks over speculation.Active management over passive.Maintain exposure to bonds and high-qualitycredit for income and stability.Regular rebalancing to maintain target allocations.The key is to remain invested. While short-termvolatility can be uncomfortable, maintaining a long-term perspective and diversified approach remainsthe best strategy for most investors.Returns of major asset classes to 31 January 2025Where are we now?The December quarter was a reminder thatmarkets never move in a straight line. Despitemilder inflation and continued US and EuropeanCentral Bank interest rate cuts, both global sharemarket returns and the ASX 200 ended slightlydown in US dollar (USD) terms. The significant fallin the Australian dollar (AUD) against the USD,turned the Q4 global share market return of-0.9% in USD into a solid 11.1% in AUD.The 12-month returns were exceptional forglobal, US, and emerging markets.Despite a solid performance, the ongoingweakness in the Australian economy explains therelative underperformance of Australian shares.In February 2025, the Reserve Bank of Australia(RBA) cut rates for the first time in 5 yearsreducing the cash rate from 4.35% to 4.10%. Thepositive move in bond prices in Australiareflected optimism that the RBA will cut ratesseveral times in 2025. It is unclear whether long-term rates will fall in the US.Implications of the Trump presidencyCommentators expect that while the Trump presidency will be pro-growth within the US, the impact on global growth may be negative. Trump has surprised the world with the speed ofimplementation of his agenda. While there are considerable uncertainties for 2025, our basecase is that there will be negotiated/delayed tariffs and a soft landing in the US. This implies that the US Federal Reserve would continue to reduce rates, the US economy should grow modestly (2.5%), and inflation will moderate slightly. However,should US inflation increase significantly, or atrade war occur, this would hurt global sharemarkets. Geopolitical tensions remain high and muchdepends on Trump's approach.Outlook for economies and marketsMost feel that investor sentiment is unlikely tosend large cap share prices much higher in theUS as this would require high and very optimisticcompany earnings to materialise. The Wall Streetconsensus is for a stock market return of 8-10%in the next 12 months.CONTINUED FROM PAGE 1PAGE 2 AUTUMN 2025Source: FE Analytics
PAGE 3AUTUMN 2025Many clients look for guidance to help them charttheir next stage of life; combining part-time work,volunteering or mentoring, exploration, friendship,family, and fun. While most feel they are in prettygood shape financially, many are unnerved by theidea of not being busy and needing to find ways to fillup their days in fulfilling ways. Let’s call this‘unretirement[1]’ or semiretirement - working part-time or volunteering in retirement. Among the mostimportant aspects of unretirement are findingmeaning and purpose.Here are five great tips for thriving in unretirement.1. Try to figure out not just what you want toretire from, but what you want to retire to. Few people seem to do that, which causes some ofthem to flounder, get bored, get depressed, or justget spooked in unretirement. Spend some timethinking about what would give you pleasure inunretirement and what you need to do to make thathappen.2. To transition from full-time work tounretirement, try to be a ‘purposefulpathfinder[2]’.A ‘purposeful pathfinder’ as described in the‘Longevity and the New Journey of Retirement’ reportis the type of retiree who is most fulfilled, mostliberated, and most prepared. Purposeful pathfindersoften want to volunteer and go back to school.3. When determining when, how, and whether toretire, try the six-word idea.List six words that best describe you and thenconsider how retiring might change that description.If your identity is wrapped up in your job, you maynot be ready to retire quite yet. Repeat the exercisein a few months while undertaking alternate activitiesto help prepare yourself for a transition tounretirement.4. To find part-time work in retirement, go localand age-friendly.Pitch yourself to local businesses and nonprofits foran unretirement job, freelance, gig, or consultingwork. You likely won’t need to go through HRbureaucracy, and you may be a strong candidatesimply because you’ve been a loyal customer, client,patient, or supporter.5. Finally, don’t underestimate the importance oflooking for meaning and purpose inunretirement.Overcoming the challenge of redefining your sense ofpurpose in retirement involves a deliberate shift inperspective and a journey of self-discovery. It can bea great opportunity to explore interests you shelvedover the years due to work commitments. Or it canbe a chance to discover new passions - likevolunteering, pursuing hobbies or learning new skills.Research has shown that finding meaning andpurpose can be good for your mental and physicalhealth. You may find this through reconnecting withold friends or bolstering relationships with your familyand relatives. Or by leaving a legacy as a mentor,passing along what you’ve learned over the years.Volunteering is an excellent way of finding meaningand purpose since it lets you spend time assisting amission that matters to you. You could even findpurpose through part-time work in unretirement.Here’s hoping these suggestions help make yourunretirement a spectacular one.