Author Topic: Income Insurance + Moving home + Beyond Australian superannuation  (Read 1467 times)

syednaeemul

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Hello all!

Just joined a few days back, and have been reading the forum religiously. I've also thrown down a gauntlet to save $50,000 in cash over the year, which will be a good battle against bad habits. I'm based in Melbourne, Australia.

Here are my questions:
-I've got income protection insurance, along with life insurance coming from my superannuation fund. How important are these now? I'm guessing that once someone is FI or FIRE, these insurances can really go away?

-This coming year I have the option of moving back in with my folks. What would a Mustachian do? Commute time increases from 10min walk to 45mins on the train one-way. Savings would be around $1,200/month from not having to pay rent and my own utilities. And I gift my mother $400/month but if I move that could be considered rent for tax purposes (probably not important).

-For Aussies: Do you count your mandatory superannuation contribution towards your income saved? To me, super is "dead" money as 1. Who knows if I'll live till 65 to access it, and 2. By the time I hit 65 the withdrawal age will probably increase.

I've attached my 2015 budget, open to comments and facepunches.

urbanista

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Re: Income Insurance + Moving home + Beyond Australian superannuation
« Reply #1 on: November 24, 2015, 05:49:18 PM »
We max out our superannuation (30K + 30K = 60K a year before tax) and include superannuation balance into our net worth.

I don't understand the doom and gloom about future superannuation changes. For starters, the preservation age is 60, not 65. Then I don't see why the age will be increased. That's just not going to benefit the budget at all. All working poor who could get access to super and use it when they turn 60, will instead apply for the dole. Their super will last longer only to be collected by heirs.

What will probably happen, the super contributions will be taxed at a higher rate than current 15% tax rate. The latest proposal is to tax super contributions at the marginal income tax rate minus 20%. So someone earning 180K salary, will pay a higher tax on super contributions, but someone earning 37K will pay lower tax than they currently pay.

Adram

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Re: Income Insurance + Moving home + Beyond Australian superannuation
« Reply #2 on: November 25, 2015, 04:16:06 AM »
Preservation age may or may not be increased... But what is much more likely with super, is the end to lump sums, with super pensions becoming mandatory.... Too many people are pulling it all out and blowing it then going on a full government pension.

I don't currently count super towards my FIRE assets even though I do consider it an asset obviously, but more of a safety net.

Really it means that you can FIRE with less, and have a slightly higher SWR until 60, as once you hit 60 you can draw less from the taxable assets due to the income from super.

I would never move back home, I hate commutes, that's 1.5 hours of your life stuck on a train... I would look for other expense areas to reduce.

Mark31

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Re: Income Insurance + Moving home + Beyond Australian superannuation
« Reply #3 on: November 25, 2015, 09:28:31 PM »
If you donít own a house with a mortgage with a partner, and donít have kids you donít need life insurance. You can just pick it up later if you need it. (Note that not all super providers will let you do this, but you could just open a different super account).

Income protection benefits vary quite a lot, so you really need to work out if the cost vs benefit is worth it. If youíre young and have a lot of sick leave I wouldnít bother. I have it, because Iím in my 40s (use of the benefit increases as people age, this is probably reflected in the premium you pay), I have virtually no sick leave, and it would depress me no end to be making no progress on my savings goals. I believe we could get by on government benefits, however.

If you move in with your parents and pull your weight, it seems reasonable to me, at least for your first year of power saving to really give you a head start. The commute would sap the will to live out of me, but I understand not everyone feels that way.

Please donít ignore your super because accessing it is so far away, make sure itís in a  good low-fee account. If you get an employer match take full advantage of it, but donít add any extra amount to the account at this point. Superannuation is great as a tax advantaged environment. Once your retirement date looks like it will be past 40 (maybe it never will!) take note of how much of your wealth it makes up. If you were to retire as late as 50, for example, you would want half your wealth in super at that point. At 45, maybe 30% of your wealth.

bigchrisb

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Re: Income Insurance + Moving home + Beyond Australian superannuation
« Reply #4 on: November 25, 2015, 11:36:11 PM »
My views on insurance have changed over the last years as I have gotten closer to FI.  I was a tightwad with it, and didn't hold it.  However, in hindsight, for someone on this path, their income over the 10-15 years of accumulation is significantly more important.  If I were doing it again, I'd take out income protection insurance, but only protect the amount of income to cover the gap between my current stash SWR and my retirement spending.  e.g. if you had no stash and expected to retire on 50% of your income, take that out.  If you had a stash that funds half your retirement needs (25% unfunded), then drop the income protection to 25%. 

As someone building a stash, your income is your most valuable asset.  I'm probably a bit biased in this now, as I had a bit of a health scare a while back that could have ended my earning capacity.