Australian Investing Thread

[foreveryoung]

Hey guys!

Sorry if this question has been asked before in this thread but I could really use some help and assistance.

I'm a 20 year old male, currently in university and working part-time.

I'm looking to invest for the future and hopefully FIRE some-time in the future. I've read all about FIRE, finance and Investing generally, and i'm pretty set on investing in Index Funds primarily. I'm eager to get early into the market to really unlock the power of compound interests.

I currently have 10k saved up and looking to make my first plunge in the market. After that i'm hoping to invest 10k every year ( probably in 2 separate 5k partials twice a year to reduce brokerage costs) until I graduate university and hopefully end up with a higher paying job to invest some more.

As of now i'm torn between two options.

Option 1: (VAS, VGS, VGE) - 40%, 40%, 20%
Option 2: (VAS, VTS, VEU) - 40%, 40%, 20%

Any thoughts on this asset allocation?

In terms of AA at the moment my risk level is enough for me to be 100% in stocks. Not looking at including bonds until a bit later down the future. I understand Option 1 is a bit favourable in terms of tax purposes and more convenient, no W8Ben form i've read, however Option 2 seems to cover a bit more of the market. Would love to get some advise.

Am I heading in the right track or am I missing something? Would appreciate someone to put me in the right direction!
Thank you!

[misterhorsey]

^^
Sounds good to me. I wish I'd had your insight at that age. You're setting yourself up with a great foundation. 

I'd plump for Option 1, as it's easier to manage and I think it actually has more coverage: Aus / All World / Emerging Markets

Option 2 has Aus / US / All World ex US

However, you could also do the Lifestyle Strategy Fund route if you want greater diversification from the get go, automatic rebalancing appeals, you can invest your cash as soon as it's in your hand instead of waiting to build up a lump sum, and you are happy to pay marginally higher fees for the service.

[mw]

Hi everyone. My husband, 3yo daughter and I moved back to Australia 2 years ago and are still getting our heads around the Australian system (after living in the UK). Would love some input as everyone seems very well informed and helpful here!

We have setup for FIRE like this:
- $1M Vanguard LifeStrategy Growth & High Growth (via family trust)
- $400k investment property in Melbourne
+ live in $400k house
No debts and access to 450k line of credit.

We're 36 so aiming to live off dividends and happy to ride out ups and downs in income (don't need stability). We aren't expecting to add much to it for another 5+ years if / when my husband's hobby makes money and I'm not focusing full-time on my daughter.

We have no interest in active investing so Lifestrategy seemed like a good way to get diversification + auto rebalancing. However we've been surprised at the amount of capital gains over the last 2 years. We've been reinvesting the capital gains back in, so it feels like it just increases our taxable income and decreases the amount in the funds with no benefit.

Are there any low-fee alternatives where you get less capital gains (perhaps where redemptions aren't passed on?) but still decent diversification?

Thanks in advance for any advice!

[JACKA]

However, you could also do the Lifestyle Strategy Fund route if you want greater diversification from the get go, automatic rebalancing appeals, you can invest your cash as soon as it's in your hand instead of waiting to build up a lump sum, and you are happy to pay marginally higher fees for the service.

Thanks for this Misterhorsey. Im going to be debt free in August and I'm deciding whether to put my $5K tax return into either a
(VAS, VGS, VGE) or (VAS, VTS, VEU) ETF portfolio - OR like you suggested a Lifestyle Strategy Fund like the Vanguard High Growth Index Fund. 

I feel like if I went down the ETF portfolio route I'd get sucked into trying to gauge the market and buying low, which I feel would take away from the simplicity and set and forget appeal of long term index investing.  The Auto re-balancing appeals to me also but at the same time I don't know how difficult re-balancing is, I've read the whole thread but i'm still confused as to how re-balancing is done and how frequently?

Also, does being able to trickle money into a Retail Fund have an effect similar to Dollar Cost Averaging ?

Thank you for every ones contributions to this thread. It's an amazing resource.   

[marty998]

However, you could also do the Lifestyle Strategy Fund route if you want greater diversification from the get go, automatic rebalancing appeals, you can invest your cash as soon as it's in your hand instead of waiting to build up a lump sum, and you are happy to pay marginally higher fees for the service.

Thanks for this Misterhorsey. Im going to be debt free in August and I'm deciding whether to put my $5K tax return into either a
(VAS, VGS, VGE) or (VAS, VTS, VEU) ETF portfolio - OR like you suggested a Lifestyle Strategy Fund like the Vanguard High Growth Index Fund. 

I feel like if I went down the ETF portfolio route I'd get sucked into trying to gauge the market and buying low, which I feel would take away from the simplicity and set and forget appeal of long term index investing.  The Auto re-balancing appeals to me also but at the same time I don't know how difficult re-balancing is, I've read the whole thread but i'm still confused as to how re-balancing is done and how frequently?

Also, does being able to trickle money into a Retail Fund have an effect similar to Dollar Cost Averaging ?

Thank you for every ones contributions to this thread. It's an amazing resource.   

You don't need to rebalance if you've only got $5k in the market. Maybe the previous poster who is early retired with $1m in Vanguard High Growth options should consider rebalancing (perhaps if only just down to the Growth option to take some risk off the table, but not too much).

For $5k, just buy VAS. Your next $5k can go in VTS if you choose.

I take the basic route and just have everything ($120k+) in VAS (with a couple of minnows to add some spark at the margins).