[1] https://www.marketwatch.com/story/6-ways-to-build-a-successful-retirement-3ec635b[2] Longevity and the New Journey of Retirement Age Wave Report5 ways to build a successful unretirementFebruary 2025 saw the Reserve Bank of Australia (RBA)lower the official cash rate for the first time since 2020.The cut to 4.1% is a 0.25% reduction from the 4.35% ithad held since 2023 and signals the RBA's shifttowards stimulating economic growth. Whether this isa small relief or the first cut of many remains to beseen.This offers potential relief for homeowners, as variablemortgage rates are likely to decrease and easerepayment pressures. Whether fixed rates becomemore competitive is still uncertain.What is certain is that you should discuss any ratechanges with your lender, to understand their specificimpact on your circumstances. If you’re unsure how toapproach this, give us a call.Interest rate relief
The premise behind Australia’s superannuationscheme is simple: regularly contribute to a complyingsuperannuation fund to provide financial supportupon retirement. Well, that’s the plan. But whathappens if your savings strategy is disrupted beforeyou get to retirement? Knowing how super is affectedwhen life doesn’t go to plan can help you determineyour approach. So, what happens to your superannuation if…1. You pass away?Superannuation is governed by Superannuation law,meaning your Will does not determine how thebenefits are distributed unless you have made anomination to pay your superannuation to yourestate. This is usually done by the nomination of abeneficiary. If you die without completing any form ofnomination, the trustee will decide how to distributethe superannuation proceeds. The proceeds at thattime may also include your Life insurance proceeds. There are two types of nominations:Binding Nomination: specifies one or moredependents to receive the death benefits.Trustees must follow your nomination.Non-Binding Nomination: records yourpreference although trustees retain discretionand distribute the benefits according to what isdeemed most appropriate.2. You pass away without a Will (intestate)?Fund trustees refer to nominations of beneficiarieswhether a Will exists or not. If there is no bindingnomination of beneficiary, the trustee assesses yourrelationships to determine entitlement. If there areno beneficiary nomination, the death benefit maybecome part of your estate and be distributedaccording to intestacy laws.3. You get divorced?Superannuation, in Family Law, is considered anasset and entitlements are determined between youand your former partner through negotiation orcourt order. In the event of divorce or a relationshipbreakdown, there may be a need to split yoursuperannuation benefits and share the amount withyour former partner. Your former partner may then:Add the amount to their superannuation benefitsInvest the amount as they likeAccess the amount as a super benefit if they meetstandard release conditions.Tax-free and taxable components are calculated anddivided proportionately between the two entitlements.4. You move overseas?Moving permanently overseas was once a condition ofthe early release of super. The Australian governmentremoved this option in 2002, the logic being that yoursavings can be maintained in Australia, where normalpreservation and release conditions apply. 5. You retire early?To be able to access your retirement benefits, youmust meet one of the specified conditions of release,eg attain age 65 or reach your preservation age(currently age 60) and retire. If you decide to retireearlier, you may need to access your investmentsoutside of superannuation environment or apply forgovernment payments until you meet these specifiedconditions of release. Your superannuation is a valuable asset, andregardless of what life throws your way, makinginformed decisions about how your super is managed,can greatly impact your financial security.Seek professional advice and plan for success!Disclaimer: The content in this newsletter is of a general nature only and are not to be taken as recommendations as they might be unsuited to your specificcircumstances. The contents herein do not take into account the investment objectives, financial situation or particular needs of any person and should not be used asthe basis for making any financial or other decisions. Your Lifespan adviser or other professional advisers should be consulted prior to acting on this information. Thisdisclaimer is intended to exclude any liability for loss as a result of acting on the information or opinions expressed.What happens to my superannuation if...?AFSL 229892 ABN 23 065 921 735 lifespanfp.com.auLevel 24, 1 Market Street, Sydney, NSW, 2000Phone: 02 9252 2000 Email: advice@lifespanfp.com.auYour financial planner is an Authorised or Corporate Authorised Representative ofLifespan Financial Planning Pty Ltd