Retirement and Estate Planning
Retirement planning is the accumulation of wealth to provide income and financial security in retirement.
Estate planning focuses on wealth preservation and wealth transfer.
When do you need financial advice?
How can we help?
With a dedicated technical research team Morgans' advisers are kept up to date with legislation changes.
If you are planning your retirement, just reducing your working hours, or thinking about an estate plan, we can help.
Retirement planning
Effective retirement planning involves both tax efficiency and strategic investments. Beginning retirement planning early is crucial as it allows for ample time to prepare. Ensuring that your retirement income is tailored to align with your specific needs and goals is paramount. During retirement, income typically originates from three primary sources: superannuation, which includes pension income streams and lump sum withdrawals; non-superannuation assets, encompassing returns from shares, property, cash, and fixed interest; and Centrelink benefits, such as the age pension. Our expertise can guide you in structuring your retirement income stream to best suit your financial requirements.
Estate planning
Estate planning serves the vital purpose of safeguarding your family's wealth through the strategic distribution of assets to chosen beneficiaries. Achieving this objective necessitates a thorough assessment of each beneficiary's individual circumstances, ensuring that the inheritance positively contributes to their financial well-being without adverse repercussions.
Central to effective estate planning is the establishment of a current and legally binding will. Beyond the will, it's essential to consider additional instruments such as Powers of Attorney, medical directives, testamentary trusts, and business succession plans. Particularly regarding superannuation, which falls outside the purview of a will, proactive steps such as nominating beneficiaries and establishing binding death nominations are crucial to ensure that your intentions are honoured in the distribution of superannuation death benefits.
Implications for SMSFs
With respect to self managed superannuation funds, trustees and members effectively have ultimate control in the distribution of death benefits within your fund.
It is important you prepare a strategy for the payment of benefits to members' chosen beneficiaries and incorporate the facilities to implement this strategy in your trust deed. It will also be necessary to make preparations for the wind-up of the fund in the event of the deaths of all trustees and members.
Centrelink issues
Centrelink benefits are available for eligible seniors who have retired or are about to retire. Eligibility is based on two tests – the Incomes Test and the Assets Test. Your financial position (combined if a couple) is taken into account for these two tests, and eligibility for benefit payments is determined by the outcome of these tests.
We recommend you visit the ‘Retirement years' page on the Services Australia website. This page is a very useful guide to help individuals understand income support, what additional services and supplements are available and how you can make a claim. It also discusses residential aged care for those who are looking at their options for retirement homes.
News & insights
Each quarter, the Australian Financial Review conducts a comprehensive survey involving 39 economists who provide forecasts on key indicators such as GDP, the Australian dollar, the cash rate, and core inflation. Over the past two years, the AFR has also ranked these economists based on the statistical accuracy of their predictions. I have been fortunate to be included in the top ten for both years.
In this article, I will share my own views on the economic outlook, as published in the AFR survey, alongside insights from two other top-ten contributors. One represents a major bank and the other a leading financial institution.
Starting with GDP, my forecast for 2025 is 1.7 percent growth. This matches the major bank’s projection. The financial institution is slightly more optimistic, forecasting 1.8 percent. These figures suggest a broadly consistent view of modest growth.
By mid-2026, growth is expected to pick up. I am slightly more conservative than the others, forecasting 1.9 percent for the year to June. For the year to December 2026, I anticipate growth of 2 percent, while the bank and institution forecast 2.2 and 2.3 percent respectively.
This divergence in growth estimates likely reflects differing views on productivity. In the first quarter of this year, most GDP growth came from the public sector, resulting in very low productivity growth of just 0.30 percent. As growth shifts toward the private sector, productivity should improve. However, I expect less private-sector-driven growth, which informs my more cautious forecast. I also anticipate that employment growth will be driven more by Federal government spending and public sector hiring.
Turning to the Australian dollar, I hold a more optimistic view than the other two contributors. I forecast the dollar to reach 68 US cents by the end of this year and 70 US cents by mid-next year. The major bank expects 67 US cents and then 68 US cents, while the institution forecasts 67 US cents and 69 US cents. My outlook on the Australian dollar is based on the belief that Australia’s rate cuts are nearing completion, while the United States is just beginning its rate-cut cycle.
I have previously stated that the Federal Reserve funds rate could fall to 3.35 percent, assuming it stops at neutral. However, if the U.S. economy weakens, which is likely in a midterm election year, the Fed may cut rates more aggressively. Additionally, the inflationary impact of tariffs is expected to fade next year, leading to a significant drop in U.S. inflation by mid-2026. This could prompt the Fed to cut rates below neutral, weakening the U.S. dollar and strengthening the Australian dollar.
