Superannuation Discussion + market volatility

[JohnK]

That’s true, but for a financially very conservative person like JohnK seems to be (and a worrier with it), I thought to not understand that he could choose his own (more conservative) investment mix within his super fund was a lack of very basic knowledge that could save him some angst.

You're a nice person. Thanks for answering some simple questions.

For me superannuation was going to be some extra cash at retirement but I stuffed up and now superannuation is a little bit more important.

I'm happy with the little bits of information I pick up here and there.

 

[Flying mermaid]

You're a nice person. Thanks for answering some simple questions.

For me superannuation was going to be some extra cash at retirement but I stuffed up and now superannuation is a little bit more important.

I'm happy with the little bits of information I pick up here and there.

John, you seem quite an intelligent person and with a young child and a wife, maybe you should do some extra reading on finances? There are some terrific books around that would help. I am not suggesting going into financial wizardry or charting, but just basic ones.

While the information on here is excellent, perhaps something a bit more structured so you can make more informed decisions?

I gave all my kids Alan Kohler’s guide to investing one Christmas. It really is investing 101, but they found it useful as an intro and there are probably a lot of better books as well that people on here could recommend.

 

[JohnK]

John, you seem quite an intelligent person and with a young child and a wife, maybe you should do some extra reading on finances? There are some terrific books around that would help. I am not suggesting going into financial wizardry or charting, but just basic ones.

While the information on here is excellent, perhaps something a bit more structured so you can make more informed decisions?

Thanks. You're a nice person too.

I'm not that smart. If I was I'd be retired already. I have a few issues and luckily I recognised these issues and have worked around them.

I'm hoping to retire at 60. Another 6 years. As mentioned in super thread my plan is to have ~$52,000/year income in retirement. Some of that will go to tax so not quite $1,000/week. That should be possible with rental income and ~$300,000 in superannuation.

If that gets me through to 76 years of age and I'm still alive then I've done alright. Daughter should just about be out of university and hopefully study something useful like being a doctor and giving something back to the community.

 

[tgh]

Thanks. You're a nice person too.

I'm not that smart. If I was I'd be retired already. I have a few issues and luckily I recognised these issues and have worked around them.

I'm hoping to retire at 60. Another 6 years. As mentioned in super thread my plan is to have ~$52,000/year income in retirement. Some of that will go to tax so not quite $1,000/week. That should be possible with rental income and ~$300,000 in superannuation.

If that gets me through to 76 years of age and I'm still alive then I've done alright. Daughter should just about be out of university and hopefully study something useful like being a doctor and giving something back to the community.

Many people at your proposed level of retirement income find it useful to manage their assets and income in a manner that secures a health card or even a part or full pension. There is quite an industry managing trough access.
During a period of low inflation/ low interest rates , it's important to consider the personal ramifications of a return to a more normal economy with high interest and high inflation.

 

[Pushka]

Thanks. You're a nice person too.

I'm not that smart. If I was I'd be retired already. I have a few issues and luckily I recognised these issues and have worked around them.

I'm hoping to retire at 60. Another 6 years. As mentioned in super thread my plan is to have ~$52,000/year income in retirement. Some of that will go to tax so not quite $1,000/week. That should be possible with rental income and ~$300,000 in superannuation.

If that gets me through to 76 years of age and I'm still alive then I've done alright. Daughter should just about be out of university and hopefully study something useful like being a doctor and giving something back to the community.

If you’ve reached retirement age and drawing money only via super then no tax payable on those drawings. And your super fund won’t pay tax on interest and dividends etc and if well structured it should receive the imputation tax back.

Heard a sad story the other day. Older folk purchased a house for one of the kids who has significant mental health issues. That kid now an adult at least has a home. But as a result that home precludes them as an asset for getting any pension even though it costs them to have it (council rates, esl, land tax etc) as the son can’t pay rent. So, they are at the age where one needs aged residential care, the other will stay at home. So the other siblings will need to each take out $50,000 mortgage to get together a bond - I think I’ve mentioned this before - and was given the advice to tell them to get an Agent?

 

[QF WP]

That's where they should have got advice (which probably would have been to start a special disability trust for their son) and the problem would been managed as the value "gifted" ($626K + $14k per annum) would have been an excluded asset.

Special Disability Trusts | Department of Social Services, Australian Government

They still may be able to utilise this method, but need to talk to Centrelink and a qualified Aged Care adviser.

 

[JohnK]

If you’ve reached retirement age and drawing money only via super then no tax payable on those drawings. And your super fund won’t pay tax on interest and dividends etc and if well structured it should receive the imputation tax back.

Rental income, share dividends, term deposit interest + drawing on superannuation means paying some tax.

The highest possible tax paid would be $8447 which would leave ~$838/week net income.

 

[Pushka]

Rental income, share dividends, term deposit interest + drawing on superannuation means paying some tax.

The highest possible tax paid would be $8447 which would leave ~$838/week net income.

