Australian shares continued to rise through August, but stronger markets do not remove the need for discipline. Interest rates remain restrictive, inflation is still relevant to household budgets, and geopolitical uncertainty continues to affect oil, currencies and defensive assets such as gold.
For people approaching or living in retirement, the practical question is not whether the next market move can be predicted. It is whether their financial plan has enough structure to withstand a range of outcomes.
The August market picture
The ASX 200 recorded another positive month in August. At the same time, market valuations remained elevated by historical standards.
An index tells us where capital has already moved; it does not tell us with certainty what comes next. When markets are strong, it can be tempting to increase risk simply because recent returns have been favourable. A more considered response is to review whether the portfolio still reflects its intended asset allocation, time horizon and income needs. Acquira’s investment philosophy explains the role of structure and evidence in that process.
Interest rates and inflation also remained important. The Reserve Bank of Australia held the cash rate at its August meeting, while headline inflation had moderated but remained above the midpoint of the RBA’s target range.
What higher interest rates can mean in retirement
Higher rates can create both benefits and pressures. Cash accounts and term deposits may offer more income than they did when rates were lower, but borrowers face higher repayments. Businesses and property investors may also experience increased financing costs, which can eventually affect company earnings, asset values and household spending.
For a retiree, the headline cash rate is only one part of the picture. The more useful review is whether reliable income from pensions, cash, term deposits and other sources is sufficient to meet planned spending without taking unnecessary investment risk.
Why inflation still matters after retirement
Inflation reduces what a fixed amount of money can buy. Even moderate inflation can have a material cumulative effect over a retirement that may last 20 or 30 years. Some expenses—including health care, insurance, home maintenance and energy—can also rise at a different rate from the published consumer price index.
A retirement-income plan therefore needs to consider both current cash flow and the likelihood that spending will change over time. Assets with growth potential may help protect long-term purchasing power, while cash and defensive investments support nearer-term stability. The balance between them will depend on the individual.
For retirees and pre-retirees, these conditions can affect:
- the interest earned on cash and term deposits;
- mortgage and investment-loan repayments;
- the real purchasing power of retirement income;
- the relative appeal of growth and defensive assets; and
- the sustainability of planned pension withdrawals.
- Why gold and oil remain in focus
Gold traded near record Australian-dollar levels during the period, reflecting continued concern about government debt, currencies and geopolitical risk. Oil prices also remained sensitive to developments in the Middle East.
These movements are a reminder that diversification has different purposes. Growth assets support long-term capital growth, while cash and defensive assets can provide liquidity and help reduce the need to sell growth investments during a downturn.
That does not mean an asset should be purchased simply because it has recently performed well. Any allocation should be considered in the context of the whole portfolio, including its role, risks, costs and expected holding period.
How franking credits can support retirement income
Australian companies may attach franking credits to dividends to reflect company tax already paid. The shareholder includes both the cash dividend and the franking credit in assessable income, then may claim the credit as a tax offset.
Where an investor’s tax liability is lower than the available franking credits, eligible excess credits may be refundable. This can increase the after-tax income produced by Australian shares in some retirement structures.
A simple franking-credit example
Suppose an Australian company earns $100 of profit and pays $30 in company tax. If it distributes the remaining $70 as a fully franked dividend, the shareholder may receive a $70 cash dividend and a $30 franking credit. For tax purposes, the grossed-up income is $100, with the $30 credit available as a tax offset, subject to the shareholder meeting the relevant rules.
The final outcome depends on the shareholder’s taxable income, marginal tax rate, ownership period and eligibility. The example explains the mechanism only; it is not an estimate of the return from a particular investment.
Franking credits should not, however, be the sole reason to own a company or concentrate a portfolio in Australian shares. Investment quality, diversification, valuation and the investor’s personal tax position remain important.
For more detail, see the Australian Taxation Office’s guidance on franking credits .
Four retirement-planning matters worth reviewing
1. Your transfer balance cap
The transfer balance cap limits the amount that can be transferred into the tax-free retirement phase of superannuation. The general cap is indexed over time, while an individual’s personal cap can differ depending on their history.
Even if a super balance is below the general cap, it can still be useful to understand how future contributions, pension commencements and indexation may affect the available amount. The ATO provides current information about the transfer balance cap . Acquira also provides superannuation advice on the Gold Coast for people considering how these rules fit within a broader strategy.
The transfer balance cap does not limit how much can remain in super overall. Amounts that cannot be held in retirement phase may remain in an accumulation account, where investment earnings are generally taxed under the rules applying to that environment. Starting, stopping or restructuring pensions can have reporting and tax consequences, so records of earlier pension activity matter.
2. Your superannuation death-benefit nomination
A valid binding death-benefit nomination can direct a super fund trustee to pay a death benefit to nominated eligible beneficiaries. A non-binding nomination generally guides the trustee but does not bind its decision.
Rules differ between funds, and nominations may lapse or become invalid. Check the fund’s requirements and consider how the nomination works alongside a Will and broader estate plan.
Superannuation does not automatically form part of an estate. The identity of the nominated beneficiary, whether that person is eligible under super law, and whether benefits are paid directly or through the estate can affect control, timing and tax. Legal and financial advice may both be needed where family structures or intended beneficiaries are complex.
3. Your enduring power of attorney
An enduring power of attorney determines who can make specified financial and legal decisions if you lose decision-making capacity. It should be reviewed after major changes in family circumstances, health, residence or financial arrangements.
Estate-planning documents involve legal issues, so obtain legal advice about whether existing documents remain appropriate.
