Superannuation Discussion + market volatility

[SYD]

Anyone over 150yrs. Apparently there are a few over in the US?

Some US pensions pass onto dependents - Widows and children.

Famous example of someone receiving a Civil War pension!

Irene Triplett - Wikipedia

en.wikipedia.org

 

[Quickstatus]

I may not have 10 years but point taken.

Worst thing to do now is to move funds into higher return (potentially) but riskier (definitely) investment mix in order to chase a retirement target

 

[CaptJCool]

Anyone over 150yrs?. Apparently there are a few over in the US?

Ideally if Superannuation is successful as a pension replacement, then the peak numbers should be reducing and also shifting toward the later age groups. Are you seeing this trend?

There’s a couple of things to mention

The raw figures for inbound are relatively flat

At the same time the potential eligible Australians who turn 67 are going higher and higher (census 2021 data - 4 years ago)

That means the % of the total is dropping because the big cohort of baby boomers is getting to 67…

And because the vast majority of both genders worked we are passing through the “must quit your job when married” “stay at home mother” generations who had no superannuation

We are living Longer so this affects the over 90s. The surviving spouse situation means many on inheriting their partners share fall foul of the MUCH LOWER asset thresholds with twice the amount of assets now in one name not two.

Apparently there’s also a rule that if you go into aged care and don’t rent the house nor sell it that after 2 years they cut Orf age pension

The net impact is the new entrants appear to be around 33-36% of those who turn 67 (as compared historically 80%)

This is roughly meaning as each person who’s on age pension falls foul of surviving spouse or passes away , new entrants (from a much bigger pool) are only replacing the departed. Thus the % of the total grows smaller and smaller

 

[Rebekkap]

I've been quietly watching my little stash grow with work contributions and investments but my heart skipped a beat this morning when I noticed ~2% of my funds disappear into thin air.

The 8%-9% growth the past few years has been nice but cannot afford dips like this one if I'm retiring and taking a pension in 3-4 years.

This is not financial advice, it’s general information only, but most people don’t die immediately after they retire. If average lifespan for men is around 80 and you retire at 65, you’ve got another 15 years left and possibly more than that. Most people want their money to at least keep up with inflation in retirement and that means they need to still take some risk, even if they’re not comfortable taking as much as they did. My mother is nearly 80 and is drawing down from her super but because it’s still mostly in a balanced option she’s made enough on average each year since she retired that her capital sum hasn’t gone down at all. Your mileage may vary, past performance is not an indication of future performance etc, but just because you’re close to retirement doesn’t mean you suddenly have a really short investment horizon. When I get closer to retirement I will start switching *some* of my money into cash until I have enough in a cash option to fund 3-4 years of living expenses without having it come out of equities if the market is down. That way I can leave the rest invested in a way that hopefully still generates decent returns without having to panic every time the market goes up or down. When the market’s going well I’ll take profits and switch a bit more into cash, when it’s not, I won’t worry about it. Again, just what I’m personally going to do, not advice.

 

[Quickstatus]

because it’s still mostly in a balanced option

And the catch is that some super funds apparently automatically move portfolio into "safer/conservative" close to retirement which may not suit everyone

 

[RSD]

Worst thing to do now is to move funds into higher return (potentially) but riskier (definitely) investment mix in order to chase a retirement target

Yes - especially with things being so messed up at the moment!

 

[CaptJCool]

Yes - especially with things being so messed up at the moment!

The simplified answer is until about 12-18 months out you can recover late period losses
After that as you head towards the access date, you got no hope recouping losses and bear in mind the loss drops your capital and means you got to make up an even higher interest return to recover the capital and then any interest.

At the time I took super at 54/11
The last 6 months were like this

July +1.08%
August +1.12%
September -0.16%
October -2.03%
Switched from default to cash
So basically lost all contributions and earnings for July - October

So I saved myself from further losses of
November -1.17%
December (day pension accessed) -1.1

If say I took the additional losses woulda made it up within 18 months on the CPI adjustments. Nevertheless it was still a decent hit to the per annum superannuation figure …

 

[burmans]

And the catch is that some super funds apparently automatically move portfolio into "safer/conservative" close to retirement which may not suit everyone

I think this is only if you are in the ‘default’ option. We (almost) all have the ability to control what options our super is invested in, IMO amazingly few actually use it, that is in my view on us not the super fund. They do what is on average regarded as best, if you think you can do better, do so. Of course that removes your ability to complain.

 

[stm1sydney]

but just because you’re close to retirement doesn’t mean you suddenly have a really short investment horizon.

Exactly. The investment horizon is still about 20 to 30 years!

Post automatically merged: Today at 11:13 AM

I've been quietly watching my little stash grow with work contributions and investments but my heart skipped a beat this morning when I noticed ~2% of my funds disappear into thin air.

The 8%-9% growth the past few years has been nice but cannot afford dips like this one if I'm retiring and taking a pension in 3-4 years.

