Superannuation Discussion + market volatility

[cove]

So don’t panic if you realise you won’t make it to $3.2 million retirement nest egg seeing only 5% actually get there.
The future cost of living is a big unknown for all of us.

 

[burmans]

Without intending to question Coves wisdom, I'd just like to ask the collective as to who agrees with this statement?.

Well it happens to be exactly my target too but it's a very arbitrary one set largely by the fact that it's the limit recently set by the government for how much you can have in a pension fund for a couple without losing tax benefits. Frankly I could survive on a lot less (though I wouldn't have as much fun) or more (though I'd have to work longer than I really want to).

 

[amaroo]

We should exceed that target. We're a couple under 50 with a few established businesses. If we didn't travel, we'd be very miserable, but very comfortable - no fun there

SMSF has allowed super flexibility I suppose one of us being a CA, super, and tax specialist has also helped.

 

[lovetravellingoz]

So don’t panic if you realise you won’t make it to $3.2 million retirement nest egg seeing only 5% actually get there.
The future cost of living is a big unknown for all of us.

I am actually surprised that 5% of couples have $3.2 million in Super on retirement. I would have thought the figure would be lower and in particular as bricks and mortar is the favoured investment vehicle of so many.

From 2015:
There are over 200,000 people who have superannuation account balances in excess of $1 million More than 210,000 people have more than $1 million in superannuation, the majority (140,000) of whom are self-managed superannuation fund (SMSF) account holders. The remainder (70,000) are in APRA-regulated funds. Around 140,000 persons have more than $1.5 million in super, 100,000 in excess of $2 million and about 70,000 in excess of $2.5 million.

 

[cove]

One of my business friends had well over $10 million in his superannuation account which was caused by him holding a quantity of one mining share that rocketed and was then taken over. It wasn’t planned and it was unusual to have only two shares in his SMSF at that time. The new rules that the Government introduced have made some of the current investments subject to tax.
I have 13 investments in our SMSF and surprisingly I am behind on a big 4 bank share by about 3%. It is a pretty well run bank that has avoided most of the scandals so I am not worried. Currently all the big 4 banks are having to spend much more management time on checking compliance and documentation due to mortgage brokers having introduced liar loans into home mortgages.The banking watchdog APRA is definitely causing changes to how banks operate.

 

[Deleted member 29185]

Much of these conversations are in a foreign language to me. I lost faith in super, not long after Keating made it mandatory. The Regal fund manager stole a phenomenal amount of money (a portion of it being mine) and was aided and abetted by the Commonwealth Bank as I recall and the gov't did very little to get my money back. That taught me a lesson not to trust others to do the right thing with my cash and successive failures (of investment institutions) since then have done little to convince me the gov't have any sway at all, except to continually change the position of the goal posts for us (as we're the easy targets and they know they have absolutely no control over big business scams and fraud).

I decided to invest for my retirement in other ventures, but predominantly bricks and mortar. At least you can see the thieving mongrels stealing your assets but I do have a modest super balance regardless and I'd like to ensure it doesn't get stolen in the next decade or so, hence my (also modest) interest in this thread.

 

[Pushka]

While trying to put as much salary sacrofice as possible into Super last year, this year thanks to my once Fav politician Turnbull, I’m limited. But having a frightening and now chronic health issue last year I decided I’d also focus on bucket list issues now because in reality I’m at significant risk of stroke even though still not retirement age. Don’t see the point so much anymore.

 

[cove]

We treated superannuation as secondary to running our business. I paid much more attention when I stopped working long hours. With spare time I changed over to a SMSF and it went pretty well.
I don’t think of these funds forming any part of a wealth transfer to beneficiaries but you cannot predict whe you are going to drop off the perch.

 

[tgh]

a tad o/t , but a genuine question....... what do you intend to do with "it" cove ?

 

[cove]

Travel sounds like a great idea tgh. Mrscove loves shoes me not so much.
We have plenty of frequent flyer points and miles so we can get to most places.
I still love flying over Asia and the Middle East stopping only in Singapore for a journey break at the Crowne Plaza for a night.
London and Los Angeles are always great starting places for a holiday.

