Superannuation Discussion + market volatility

[dec540]

Thanks. It will certainly prove beneficial to us. The equity in our house has, like everyone else's, has been rocketing. Even if this growth slows down, there will still be enough left over to take care of our nursing home costs when that dreaded day comes. As I said earlier, we seem to be in the sweet spot with enough super to be able to top up an aged pension, but without having enough to cut out the pension. I really feel sorry for a couple with $800k in super.

There's really no reason to feel sorry for them. The system is designed such that Australians are expected to use their own assets prior to claiming social security. The couple with $800k in super is expected to draw their desired income primarily from superannuation assets. If their investment earnings are not sufficient to replace the drawn income, their eligibility for social security will slowly increase over time.

At the end of the day, if anyone feels they have too much assets and it's hurting their Centrelink eligibility, there's a pretty simple solution (turn left instead of right when boarding the plane )

 

[Blinky]

You means the ones with the new boat, new car, fresh back from two RTW trips who have $500K in super.....

True. Not quite us, but not far from it. We have a broken super system where financial advisors say "spend it quick".

 

[Blinky]

There's really no reason to feel sorry for them. The system is designed such that Australians are expected to use their own assets prior to claiming social security. The couple with $800k in super is expected to draw their desired income primarily from superannuation assets. If their investment earnings are not sufficient to replace the drawn income, their eligibility for social security will slowly increase over time.

At the end of the day, if anyone feels they have too much assets and it's hurting their Centrelink eligibility, there's a pretty simple solution (turn left instead of right when boarding the plane )

Yup. I wonder how many people in this position realises that the more they have in super the worse off they can be.

 

[Isochronous]

The younger among us don't need to worry because the profligate and socialist tendencies of government will result in super being nationalised sooner or later for the sake of "fairness".

 

[get me outta here]

It seems any subject can be made into a political comment, perhaps hairdressing or cooking or riding the bus as well.

The younger among us don't need to worry because the profligate and socialist tendencies of government will result in super being nationalised sooner or later for the sake of "fairness".

 

[Deleted member 29185]

It seems any subject can be made into a political comment, perhaps hairdressing

My hairdresser is great for political comment!

 

[Blinky]

The younger among us don't need to worry because the profligate and socialist tendencies of government will result in super being nationalised sooner or later for the sake of "fairness".

Oh I don't think that will need to happen. My kids will retire with north of 2 million of super. It's only baby boomers who will be caught in the position of needing age pension top up. We are really in a class of our own as a nation in how we have managed retire income for ordinary people.

 

[QF WP]

We have a broken super system where financial advisors say "spend it quick".

Can't agree with you there. If a couple with that level of assets (plus PPR house which is excluded for Centrelink Assets Test purposes), can't obtain a reasonable income then they should have been planning a lot longer than they did (regarding contributions as well as investment management).

That's why dec540 said what he did - I'm sure we both came across plenty of clients who were at or near the previous thresholds where spending money (whether consumable or prepaying expenses) was the only way they would continue to receive the Age Pension. For most it wasn't about the income, it was the access to the Pensioner Concession Card. The scenario hasn't changed with the reduction in assets test limits at the beginning of 2017. Those that take advice (or research themselves) are the ones that profit from using the legislation to their best advantage.

At the end of the day, if anyone feels they have too much assets and it's hurting their Centrelink eligibility, there's a pretty simple solution (turn left instead of right when boarding the plane )

Amen to that . I had a couple who prescribed that treatment to themselves (with my blessing) to stay under the threshold limits.

 

[Isochronous]

Oh I don't think that will need to happen. My kids will retire with north of 2 million of super. It's only baby boomers who will be caught in the position of needing age pension top up. We are really in a class of our own as a nation in how we have managed retire income for ordinary people.

So you see the budget magically returning to balance/surplus and the national debt being reduced whilst spending continues to spiral out of control?

This isn't purely a retirement income issue - it's an issue of government greed and failure to control spending.

 

[Blinky]

So you see the budget magically returning to balance/surplus and the national debt being reduced whilst spending continues to spiral out of control?

This isn't purely a retirement income issue - it's an issue of government greed and failure to control spending.

I don't think Australia will magically turn into one of the few nations to return to a surplus any time soon. But it will continue its record run of GDP growth while successfully managing its surplus.

What I do know is that any government which cuts pensions to non-wealthy people would lose office quite rapidly.

Anyway, as I have pointed out, the cost of the Age Pension will not be a long term problem as most people will retire with large super balances 10 years or so from now. All praise the visionary Hawke/Keating years.

 

[RB]

Anyway, as I have pointed out, the cost of the Age Pension will not be a long term problem as most people will retire with large super balances 10 years or so from now. All praise the visionary Hawke/Keating years.

Unfortunately I don't think this is the reality

 

[Blinky]

Unfortunately I don't think this is the reality

I think it might be.

7.1 Age Pension

People will still receive the Aged Pension at about the same 80% rate, but an increasing number will receive a part pension and not a full pension. A good thing by any measure.