We are up about 15% FYTD before the last week, so a 2% correction is not even a blip.

 

[mrsterryn]

@CaptJCool
Do you happen to have the breakdown of full versus broken rates ?

 

[CaptJCool]

@CaptJCool
Do you happen to have the breakdown of full versus broken rates ?

Broken rates ?

 

[mrsterryn]

Broken rates ?

Partial rated not full pension

 

[andye]

The simplified answer is until about 12-18 months out you can recover late period losses
After that as you head towards the access date, you got no hope recouping losses and bear in mind the loss drops your capital and means you got to make up an even higher interest return to recover the capital and then any interest.

At the time I took super at 54/11
The last 6 months were like this

July +1.08%
August +1.12%
September -0.16%
October -2.03%
Switched from default to cash
So basically lost all contributions and earnings for July - October

So I saved myself from further losses of
November -1.17%
December (day pension accessed) -1.1

If say I took the additional losses woulda made it up within 18 months on the CPI adjustments. Nevertheless it was still a decent hit to the per annum superannuation figure …

Interested in the thoughts behind this

Am I assuming that the absolute value of your pot at the time of retirement* is important as you are then transferring to an annuity type product?

For me, I'll be retiring with an SMSF and wouldn't want to sell anything just before retiring as that would incur some tax.

The investment horizon for me at retirement would be (hopefully) 10+ years and as I have no special skills in timing the market, tax efficiency is the key.

I might dial down my risk asset proportion but unlikely to go below 70%. As long as I can avoid selling any shares during a 5 year downturn, I reckon I'd be more than all right

*as an aside, a market dip just before retiring might be an advantage for me, as it would leave more transfer balance cap available in the future should accumulation funds be available

 

[Quickstatus]

t would leave more transfer balance cap available in the future should accumulation funds be available

Cant you leave some in the accumulation side - ie not transfer everything?

 

[andye]

Cant you leave some in the accumulation side - ie not transfer everything?

I could and will almost certainly be able to*.
Funds in pension mode have a higher rate of return though, so it's a balance (for want of better word)
Plan not to hit my transfer balance cap until age 75 to remain flexible.

*I do seem to be able to spend money pretty easily currently and will need a decent retirement income to stay there though. In fact, I'm terrible at saving/budgeting and compulsory super has been a godsend for keeping me on track

 

[SYD]

Cant you leave some in the accumulation side - ie not transfer everything?

Not sure that’s possible?

Apart from entering into TTR or DBS, it’s usually a single shot to establishing a pension I thought? So most would be better maxing out their TBC. Obviously anything over has to remain in accumulation anyway.

BTW, the TBC was confirmed to go to $2m from 1 Jul.

So a tidy $80k pa tax free taking the min 4%.

 

[burmans]

Not sure that’s possible?

Apart from entering into TTR or DBS, it’s usually a single shot to establishing a pension I thought? So most would be better maxing out their TBC. Obviously anything over has to remain in accumulation anyway.

BTW, the TBC was confirmed to go to $2m from 1 Jul.

So a tidy $80k pa tax free taking the min 4%.

Definitely possible, you can’t add to a pension but can have multiple pensions. Though if you already have transferred some money to pension you don’t get access to the full TBC increase, there is a worked example on the ATO site somewhere I’ll try and find.

Edit: Found it, see last three examples.

Calculating your personal transfer balance cap | Australian Taxation Office

How your personal transfer balance cap is calculated.

www.ato.gov.au

 

[Pushka]

Not sure that’s possible?

Apart from entering into TTR or DBS, it’s usually a single shot to establishing a pension I thought? So most would be better maxing out their TBC. Obviously anything over has to remain in accumulation anyway.

BTW, the TBC was confirmed to go to $2m from 1 Jul.

So a tidy $80k pa tax free taking the min 4%.

We have done exactly this, kept our accumulation account and have set up a pension account. We re still working so SS and SG into accumulation. We transferred only to the pension enough to keep compulsory payments (5%) at a minimum. When we want to put more to the pension account we either close the current pension or run two simultaneously. Yes, the tax savings are excellent but that pesky 5% that increases with age is problematic.

 

[Quickstatus]

Yes, the tax savings are excellent but that pesky 5% that increases with age is problematic.

Though that can be used to recontribute as Non Concessional contribution up to $120K/year?

When we want to put more to the pension account we either close the current pension or run two simultaneously

Our super is 100% concessional contributions.
The goal would be to change as much as possible to Non C.

What is you strategy?

 

[Pushka]

Though that can be used to recontribute as Non Concessional contribution up to $120K/year?


Our super is 100% concessional contributions.
The goal would be to change as much as possible to Non C.

What is you strategy?

To be honest, I knew about this 'cleaning' option but hadn't really researched much. Maybe I should. While we are still working and SS to the full $30,000 that's about it. I do know it's not 100% concessional but can't recall the actual percentage. Ok back in 2023 it was roughly 60% taxable and 40% tax free. The info isn't available on the website, you have to email them.