 

[tgh]

Travel sounds like a great idea tgh. Mrscove loves shoes me not so much.
We have plenty of frequent flyer points and miles so we can get to most places.
I still love flying over Asia and the Middle East stopping only in Singapore for a journey break at the Crowne Plaza for a night.
London and Los Angeles are always great starting places for a holiday.

prhaps we are a tad older, but travel is increasingly more challenging/less interesting.
leads to…..(my question)…
..in all fairness.. posted from a nice b&b in southwest harbor, Maine…...

 

[Deleted member 29185]

I liked the comment someone raised earlier (QF WP perhaps?) about taking into account the super capital and not just the income derived from it. I did note someone had said to allow for perhaps 30 years of life expectancy, but to be honest, if we're lucky enough to live for 30 years over retirement age (unlikely in most cases, I'd assume), our needs become less. My Mum is a classic example. She and Dad enjoyed travel and adventure, but now (she is in her 80's) travel and adventure is not high in her thoughts. She is far more comfortable pottering around her garden and visiting friends and family and doesn't even think about travel and her eating habits are considerably different as well. She eats less, rarely eats out and her financial needs are miniscule in comparison to what I would have thought if I did a budget for her perhaps 10 years ago. She even decided to give up the car as she just didn't want the stress of driving. All this is not because of a lack of funds. She still has a reasonable investment. Admittedly, there will be others very different, but I think spending considerably less as we age would be a fairly commonplace scenario.

I'm tending to think the biggest splash of cash would likely occur within 10-15 years of retirement and from thereon in, be a reducing need.

 

[QF WP]

I am actually surprised that 5% of couples have $3.2 million in Super on retirement. I would have thought the figure would be lower and in particular as bricks and mortar is the favoured investment vehicle of so many.

From 2015:
There are over 200,000 people who have superannuation account balances in excess of $1 million More than 210,000 people have more than $1 million in superannuation, the majority (140,000) of whom are self-managed superannuation fund (SMSF) account holders. The remainder (70,000) are in APRA-regulated funds. Around 140,000 persons have more than $1.5 million in super, 100,000 in excess of $2 million and about 70,000 in excess of $2.5 million.

I should have clarified my answer above. Few people attain it in solely superannuation wealth, but more attain it in overall wealth (particularly given the inter-generational transfer of wealth that is happening where the majority of those assets are direct property and lesser amount in shares).

It will become less likely to attain given the lower ability to contribute to super (whether personally or via employer or self employed contributions), given the reduction in contribution caps; along with the lower growth forecasts.

 

[cove]

The contribution cap makes it important to have one superannuation account for one set of fees. Start early if you can with a co-contribution but only if you can afford it.

 

[QF WP]

Much of these conversations are in a foreign language to me. I lost faith in super, not long after Keating made it mandatory. The Regal fund manager stole a phenomenal amount of money (a portion of it being mine) and was aided and abetted by the Commonwealth Bank as I recall and the gov't did very little to get my money back. That taught me a lesson not to trust others to do the right thing with my cash and successive failures (of investment institutions) since then have done little to convince me the gov't have any sway at all, except to continually change the position of the goal posts for us (as we're the easy targets and they know they have absolutely no control over big business scams and fraud).

Ah, Regal Funds Management, a blast from the recent past:

Three things happened: two Directors (appointees from Ascalon a Westpac subsidiary) Lees and Chan resigned from the board and in doing so revealed that ASIC investigation; the Westpac-owned Asgard pulled its funds from Regal, said to be about $70 million; and, Regal decided to make an interim distribution of other funds to protect the interests of all its investors. The size of that distribution is not known, but it is unlikely that there will be much left in the former $100-million Regal Long/Short Australian Equity fund.

The reason for the ASIC invesstigation: Regal was shorting Syrah Resources when it fell by 43 per cent over a few days in March and April 2013. It subsequently recovered but not before about $30 million had been wiped from the capitalisation of the thinly traded small-cap stock.

I decided to invest for my retirement in other ventures, but predominantly bricks and mortar. At least you can see the thieving mongrels stealing your assets but I do have a modest super balance regardless and I'd like to ensure it doesn't get stolen in the next decade or so, hence my (also modest) interest in this thread.

Once bitten...

 

[cove]

I remember lots of the frauds that have occurred. We have an employee who had an employer who never paid into superannuation and then went into liquidation. Really nasty things happen so do check your account statement at a minimum of several times a year to help avoid fraudsters.