Six months ago, I was asked whether it was worth hedging the Australian dollar. At the time, I said no, as I expected more rate cuts in Australia than in the U.S. Now, with Australia’s rate cuts coming to an end and the U.S. just beginning, it is an opportune time to consider hedging the Australian dollar against the U.S. dollar.
Regarding the cash rate, I expect trimmed mean inflation to fall to 2.5 percent in the ABS estimate for the CPI released on 29 October. If this occurs, the Reserve Bank of Australia could cut the cash rate once more to 3.35 percent by year-end. If inflation does not fall, rates are likely to remain unchanged.
Interestingly, the major bank expects rates to fall not only in December but again by June next year. The financial institution sees no cut this year but expects rates to fall to 3.35 percent by mid-next year. Again, Australia is nearing the end of its rate-cut cycle, while the U.S. is just beginning its own rate cut cycle.
On inflation, I believe the RBA can only cut rates if quarterly inflation falls to 2.5 percent. I forecast this inflation number by December and again by mid-next year. The major bank expects core inflation to be 2.6 percent in both periods, which I believe is too high to justify rate cuts. The institution forecasts 2.9 percent inflation by year-end and 2.7 percent by mid-next year, which also seems inconsistent with a rate-cut scenario. These differences highlight varying interpretations of inflation data.
I have previously noted that the RBA places greater emphasis on the quarterly trimmed mean than the monthly CPI. Governor Michelle Bullock confirmed this in her recent media briefing, stating that while the RBA is transitioning to monthly CPI, it will continue to request quarterly trimmed mean data. This is because the quarterly measure provides a more accurate reflection of services inflation. While monthly CPI may be published, the quarterly trimmed mean will remain central to the RBA’s decisions on the cash rate.
In our previous discussion on the Fed, we suggested that the deterioration in the US labour market would move the Fed toward an easing path. We have now seen the Fed cut rates by 25 basis points at the September meeting. As a result, the effective Fed funds rate has fallen from 4.35% to 4.10%.
Our model of the Fed funds rate suggests that the effective rate should move toward 3.35%. At this level, the model indicates that monetary policy would be neutral.
The Summary of Economic Projections from Federal Reserve members and Fed Presidents also suggests that the Fed funds rate will fall to a similar level of 3.4% in 2026.
We believe this will happen by the end of the first quarter of 2026. In fact, the Summary of Economic Projections expects an effective rate of 3.6% by the end of 2025.
The challenge remains the gradually weakening US labour market, with unemployment expected to rise from 4.3% now to 4.5% by the end of 2025. This is then projected to fall very slowly to 4.4% by the end of 2026 and 4.3% by the end of 2027.
These expectations would suggest one of the least eventful economic cycles in recent history. We should be so lucky!
In the short term, it is likely that the Fed will cut the effective funds rate to 3.4% by March 2026.
This move to a neutral stance will have a significant effect on the world trade cycle and on commodities. The US dollar remains the principal currency for financing trade in the Indo-Pacific. Lower US short-term rates will likely generate a recovery in the trade of manufacturing exports in the Indo-Pacific region, which in turn will increase demand for commodities.
The Fed’s move to a neutral monetary policy will generate benefits well beyond the US.
Just as an introduction to what I'm going to talk about in terms of Australian interest rates today, we'll talk a little bit about the trimmed mean, which is what the RBA targets. The trimmed mean was invented by the Dallas Fed and the Cleveland Fed. What it does is knock out the 8% of crazy high numbers and the 8% of crazy low numbers.
That's the trimming at both ends. So the number you get as a result of the trimmed mean is pretty much the right way of doing it. It gets you to where the prices of most things are and where inflation is. That’s important to understand what's been happening in inflation.
With that, we've seen data published for the month of July and published in the month of August, which we'll talk about in a moment. Back in our remarks on the 14th of August, we said that the RBA would not cut in September. That was at a time when the market thought there would be a September return. But we thought they would wait until November. So with the RBA leaving the cash rate unchanged on the 30th of September, is it still possible for a cut in November?
The RBA released its statement on 30th September, and that noted that recent data, while partial and volatile, suggests that inflation in the September quarter may be higher than expected at the time of the August Statement on Monetary Policy. So what are they talking about? What are they thinking about when they say that? Well, it could be that they’re thinking about the very sharp increases in electricity prices in the July and August monthly CPIs.
In the August monthly CPI, even with electricity prices rising by a stunning 24.6% for the year to August faster than the 13.6% for the year to July; the trimmed mean still fell from 2.7% in the year to July to 2.6% in the year to August. Now, a similar decline in September would take that annual inflation down to 2.5%.
The September quarter CPI will be released on the 29th of October. Should it show a trimmed mean of 2.5% or lower, then we think that the RBA should provide a rate cut in November. This would provide cheer for homeowners as we move towards the festive season. Still, it all depends on what we learn from the quarterly CPI on the 29th of October.