[superannuationfreak]

On capital gains tax, that can be a material cost of an all-in-one fund outside super.  Typically Vanguard's ETFs and basic index funds have distributed minimal or no capital gains.

But that needs to be weighed against behavioural costs.  If an all-in-one fund will keep you invested/investing where you procrastinate with an ETF then it may be worth it.  Note the Wholesale managed funds for International Shares, Australian Shares, etc. tend to be similar costs to the ETFs and can be BPay'ed into also if that makes things easier.

Two other points on rebalancing.
i) As Marty points out, when you're just starting your precise asset allocation is less important than your decision to save and keep fixed costs of investing low.  If you put $5 or 10k into VAS or VGS or VAS+VGS they will all likely be fine.
ii) When you have more, % costs and asset allocation matter more.  But (historically) there's no need to rebalance more than once per year and if you don't rebalance all the way due to tax and other costs that's fine, it's more about mitigating risks.  Ideally, if you have some super, you can often rebalance within super at much lower tax cost.

As for Optionsxpress, I'll take a look at them. I am okay with US and International stocks instead of Aus. Do they also convert money to US? Or do you use an external provider, and transfer money over?

They do convert money to USD at, I seem to recall, reasonable rates.  However at the moment I think they only send USD via cheque or back to an account in your name so it's useful to have an exit strategy (e.g. I have a multi-currency account that can take USD).  I'll be interested to see if this changes when they take on Schwab systems.

Speaking of which, recently received an email that they're switching to Schwab branding.  The best part of that is that once they are Schwab I'll have free trades on Schwab ETFs (and some non-Schwab but they tend to be a bit more esoteric).  They'll also provide free account transfers and terminations until April 2018 so, as long as they don't take too long to do the switch, I'll get to see how they operate and switch to IB for free if it seems worthwhile.

[misterhorsey]

However, you could also do the Lifestyle Strategy Fund route if you want greater diversification from the get go, automatic rebalancing appeals, you can invest your cash as soon as it's in your hand instead of waiting to build up a lump sum, and you are happy to pay marginally higher fees for the service.

Thanks for this Misterhorsey. Im going to be debt free in August and I'm deciding whether to put my $5K tax return into either a
(VAS, VGS, VGE) or (VAS, VTS, VEU) ETF portfolio - OR like you suggested a Lifestyle Strategy Fund like the Vanguard High Growth Index Fund. 

I feel like if I went down the ETF portfolio route I'd get sucked into trying to gauge the market and buying low, which I feel would take away from the simplicity and set and forget appeal of long term index investing.  The Auto re-balancing appeals to me also but at the same time I don't know how difficult re-balancing is, I've read the whole thread but i'm still confused as to how re-balancing is done and how frequently?

Also, does being able to trickle money into a Retail Fund have an effect similar to Dollar Cost Averaging ?

Thank you for every ones contributions to this thread. It's an amazing resource.

I agree with others above that $5k alone isn't worth rebalancing, however presumably you'd be keen to add to that amount over time. So I still think that the life strategy fund is worth considering as it sets up a saving/investing habit. And yes, trickling money into a retail fund is equivalent to dollar cost averaging (into a diversified portfolio with a specific, automatically rebalancing asset allocation).

I don't think rebalancing needs to be complex, as mentioned above. You set your asset allocation and each year on a arbitrarily chosen date you sell enough units in the asset class that has increased above it's allocation, and buy enough units in the asset class that has shrunk over the year (or grown proportionally less), to restore them to their original allocations. There would be a small amount of CGT calculations each time you do it, but this shouldn't be too much of an issue if you diligently track your purchases in a spreadsheet.

But behaviourally, it can be challenging to be sufficiently disciplined to save lump sums and then tip it into the market once you've hit a target amount.  Some people have no difficulty doing this.  But people like me can't help but check the market and feel some desire to time it to optimise their entry point.  I'm sure the discipline gets easier the longer you do it though.

It's also nice to ship your cash into investments as soon as you get it, rather than growing a stash that could be tempting to divert to other expenditures. Also, holding onto cash awaiting for ETF purchases can be a bit annoying if you see an ETF price slowly crawl upwards (or great, if an ETF price declines). But sticking it in a fund as soon as you get it discourages you from price watching.

My own portfolio has a significant hangover of legacy investments that have skewed my allocation so that I am nowhere near anything that's ideal.  Things still seem to go up though, perhaps not so optimally, but I try not to  worry about it too much.  I'm edging towards an ideal allocation slowly with each tax year, or each contribution to my fund. 

But I envy those who are just starting out, who have a blank slate and the presence of mind to choose an ideal allocation from the beginning, and who recognise their own potential investing Achilles heels.  Which is why I like endorsing that approach!

[lush]

Hi everyone. My husband, 3yo daughter and I moved back to Australia 2 years ago and are still getting our heads around the Australian system (after living in the UK). Would love some input as everyone seems very well informed and helpful here!

We have setup for FIRE like this:
- $1M Vanguard LifeStrategy Growth & High Growth (via family trust)
- $400k investment property in Melbourne
+ live in $400k house
No debts and access to 450k line of credit.

We're 36 so aiming to live off dividends and happy to ride out ups and downs in income (don't need stability). We aren't expecting to add much to it for another 5+ years if / when my husband's hobby makes money and I'm not focusing full-time on my daughter.