And I expect the government to continue to tweak pensions, and possibly require a large proportion of super to be taken as an annuity, which I expect would result in even lower pension eligibility rates. But it will do so cautiously.

 

[Blinky]

Anyway, I'm looking to lock in a full pension via the Aged Pension Loan before this is changed. It seems too generous to people in my situation.

 

[CaptJCool]

The point by QF WP about the health care card is the right one
The fact people arrange their finances to get access has its merits,

The facts are Between the 2011 and 2016 Census, the % in suburbs on age pension ought have reduced...
1 million New over 65's. 400,000 died but age pension numbers flat-lined
See to:
DSS Payment Demographic Data - data.gov.au
DSS Payment Trends and Profile Reports - Age Pension Payment Trends and Profile Report June 2016 - data.gov.au
Social security payments for the aged, people with disabilities and carers 1901 to 2010 – Parliament of Australia
See table 2

Also sometime ago put this table together
to note; number of Age Pensioners today is 67.8% of all over 65 (gender split 45:55 M/F) 2.49 m of 3.6 m so the Super gig is kicking in (and as QF WP the other key ratio is full to part payments recently affected by the assets test changes).

1987 80% (31:69 M/F) 1.32m of 1.64m

1997 78% (35:65 M/F) 1.68m of 2.15m

2007 74% (42:58 M/F) 1.95m of 2.64m

2017 68% (45:55 M/F) 2.49m of 3.67m

So while an extra 1m turned up in 20 years (1987-2007), the next extra 1m in half the time (2007-17).
And notice the adjustment from the rather skewed M:F ratio.... and given women by law had to stop working on marriage, so we damn well ought be supporting them in their older age...

my annoyance is where you self-fund you're now going to pay extra tax ($1.6 transfer cap) and you're up for all the health care costs, some with home care help are on salary packages nearer $70-80,000 all on the taxpayers dime. It beggars belief this double dipping AND expecting someone else to just stump up the money for the bill

 

[dec540]

Yup. I wonder how many people in this position realises that the more they have in super the worse off they can be.

I can see why you think this way, but I have to disagree that those with $800k in super are 'worse off' than those with less on the basis they have limited access to age pension entitlements.

The idea of superannuation, and any retirement savings (so far as the government is concerned) is to fund your own retirement. Not to generate an income that is supported by the aged pension so that your 'nest egg' doesn't erode and is inherited by the next generation.

The recent changes to the asset test force pensioners to use their own savings before becoming reliant on social security. The balancing act comes in ensuring that you can maintain a similar level of income as your own savings deplete and your eligibility for the aged pension increases.

my annoyance is where you self-fund you're now going to pay extra tax ($1.6 transfer cap) and you're up for all the health care costs, some with home care help are on salary packages nearer $70-80,000 all on the taxpayers dime. It beggars belief this double dipping AND expecting someone else to just stump up the money for the bill

If we take the example of a couple, each member is allowed to have the $1.6 million within superannuation. As a couple they'd also be able to generate approximately $57,948 of assessable income prior to paying a cent in tax (due to the Seniors & Pensioners Tax Offset). That's assuming no deductions or franking credits either..

So effectively $3.2 million in pension phase and investment income of circa $60k per annum before paying any tax. If that's not generous I don't know what is.

 

[PDog]

my annoyance is where you self-fund you're now going to pay extra tax ($1.6 transfer cap) and you're up for all the health care costs, some with home care help are on salary packages nearer $70-80,000 all on the taxpayers dime. It beggars belief this double dipping AND expecting someone else to just stump up the money for the bill

CaptJCool- sorry, I don't get what you're arguing in this last point. Are you annoyed you have a cap on your super while your taxes are paying for current pensioners?
Serious question, not being argumentative!

 

[CaptJCool]

Yes,

by paying taxes and paying your own health (private health insurance and then significant gaps) and making a significant contribution to home care costs you are being ripped off - single people probably argue this the most...
By not paying taxes (because you have two thresholds) and not paying your home care costs and not paying your health system costs (even if that includes not having private health insurance) someone else must foot the bill....
That's just maths

I found these interesting to contemplate in context of Super
Private health insurance is just another way to rip off millennials | Naaman Zhou
Market failure: private health insurance only worth it for 'the pregnant, the rich and the sick'
Is private health insurance worth the money?
Premiums aren't the problem with private health insurance. This is

 

[Deleted member 29185]

private health insurance only worth it for 'the pregnant, the rich and the sick'

I had to laugh at this headliner ... err, yes and the point being??

(and the linked article is pure rubbish IMHO)

 

[Isochronous]

Well, it's obvious that health insurance is more valuable to those people who use health services. It's not rocket science.

 

[JohnM]

Well, it's obvious that health insurance is more valuable to those people who use health services. It's not rocket science.

But if those who don't need it now (generally the young) fail to recognise that they are likely to need it in the future, and consequently opt out, the system will ultimately be primed for failure.