Maybe think about and get financial advice about putting some of those assets (not the rental) into your super fund so tax not payable once it’s into pension phase. Drawing on super won’t incur tax.

 

[Quickstatus]

1.6 mil in super is not that much unless you believe the Govt who said the earning rate is assumed to be 5% = 80K pa without touching the capital and tax free. Sounds like a lot?. However remember this is Pension phase capital - the funds will be remember thhoused in a capital protective structure. 5% is optimistic.

Additionally inflation will erode the value of that income over the period of the pension phase. 80K in the first year will not be worth 80K in subsequent years.

5% interest on the capital but 2% inflation on the income:
First year 80000
2nd year 78400
3rd year 76832
4th year 75295
5th year 73789
6th year 72313
7th year 70867
8th year 69450
9th year 68061
10th year 66699 (effectively 4% x 1.6mil)

Of course you can structure the pension phase annuity so that the capital is consumed by a certain age. This is the other question. How long do you want the super to last before drawing on the age pension

 

[Quickstatus]

Yes i have just posted there:

1.6 mil in super is not that much unless you believe the Govt who said the earning rate is assumed to be 5% = 80K pa without touching the capital and tax free. Sounds like a lot?. However remember this is Pension phase capital - the funds will be remember thhoused in a capital protective structure. 5% is optimistic.

Additionally inflation will erode the value of that income over the period of the pension phase. 80K in the first year will not be worth 80K in subsequent years.

5% interest on the capital but 2% inflation on the income:
First year 80000
2nd year 78400
3rd year 76832
4th year 75295
5th year 73789
6th year 72313
7th year 70867
8th year 69450
9th year 68061
10th year 66699 (effectively 4% x 1.6mil)

Of course you can structure the pension phase annuity so that the capital is consumed by a certain age. This is the other question. How long do you want the super to last before drawing on the age pension

 

[andye]

Most pension calculators, that I've seen, assume some erosion of the capital sum. While in an ideal world, one wouldn't need to do this, I'd argue that working beyond the time you want to in order to leave a hefty inheritance, is not necessarily the best decision

 

[Buzzard]

5% is a pretty poor return.
I think you can do better than that.

 

[Quickstatus]

5% is a pretty poor return.
I think you can do better than that.

In a capital protected/stable fund averaged over 25 yrs?

 

[JohnK]

Of course you can structure the pension phase annuity so that the capital is consumed by a certain age. This is the other question. How long do you want the super to last before drawing on the age pension

For me the plan is to retire at 60 and hopefully have enough super until 76. My reasoning is I don't see myself active much past 76.

All my projections have been on 2% inflation with 2-3% return on investment. Very conservative and if return on investment is higher then obviously money will last a little longer.

How much is enough? I think what I have already is too much. I only need a moderate lifestyle and I'm wasting good years spending time in an office where as I should be spending that time on a golf course.

I also think the government's number of $80,000 is too much. I've seen way too many people work themselves to the point where they did not enjoy much of their retirement.

 

[Quickstatus]

Most pension calculators, that I've seen, assume some erosion of the capital sum. While in an ideal world, one wouldn't need to do this, I'd argue that working beyond the time you want to in order to leave a hefty inheritance, is not necessarily the best decision

Understand, so what should be zero balance year? Life expectancy + 5 years?

 

[PLANT]

^Pepple Beach JK?

 

[JessicaTam]

[mod hat]
A number of posts discussing superannuation have been moved from the off topic thread to this one. There may be some disconnect between some posts, but hopefully I got most of them.
[/mod hat]

 

[Deleted member]

In a capital protected/stable fund averaged over 25 yrs?

Compare that to a share fund over the same time frame.

 

[Deleted member]

It

For me the plan is to retire at 60 and hopefully have enough super until 76. My reasoning is I don't see myself active much past 76.

All my projections have been on 2% inflation with 2-3% return on investment. Very conservative and if return on investment is higher then obviously money will last a little longer.

How much is enough? I think what I have already is too much. I only need a moderate lifestyle and I'm wasting good years spending time in an office where as I should be spending that time on a golf course.

I also think the government's number of $80,000 is too much. I've seen way too many people work themselves to the point where they did not enjoy much of their retirement.

is worth noting that statistically speaking the earlier you retire, the earlier you die. My plan is to not actually retire. To have a multi faceted income source, and remain an active force in my business right up to when I die, which I plan to be sometime between 90 and 100. Accidents notwithstanding. ;-)
But different strokes for different folks I suppose.
I have yet to meet anyone who complains about having too much money, or too many diamonds. (Sic)

 

[andye]

Understand, so what should be zero balance year? Life expectancy + 5 years?

I dont think there is a generic answer as it depends on how willing you are to risk a drop in income. Of course if you planned for 90 and make it to 85 while in robust health you may want to scale back your spending to keep things constant. I'm making my assumptions on leaving nothing if I live to 100 but a fair sum if I live to a more likely age