We have no interest in active investing so Lifestrategy seemed like a good way to get diversification + auto rebalancing. However we've been surprised at the amount of capital gains over the last 2 years. We've been reinvesting the capital gains back in, so it feels like it just increases our taxable income and decreases the amount in the funds with no benefit.

Are there any low-fee alternatives where you get less capital gains (perhaps where redemptions aren't passed on?) but still decent diversification?

Thanks in advance for any advice!

We are in a similar set up with approx 900k in Vanguard balanced fund & about $100k in VAS. Yes the CG impact I mentioned in one of my earlier posts - I don't like the  surprise factor, so we are thinking of topping up our VAS in order to have at least  franked dividends to enable a reduction of tax. I was also considering for a moment taking a margin loan to buy shares to offset the tax implications - but don't want to carry any more debt leading into FIRE. There are others here that have responded to me with other strategies like super, family trusts etc that are worth a read.

[Wadiman]

Re rebalancing - as I add new funds to my investment account on a monthly basis I seek to rebalance by purchasing more units in ETFs that need to be topped-up to reach the desired allocation %s rather than selling units that have exceeded their allocation %s and reinvesting.  I do this to try and minimise CGT.  I think it's also worthwhile allowing a little bit of a buffer in asset allocations and not getting obsessed with a 1% variation here or there.

[AussieLad]

What are people's thoughts on merging bank account once married?
I'm keen to merge to make cost tracking easier, but wonder if the benefit of having most of our savings in her account (lower income tax bracket) is a financially wiser move...

Have almost 100k, which we are currently deciding whether to invest in ETF's or keeping liquid for possibly purchasing our first PPOR (currently renting).

[GT]

If you're relying on her bank account for savings (and the interest it generates) then you're likely missing out on better deals available online like ING.

A combined account for the two of you for day to day banking requirements and an online one set up in her name may be a better option.

If you're planning on a PPOR in the next year or two, keeping it at cash would be more advantageous than an ETF, however with $100K, you may be able to get into the Vanguard Wholesale funds, so it could be worthwhile, depending on when you'd want to access the cash for you PPOR purchase.

As the lesser earner in our family unit I have cash we haven't allocated to jobs yet (and when it's not all used up supporting extended Mat Leave) sitting in an ING account under my name.  Anything else sits on our home loan.

[AussieLad]

If you're relying on her bank account for savings (and the interest it generates) then you're likely missing out on better deals available online like ING.

A combined account for the two of you for day to day banking requirements and an online one set up in her name may be a better option.

If you're planning on a PPOR in the next year or two, keeping it at cash would be more advantageous than an ETF, however with $100K, you may be able to get into the Vanguard Wholesale funds, so it could be worthwhile, depending on when you'd want to access the cash for you PPOR purchase.

As the lesser earner in our family unit I have cash we haven't allocated to jobs yet (and when it's not all used up supporting extended Mat Leave) sitting in an ING account under my name.  Anything else sits on our home loan.

Thanks for your reply.
That's a valid point, will look into merging a day-to-day account, and setting up a higher interest savings account then the poor 1.9% we are currently getting.

Have read a fair bit into ETF's, though don't know much about the Wholesale Funds.
From a quick look, they have the higher initial buy-in but then also have higher management costs.

What's the difference between them? There must be a benefit to the Wholesale fund I would imagine?

[marty998]

What's the difference between them? There must be a benefit to the Wholesale fund I would imagine?

Comment doesn't necessarily apply to Vanguard but the entire world of Finance is devoted to coming up with complicated names and structures that are impossible to understand, so that they can extract as much money from you as possible without you knowing.

e.g.
- a wholesale fund sounds cheaper than retail but may include investments that are riskier for a normal retail investor.
- add the word "structured" to the name of the fund and you can double you management fee
- add the word "hedge" to the name of the fund and you can double your management fee again plus add a performance fee of 20% of outperformance.

Name your firm after a big mountain (Everest, K2) or some other far away object in the universe (Magellan, Orion, Anteras etc) and you're pretty much a Fund Manager who can charge whatever they like...

[Ozstache]

A combined account for the two of you for day to day banking requirements and an online one set up in her name may be a better option.

My wife and I arrange our bank accounts this way.

[misterhorsey]

If you're relying on her bank account for savings (and the interest it generates) then you're likely missing out on better deals available online like ING.

A combined account for the two of you for day to day banking requirements and an online one set up in her name may be a better option.

If you're planning on a PPOR in the next year or two, keeping it at cash would be more advantageous than an ETF, however with $100K, you may be able to get into the Vanguard Wholesale funds, so it could be worthwhile, depending on when you'd want to access the cash for you PPOR purchase.

As the lesser earner in our family unit I have cash we haven't allocated to jobs yet (and when it's not all used up supporting extended Mat Leave) sitting in an ING account under my name.  Anything else sits on our home loan.

Thanks for your reply.
That's a valid point, will look into merging a day-to-day account, and setting up a higher interest savings account then the poor 1.9% we are currently getting.

Have read a fair bit into ETF's, though don't know much about the Wholesale Funds.
From a quick look, they have the higher initial buy-in but then also have higher management costs.

What's the difference between them? There must be a benefit to the Wholesale fund I would imagine?

I'm a little unclear on whether you are you referring to the price difference between:

- ETFs v Wholesale Funds?
or
- Wholesale Funds v Retail Funds.