4. Contribution rules later in life
Super contribution rules depend on age, contribution type and timing. The work test is no longer a general requirement for every voluntary contribution after age 65, although it can still apply when claiming a deduction for certain personal contributions. Age limits and other eligibility rules also apply.
Before contributing, check the current ATO guidance on contributions by age and consider the contribution caps, tax consequences and access rules.
It is also important to distinguish between contribution types. Concessional, non-concessional, spouse, employer and downsizer contributions can have different eligibility conditions and cap treatment. A contribution made shortly before a deadline may also be counted when the fund receives it, not when the payment was initiated.
Property decisions require current numbers
Property conditions can vary considerably by suburb, dwelling type and price range. A quieter market may give buyers more negotiating room, but it can also mean a longer selling period.
If you own an investment property, review whether the expected return remains reasonable after allowing for current interest rates, rent, vacancy, insurance, maintenance, tax and transaction costs.
If you are considering downsizing, timing the sale and purchase is only one part of the decision. Eligible Australians aged 55 or older may be able to make a downsizer contribution to super from the proceeds of selling a qualifying home. Conditions and time limits apply. The ATO explains the current downsizer contribution rules .
Questions to consider before downsizing
The financial outcome depends on more than the sale price. Consider:
- selling, buying and moving costs;
- whether the replacement home is suitable for later-life needs;
- the effect of released capital on Centrelink means testing;
- whether a downsizer contribution supports the wider super strategy;
- the timing difference between settlement, contribution deadlines and the next home purchase; and
- the emotional and practical value of location, community and family access.
A smaller home does not always produce a large cash surplus, particularly when moving into a more desirable or accessible location. Modelling the complete transaction can provide more clarity than focusing on the property’s headline value.
A cash reserve is part of the plan
A retirement cash reserve can help meet near-term spending needs without forcing the sale of growth assets after a market fall. It is one component of a broader retirement-planning strategy and may make it easier to remain disciplined when headlines are unsettled.
The appropriate reserve is personal. Holding too little can create sequencing and liquidity risk; holding too much for too long can reduce expected returns and expose more of the portfolio to inflation. The amount should be linked to planned expenditure, reliable income sources, investment time frames and capacity for risk.
What is sequence-of-returns risk?
Sequence-of-returns risk is the risk that poor investment returns occur early in retirement while withdrawals are being made. Selling assets after a fall can lock in losses and leave less capital available to participate in a later recovery. Two retirees can experience the same average return over time but have different outcomes because the returns occurred in a different order.
A cash reserve is one way of managing this risk, but it is not the only one. Other considerations can include diversification, withdrawal flexibility, reliable income sources, portfolio rebalancing and the proportion held in defensive assets.
How should a retirement cash reserve be reviewed?
Rather than selecting an arbitrary number of years, a review can begin with the expenses the reserve is intended to cover. Useful questions include:
- Which essential expenses are not covered by reliable income?
- Are any major one-off costs expected in the next few years?
- How flexible is discretionary spending after a market fall?
- What assets could be sold or rebalanced in normal markets?
- How will the reserve be replenished after it is used?
The reserve should be reviewed as spending, pensions, interest rates and market conditions change.
Frequently asked questions
Should retirees change their portfolio when interest rates are on hold?
Not solely because the RBA has held or changed the cash rate. A portfolio review should consider the individual’s income needs, asset allocation, liabilities, time horizon and capacity for loss. A single rate decision rarely provides enough information to justify a major change.
Are franking credits tax-free income?
No. Franking credits form part of the tax calculation. The cash dividend and attached credit are generally included in assessable income, and the credit may then be used as a tax offset. Whether an excess credit is refundable depends on eligibility and the investor’s circumstances.
How much cash should a retiree keep?
There is no universal amount. The appropriate reserve depends on essential spending, reliable income, foreseeable large expenses, withdrawal flexibility, portfolio risk and personal comfort. Too little cash can increase the risk of selling after a downturn; too much may weaken long-term purchasing power.
Can a downsizer contribution be made in addition to other super contributions?
Potentially. Downsizer contributions have their own eligibility rules and do not count towards the usual non-concessional contribution cap, but they can affect the total amount held in super and do not bypass the transfer balance cap. Current rules and personal consequences should be checked before acting.
When should a retirement strategy be reviewed?
A regular review is useful, but a review may also be appropriate after retirement, a significant market movement, the sale of a property, a change in health or family circumstances, the death of a partner, a major expenditure decision or a change to superannuation, tax or Centrelink rules.
Focus on preparedness, not prediction
Markets near highs, interest rates on hold and gold near records can all attract attention. None provides a reliable shortcut to the next investment decision.
A structured retirement plan should already allow for periods of market weakness, changing interest rates and unexpected expenses. Regular reviews can help ensure that the investment mix, cash reserve, super strategy and estate arrangements remain aligned with the life they are intended to support.
If recent market movements or a change in your circumstances has raised questions about your retirement strategy, contact Acquira Wealth Partners to arrange a considered review.
General information only
This article has been prepared by Acquira Wealth Partners for general information and educational purposes only. It does not constitute financial product advice and has not been prepared taking into account your objectives, financial situation or needs. Before acting on any information, consider whether it is appropriate for your circumstances and, if necessary, seek appropriate professional advice. Past performance is not a reliable indicator of future performance.
Reine Clemow is an Authorised Representative (No. 461670) and Acquira Wealth Pty Ltd is a Corporate Authorised Representative (No. 001319892) of GPS Wealth Ltd, AFSL 254 544, ABN 17 005 482 726.
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