 

[QF WP]

I liked the comment someone raised earlier (QF WP perhaps?) about taking into account the super capital and not just the income derived from it. I did note someone had said to allow for perhaps 30 years of life expectancy, but to be honest, if we're lucky enough to live for 30 years over retirement age (unlikely in most cases, I'd assume), our needs become less.

Not sure it was me. Well, statistically that will be the case - just look at the increase in female life expectancy since 1880 and then extrapolate the findings forward.
Updated life tables: Have our Australian life expectancies peaked?
Female children born in 2012 have a life expectancy of 84. Those aged 65 in 2012 had a life expectancy of 22 (so 87) and it continues to grow as they get older. Projected life expectancy is still slowly growing in most categories
Updated life tables: Have our Australian life expectancies peaked?

My Mum is a classic example. She and Dad enjoyed travel and adventure, but now (she is in her 80's) travel and adventure is not high in her thoughts. She is far more comfortable pottering around her garden and visiting friends and family and doesn't even think about travel and her eating habits are considerably different as well. She eats less, rarely eats out and her financial needs are miniscule in comparison to what I would have thought if I did a budget for her perhaps 10 years ago. She even decided to give up the car as she just didn't want the stress of driving. All this is not because of a lack of funds. She still has a reasonable investment. Admittedly, there will be others very different, but I think spending considerably less as we age would be a fairly commonplace scenario.

Your parents sounds like mine (also in their 80's). Travel might be going to ADL or Kangaroo Island, but for many years (from 1980 until 2007), one or both were still travelling. Then my Dad had a scare over in Jamaica watching the 2007 Cricket World Cup with my uncle and I had to get him home quickly (thankfully flying AA and QF so I burnt all my points upgrading him to AA First and QF Business). That made him realise he wasn't infallible. Now at 86 and 80 they are both still driving, but on their last cars. They have a reasonably good income (Dad particularly having been fortunate to have superannuation since 1951 and they were able to maximise contributions in the last 20 years until retirement in 2007).

I'm tending to think the biggest splash of cash would likely occur within 10-15 years of retirement and from thereon in, be a reducing need.

Absolute truth - trying to find data to prove the statement. Travel expenditure deceases as the health expenditure increases.

 

[lovetravellingoz]

I should have clarified my answer above. Few people attain it in solely superannuation wealth, but more attain it in overall wealth (particularly given the inter-generational transfer of wealth that is happening where the majority of those assets are direct property and lesser amount in shares).

.

Thank you for the clarification. Yes 5% of couples exceeding $3.2 million in total wealth rather only in super I can certainly believe, and indeed thanks to the property boom of the last decade I think that it would probably be well over 5%.

I might give the $3.2million per couple just in super a nudge depending when I finally pull up stumps (I now run my own business but no longer work full time, or rather I have many more holiday days per year now and this will continue to increase each year from now on), but in terms of total wealth are already well past the $3.2million mark.

 

[lovetravellingoz]

I'm tending to think the biggest splash of cash would likely occur within 10-15 years of retirement and from thereon in, be a reducing need.

In terms of normal spending yes I would think so.

However bare in mind that a number of people require increased health care and may need to buy in to a suitable facility for their last years. So that can require a large capital spend very late in the retirement. If one owns your own home that may be used to fund it, but it is still factor to keep in mind.

 

[QF WP]

Thank you for the clarification. Yes 5% of couples exceeding $3.2 million in total wealth rather only in super I can certainly believe, and indeed thanks to the property boom of the last decade I think that it would probably be well over 5%.

I might give the $3.2million per couple just in super a nudge depending when I finally pull up stumps (I now run my own business but no longer work full time, or rather I have many more holiday days per year now and this will continue to increase each year from now on), but in terms of total wealth are already well past the $3.2million mark.

Did a little research after your post above and quickly found the ABS statistics for 2015/16: 6523.0 - Household Income and Wealth, Australia, 2015-16

The mean total financial assets was $378K (with it having the highest change since the 2005/6 figures). Assuming the bulk of that is in super, then using the ASFA Retirement Standard of $34,91 p.a, for a couple, that statistical couple is likely to outlive their investment capital and to have a significant proportion of the Age Pension as income.