In terms of fees it goes, from lower to higher (assuming the fund is comprised of the same asset class/index):

ETF -> Wholesale Fund (Single Index, i.e International Shares) -> Wholesale Fund (Diversified, i.e. mix of different indexes) -> Retail Fund (Single Index) -> Retail Fund (Life Strategy).

I'm assuming that the increasing fees along this scale reflect lower economies of scale, and complexity of the fund structure/greater amounts of admin to service. 

Taking the VAS ETF as an example, the fees are ETF 0.14%, Wholesale 0.18%, Retail 0.75%. 

Retail does seem quite a bit steeper than the other options, but remember it rachets down once you hit certain thresholds (i.e 0.35% for all amounts over $100k).

But someone else may be able to provide a bit more nuanced insight into what you get for the greater fee.

From my brief time in a Vanguard Retail fund I don't recall many more bells and whistles than the Wholesale fund I am in now.  Which leads me to think it's purely economies of scale.

[deborah]

A combined account for the two of you for day to day banking requirements and an online one set up in her name may be a better option.

My wife and I arrange our bank accounts this way.

My understanding is that if you have a joint account, you can split the interest earnt whichever way makes sense to you in your tax return, so long as you have documented the reason for the distribution. If that is true, there is no need for a separate one-name account.

[Ozstache]

A combined account for the two of you for day to day banking requirements and an online one set up in her name may be a better option.

My wife and I arrange our bank accounts this way.

My understanding is that if you have a joint account, you can split the interest earnt whichever way makes sense to you in your tax return, so long as you have documented the reason for the distribution. If that is true, there is no need for a separate one-name account.

That is true, however I expect you are far more likely to raise an audit flag with the ATO by modifying the default 50/50 split of interest distribution they expect to see. Best to stay under the ATO audit radar wherever you can IMO and setting up accounts this way is very easy to do.

[deborah]

A combined account for the two of you for day to day banking requirements and an online one set up in her name may be a better option.

My wife and I arrange our bank accounts this way.

My understanding is that if you have a joint account, you can split the interest earnt whichever way makes sense to you in your tax return, so long as you have documented the reason for the distribution. If that is true, there is no need for a separate one-name account.

That is true, however I expect you are far more likely to raise an audit flag with the ATO by modifying the default 50/50 split of interest distribution they expect to see. Best to stay under the ATO audit radar wherever you can IMO and setting up accounts this way is very easy to do.

Some time ago, I got a letter from the ATO about this very thing. I rang them up. After  lengthy conversation (at first they said what I was doing was wrong), they said it was OK. So, yes, it is a radar item.

[misterhorsey]

Thanks for the tip! Yes you're right. They include a notice in the Forms and Notices section. That would have been handy to have known.  3 days is ample time for a bit of quick selling!

I don't actually recall receiving any email alerting me to this.

I use a web page monitoring service (specifically https://visualping.io) that lets me know when Vanguard posts a new notice to that section of their website.

Thanks for the tip Kivex. 

[AussieLad]

Taking the VAS ETF as an example, the fees are ETF 0.14%, Wholesale 0.18%, Retail 0.75%. 

I guess this is what I was alluding to.
What incentive is there to pay an extra 0.04% (and the higher buy-in) for Wholesale compared to the standard VAS ETF?

[misterhorsey]

The only advantage I can really think of is the fund allows you to drip feed small amounts into the fund.  Even though the Wholesale fact sheet states that minimum contributions is $5k a pop, they don't police this and I've regularly put in 3 figure amounts.

I'm not sure about the higher buy in, but there's no brokerage on the fund contribution (which is no doubt included in the price anyway).

But if you have a more DIY inclination, are more likely to invest via irregular lump sums (rather than regularly drip feed), are attracted to focused indexes (as opposed to diversified funds), then an ETF way is probably the way to to go.

Oh one last thing, if you are drip feeding into a fund, when it comes time to draw down, if you wanted to take small amounts out as you need, it's probably more administratively straightforward to withdraw small amounts from a fund than if you wanted to sell out of ETFs you 'lump summed' into.  Just from a record keeping / capital gains tracking perspective.  Spreadsheets are great but they don't come naturally to everyone!

[kivex]

The only advantage I can really think of is the fund allows you to drip feed small amounts into the fund.  Even though the Wholesale fact sheet states that minimum contributions is $5k a pop, they don't police this and I've regularly put in 3 figure amounts.

The Vanguard rep that I spoke to said that if you wanted to contribute to a new wholesale fund then there is a $5k initial requirement, however after that you can send a minimum of $100 to that fund.

[JuicyCrab]

The only advantage I can really think of is the fund allows you to drip feed small amounts into the fund.  Even though the Wholesale fact sheet states that minimum contributions is $5k a pop, they don't police this and I've regularly put in 3 figure amounts.

I'm not sure about the higher buy in, but there's no brokerage on the fund contribution (which is no doubt included in the price anyway).

But if you have a more DIY inclination, are more likely to invest via irregular lump sums (rather than regularly drip feed), are attracted to focused indexes (as opposed to diversified funds), then an ETF way is probably the way to to go.

Oh one last thing, if you are drip feeding into a fund, when it comes time to draw down, if you wanted to take small amounts out as you need, it's probably more administratively straightforward to withdraw small amounts from a fund than if you wanted to sell out of ETFs you 'lump summed' into.  Just from a record keeping / capital gains tracking perspective.  Spreadsheets are great but they don't come naturally to everyone!

I was working through the whole Fund vs ETF dilemma for a while and after running some spreadsheet calcs, the wholesale fund never came out the winner expense wise (and this was when I was using a high brokerage of $19.95/transaction too!).

The ETF option can be completely optimised too by using cheap brokerage, so I recently switched to CMC Markets ($11/trade) to really bring down those transaction costs.

1 purchase every month of $3k-$5k, the brokerage + management fees beats the wholesale fund in an accumulation phase, especially for larger balances.

I believe a wholesale fund would benefit someone in a drawdown phase, but even then if you were heavily invested in Australian shares, you could simply allocate dividends to yourself as cash payments rather than a DRP and bypass any brokerage costs.

Food for thought :)

[FFA]

For some there can be behavioural advantages to the fund option, where you make a BPay and take the closing price. Mainly for those who dislike the execution, or get distracted by the many moving prices and mysterious three letter codes that could juice your returns (or otherwise). However, if you're disciplined then I agree the ETF route is slightly more cost efficient.

[steveo]

http://www.smh.com.au/money/super-and-funds/australia-nears-the-top-in-global-ranking-of-retiree-wellbeing-20170719-gxeb3s.html

Has anyone read this article. I'm interested in how they get their figures. I think the idea is the pension provides for a base level of expenses and Super simply tops up that spending. The amount you need though looks really low.

[Ozstache]

http://www.smh.com.au/money/super-and-funds/australia-nears-the-top-in-global-ranking-of-retiree-wellbeing-20170719-gxeb3s.html

Has anyone read this article. I'm interested in how they get their figures. I think the idea is the pension provides for a base level of expenses and Super simply tops up that spending. The amount you need though looks really low.

I reckon the $60k a couple in retirement they state is pretty bang on to be comfortable in Oz. We spend that now with plenty of little luxuries thrown in, so could easily do it over the long haul.

[steveo]

http://www.smh.com.au/money/super-and-funds/australia-nears-the-top-in-global-ranking-of-retiree-wellbeing-20170719-gxeb3s.html

Has anyone read this article. I'm interested in how they get their figures. I think the idea is the pension provides for a base level of expenses and Super simply tops up that spending. The amount you need though looks really low.

I reckon the $60k a couple in retirement they state is pretty bang on to be comfortable in Oz. We spend that now with plenty of little luxuries thrown in, so could easily do it over the long haul.

We spend about $40k now with 3 kids. I don't think you need anywhere near $60k. This is based on owning your own home.

[lush]

http://www.smh.com.au/money/super-and-funds/australia-nears-the-top-in-global-ranking-of-retiree-wellbeing-20170719-gxeb3s.html

Has anyone read this article. I'm interested in how they get their figures. I think the idea is the pension provides for a base level of expenses and Super simply tops up that spending. The amount you need though looks really low.

I reckon the $60k a couple in retirement they state is pretty bang on to be comfortable in Oz. We spend that now with plenty of little luxuries thrown in, so could easily do it over the long haul.

We spend about $40k now with 3 kids. I don't think you need anywhere near $60k. This is based on owning your own home.

$40k? really? That's fantastic. What does that breakdown look like? We are a couple with no kids and and I know that if we take out repairs and holidays then its 50k. Do you get government payments for your children? Sorry to be so nosy, but am amazed at the 40k figure.

[lush]

SMH Article on investment loans :

http://www.smh.com.au/money/investing/investors-falling-foul-of-rules-on-taxdeductible-interest-20170720-gxf3qe.html

Very interesting and then that got me thinking that I have an investment loan tied to an offset account which I have filled to match the loan amount -effectively not paying the interest, however if I remove the funds and have to start paying interest again, my account has assured me that is not breaking any tax laws. He said that I can remove and top up whenever I want with no issues. Is he right? Thanks.

[marty998]

Taking money out of offset is fine. Taking money out of redraw for non-investment purposes is a bad idea.

[steveo]

http://www.smh.com.au/money/super-and-funds/australia-nears-the-top-in-global-ranking-of-retiree-wellbeing-20170719-gxeb3s.html

Has anyone read this article. I'm interested in how they get their figures. I think the idea is the pension provides for a base level of expenses and Super simply tops up that spending. The amount you need though looks really low.

I reckon the $60k a couple in retirement they state is pretty bang on to be comfortable in Oz. We spend that now with plenty of little luxuries thrown in, so could easily do it over the long haul.

We spend about $40k now with 3 kids. I don't think you need anywhere near $60k. This is based on owning your own home.

$40k? really? That's fantastic. What does that breakdown look like? We are a couple with no kids and and I know that if we take out repairs and holidays then its 50k. Do you get government payments for your children? Sorry to be so nosy, but am amazed at the 40k figure.

I don't have a clue where we spend all our money on. We don't get any payments from the government. We do own our house so we don't pay rent or a mortgage. Sometimes we would go over 40k but it wouldn't be much over and typically because something important breaks. For instance the hot water system or the oven or the washing machine. I just checked our living expenses and they are $40,300 based upon how much we earn less how much we save. The only issue here is sometimes we may have to spend some of our savings. This is really rare and we typically note it down so we know when we've gone over our budget in a year. To be fair this year I haven't noted it down and I know that we've done it but it wouldn't be anymore than $1000.

We spend $200-$300 per week on groceries. Internet access is about $60 per month. $18 per month for one phone. My phone is free from work. We occasionally eat out - it used to be once or twice a year but we've been doing this once per month. We have one car. The kids expenses are the difficult things because they randomly come up.

I'm interested in how you can spend $50k but this is dependent on not paying rent or mortgage. I should add that I tend not to pay for anything like books, TV shows, movies etc. I basically don't pay for digital content but watch and read whatever I want. The Internet has made stuff that people pay a tonne for available for free for everyone else.

[onewayfamily]

$40k? really? That's fantastic. What does that breakdown look like? We are a couple with no kids and and I know that if we take out repairs and holidays then its 50k. Do you get government payments for your children? Sorry to be so nosy, but am amazed at the 40k figure.

For what it's worth our spending with 2 young kids before we left Australia was around $37,000 for everything (including full-time childcare x 2) except rent. We also weren't eligible for any government payments since we started working full-time a few years before that.

[JuicyCrab]

$40k? really? That's fantastic. What does that breakdown look like? We are a couple with no kids and and I know that if we take out repairs and holidays then its 50k. Do you get government payments for your children? Sorry to be so nosy, but am amazed at the 40k figure.

For what it's worth our spending with 2 young kids before we left Australia was around $37,000 for everything (including full-time childcare x 2) except rent. We also weren't eligible for any government payments since we started working full-time a few years before that.

Hey mate, just wondering after having your little ones how that affected your household budget? We've recently had a little girl and I've been pretty anxious about my financial plans being blown out of the water because of it. Just looking for another Aus MMM parents opinion :)

Cheers

[onewayfamily]

Hey mate, just wondering after having your little ones how that affected your household budget? We've recently had a little girl and I've been pretty anxious about my financial plans being blown out of the water because of it. Just looking for another Aus MMM parents opinion :)
Cheers

Honestly kids really aren't that expensive except for childcare. Clothes/Toys - mostly thrift stores, hand-me-downs and gifts; Food - if you keep them healthy and just keep trying to cook what you normally do, it's essentially just an extra 20-30% added on, so nothing serioius, at least until they get a bit older. If you can make do without getting more space wherever you live that's fantastic - we had a spare bedroom already so we've never really had to move just to get extra space for the kids - the two of them have basically always slept in the same room and they got used to it just fine.

The only thorn, like I mentioned, is childcare. If you or your partner want to be a stay at home parent (a more than full-time job) then that's fine and won't cost you any extra other than the lost earnings. But if you're like us, and need at least some childcare, it can be expensive. We've realised it's also a lot better for the kids to learn to socialise properly.

The only other thing that comes to mind that's a lot more expensive, is travel. It's a non-essential but we love travelling and now that we're FIRE'd we feel like we're not living our lives to the fullest if we're not either travelling or planning our next trip. Now every flight is 4 tickets :-( and travel/accomodation is also a lot more complicated than when you're backpacking alone or as a couple.

[Gremlin]

My boy just turned 12 and is eating everything in sight.  Our food budget has been hammered as a result.  Apparently it gets cheaper again when they leave home!

[Ozstache]

Our core living costs this year are approximately $35K for two of us and exclude luxuries like our second car, big holidays, major purchases and helping others. Our 10 year major expense budget, which covers these excluded items and more, works out to be $25K pa for just us (hence my statement that $60K pa covers all of our wildest dreams) and another $10K pa that we channel into helping others.

[lush]

http://www.smh.com.au/money/super-and-funds/australia-nears-the-top-in-global-ranking-of-retiree-wellbeing-20170719-gxeb3s.html

Has anyone read this article. I'm interested in how they get their figures. I think the idea is the pension provides for a base level of expenses and Super simply tops up that spending. The amount you need though looks really low.

I reckon the $60k a couple in retirement they state is pretty bang on to be comfortable in Oz. We spend that now with plenty of little luxuries thrown in, so could easily do it over the long haul.

We spend about $40k now with 3 kids. I don't think you need anywhere near $60k. This is based on owning your own home.

$40k? really? That's fantastic. What does that breakdown look like? We are a couple with no kids and and I know that if we take out repairs and holidays then its 50k. Do you get government payments for your children? Sorry to be so nosy, but am amazed at the 40k figure.

I don't have a clue where we spend all our money on. We don't get any payments from the government. We do own our house so we don't pay rent or a mortgage. Sometimes we would go over 40k but it wouldn't be much over and typically because something important breaks. For instance the hot water system or the oven or the washing machine. I just checked our living expenses and they are $40,300 based upon how much we earn less how much we save. The only issue here is sometimes we may have to spend some of our savings. This is really rare and we typically note it down so we know when we've gone over our budget in a year. To be fair this year I haven't noted it down and I know that we've done it but it wouldn't be anymore than $1000.

We spend $200-$300 per week on groceries. Internet access is about $60 per month. $18 per month for one phone. My phone is free from work. We occasionally eat out - it used to be once or twice a year but we've been doing this once per month. We have one car. The kids expenses are the difficult things because they randomly come up.

I'm interested in how you can spend $50k but this is dependent on not paying rent or mortgage. I should add that I tend not to pay for anything like books, TV shows, movies etc. I basically don't pay for digital content but watch and read whatever I want. The Internet has made stuff that people pay a tonne for available for free for everyone else.

Thanks for that information.
We don't have a mortgage to pay. I looked at our expenses and it averages out to be $3.5 - per month - not including new appliances / repairs ( this year alone we had to get a new fridge, washing machine, cooktop, hot water system, roof repairs, fireplace repairs, pool renovations and plumbing repairs).  We also own a large pool and a large garden. Costs associated with running these alone can add up. We own only a 15 year old car and keep all our living expenses as low as possible. I worked out that without even getting out of bed our monthly costs to keep the lights on (so to speak) is about $1100. I am hesitant to underestimate a realistic figure to FIRE on as the last thing I want to have to do is be forced back into the workforce because of poor planning. I think the only way to reduce our costs significantly would be to downsize, however reluctant to do that since we really love our house and where we live.

[deborah]

Yes, it's interesting that appropriate house selection plays such a big role in when you are FI - even ignoring whether or not it is in a HCOL area.

[steveo]

http://www.smh.com.au/money/super-and-funds/australia-nears-the-top-in-global-ranking-of-retiree-wellbeing-20170719-gxeb3s.html

Has anyone read this article. I'm interested in how they get their figures. I think the idea is the pension provides for a base level of expenses and Super simply tops up that spending. The amount you need though looks really low.

I reckon the $60k a couple in retirement they state is pretty bang on to be comfortable in Oz. We spend that now with plenty of little luxuries thrown in, so could easily do it over the long haul.

We spend about $40k now with 3 kids. I don't think you need anywhere near $60k. This is based on owning your own home.

$40k? really? That's fantastic. What does that breakdown look like? We are a couple with no kids and and I know that if we take out repairs and holidays then its 50k. Do you get government payments for your children? Sorry to be so nosy, but am amazed at the 40k figure.

I don't have a clue where we spend all our money on. We don't get any payments from the government. We do own our house so we don't pay rent or a mortgage. Sometimes we would go over 40k but it wouldn't be much over and typically because something important breaks. For instance the hot water system or the oven or the washing machine. I just checked our living expenses and they are $40,300 based upon how much we earn less how much we save. The only issue here is sometimes we may have to spend some of our savings. This is really rare and we typically note it down so we know when we've gone over our budget in a year. To be fair this year I haven't noted it down and I know that we've done it but it wouldn't be anymore than $1000.

We spend $200-$300 per week on groceries. Internet access is about $60 per month. $18 per month for one phone. My phone is free from work. We occasionally eat out - it used to be once or twice a year but we've been doing this once per month. We have one car. The kids expenses are the difficult things because they randomly come up.

I'm interested in how you can spend $50k but this is dependent on not paying rent or mortgage. I should add that I tend not to pay for anything like books, TV shows, movies etc. I basically don't pay for digital content but watch and read whatever I want. The Internet has made stuff that people pay a tonne for available for free for everyone else.

Thanks for that information.
We don't have a mortgage to pay. I looked at our expenses and it averages out to be $3.5 - per month - not including new appliances / repairs ( this year alone we had to get a new fridge, washing machine, cooktop, hot water system, roof repairs, fireplace repairs, pool renovations and plumbing repairs).  We also own a large pool and a large garden. Costs associated with running these alone can add up. We own only a 15 year old car and keep all our living expenses as low as possible. I worked out that without even getting out of bed our monthly costs to keep the lights on (so to speak) is about $1100. I am hesitant to underestimate a realistic figure to FIRE on as the last thing I want to have to do is be forced back into the workforce because of poor planning. I think the only way to reduce our costs significantly would be to downsize, however reluctant to do that since we really love our house and where we live.

We live in a small 4 bedroom house in a modern area. All of our running costs are low. We don't have a pool or a large backyard. I estimate our housing costs to be about $700 per month.

I completely agree with you when it comes to estimating your expenses accurately. If you get that wrong you aren't retiring on whatever WR you think you are but something higher and potentially unsustainable.

Don't get me started on things breaking. This year so far it's been the oven and the washing machine. Last year we had the hot water system, I think the TV (it was either last year or the year before), one of the kids laptops and the dishwasher.

[AussieLad]

Hi all,

Some extremely useful information on here.
Having a read through peoples opinion on super accounts - seems like the majority are pretty happy with either Sunsuper or Australian Super.

I am currently with REST, seemingly being charged 0.56% for their Core Strategy I landed with my first casual job in year 10... (http://www.rest.com.au/member/products/rest-pension/fees-and-charges-(1)/investment-fees)

Am I right in saying Sunsuper uses Vanguard ETF's for the following (which appear on page 20 of the PDF on Sunsuper's website (https://www.sunsuper.com.au/publications/documents/sunsuper-for-life-guide.pdf)
Aust Shares - Index: 0.08% fee
Intl Shares - Index: 0.09% fee

In which case I would reduce fees by 0.48% on my super if I change?
If that is the case, have I been oblivious to this fact for the beginning of my working life, or have I missed something?

Appreciate any help.

[potm]

There's extra admin fee of 0.1% as well for Sunsuper. It's still the cheapest index option if you want to set all your own percentages.
Hostplus would be the cheapest if you are happy with their percentage.
Some industry funds have been outperforming index options with their default balanced options even with the added fees in recent years.

[marty998]

RESTS's Core Strategy option has been a fantastic performer over the last 10 years - consistently they outperform benchmarks, by several % points.

Cutting your nose to spite your face if you are going to switch on the basis they are a wee bit higher in regards to fees.

[chasingthegoodlife]

Deborah - so true. Most other expenses can be wiggled a bit if something else comes up but committing to a large housing expense really raises the bar for FIRE.

It seems to me that housing costs are the main difference between HCOL and LCOL areas in OZ (others may disagree), although Perth does seem to have higher prices for many other things compared to the east.

[marty998]

It seems to me that housing costs are the main difference between HCOL and LCOL areas in OZ (others may disagree), although Perth does seem to have higher prices for many other things compared to the east.

I'd rather pay 5c a litre more for petrol, or 20c a loaf extra for bread in Perth than pay $0.5-1m more for housing in Sydney.

[deborah]

Deborah - so true. Most other expenses can be wiggled a bit if something else comes up but committing to a large housing expense really raises the bar for FIRE.

It seems to me that housing costs are the main difference between HCOL and LCOL areas in OZ (others may disagree), although Perth does seem to have higher prices for many other things compared to the east.

In general I would agree with you. However, everything in Canberra costs more. Petrol is at least TWENTY CENTS a litre more here than at my parents place EVERY TIME. Eating out costs a lot more than Melbourne (admittedly I was used to Brunswick, which has a lot of the cheap eateries, before I came here). When I have traveled around Australia, remote places really have high prices for everything except houses and the non-tourist services (because people tend to be paid less - unless it's a mining town).

[Fresh Bread]

I know that just within Sydney, prices for goods and services vary wildly. We should do something like the economist's burger index.

A family size takeaway pizza is $25 at my local shops. I can't remember how much smashed avo on toast is, it's been a while. A coffee starts at $3.50. My electrician is $80/hr.

Eta: Petrol... I hear on the radio "cheapest petrol today in Sydney is at blah blah" and it's always 20c cheaper or more than where I am.

[stripey]

It seems to me that housing costs are the main difference between HCOL and LCOL areas in OZ (others may disagree), although Perth does seem to have higher prices for many other things compared to the east.

I'd rather pay 5c a litre more for petrol, or 20c a loaf extra for bread in Perth than pay $0.5-1m more for housing in Sydney.

Depends whether wages come into it or not. I'm making $35k more in Sydney than I was in Perth last year. My husband is about the same. So at least for us in the accumulation phase it makes more sense to be in Sydney right now...

(Eating out here in Sydney is notably cheaper 9 times out of 10, not that we do that much. We go a a really fancy cafe and say to each other 'Aha! Perth prices')

[FFA]

There's extra admin fee of 0.1% as well for Sunsuper. It's still the cheapest index option if you want to set all your own percentages.
Hostplus would be the cheapest if you are happy with their percentage.
Some industry funds have been outperforming index options with their default balanced options even with the added fees in recent years.

Yeah I've been noticing that too, all the default balanced options for Hostplus, Sunsuper, Australian Super seem to have been easily outperforming their index alternatives in the past 1-3 years. Maybe infrastructure investments, poor fixed interest (index) performance, ...? I've been meaning to look into it more closely to try and understand what's causing it. Superannuationfreak might already know? Anyway I think I'll stick with the index approach as switching at times like these usually doesn't work out well!

[BRAFRA]

Hi all

I want to thank you all for sharing your knowledge over the last 66 pages, pretty impressive and educational !

I would like some advise about my situation:
- late 20s
- temporary resident in OZ for close to 1y, should have PR in 1 more year.
- salary $125k so 37% bracket, no medicare levy with the temporary visa.
- should save $55k per year based on the current trend.
- own 1 apartment in my home country ~$100k, ~$70k in savings in my home country, $80k of shares of my previous company locked for 2 more years, around $100k sitting in an ANZ savings account (2.55% pre-tax :/ ).

I plan to buy a house in OZ in ~2 years after moving to Brisbane or Sydney, obviously if I can afford it with the current markets. In the meantime, I would like to invest the $100k from ANZ.

I would like your point of view on the few points below:
- First home super saving scheme $15k/y. I have the feeling I am eligible for the first home buyer thing even if I own a house overseas. Works only if I buy a house. If I don't, no idea what happens to the money. So wait 1 more year before looking at this option.
- No point adding more in the regular super. Too young. May leave the country in a few years and will get hammered with 38% tax if I want to get the $$ before 60+. If I stay, the money can't really be used for the house.
- Don't want to buy a home in a city I don't know "well".
- No benefit in investing in VAS for the franking credits due to my tax bracket.
--> best solution that comes to my mind: invest all in VGS , with the volatility of the AUD being a big risk. Use the $100k to access the wholesale managed funds.

[kiwiozearlyretirement]

I would be interested in some real world returns from these industry super funds.

We have hesta, gesb and sun super.

I used the investment return calculator http://www.moneychimp.com/features/portfolio_performance_calculator.htm
which averages out your additions i.e. assuming people are contributing monthly. But it also works if you have made no contributions. You have to exclude any monies taken to pay for insurances etc to compare apples with apples.
Over the last 5 years I have had the following returns per annum on the growth options
hesta 5.6%
gesb 9.98%
sun super 10.8% per annum (10 months only - since they started the index low fees option ostensibly managed by vanguard - 33% balanced, 33% au 33% international)


comparatively my vanguard ETFs 14% (post tax) over the last 12 months. But these are heavily AU ETFs (VHY/VAS) at 59%

Consequently I have rolled over my hesta (which is supposed to be one of the top performing industry funds according to chant west) to gesb.

I would be interested to see what others experience had been from the various funds.

I never quite trust what the funds report as their returns.