Author Topic: Australian Superannuation Post Fire  (Read 13994 times)

deborah

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Australian Superannuation Post Fire
« on: June 20, 2015, 09:08:35 PM »
I have several questions that have been puzzling me about superannuation post FIRE.

1. Do you plan to continue contributing post FIRE?

My initial thought is - why would anyone do that? But as I am living on less than my budget, if I contribute, I could get a co-contribution from the government, and it might decrease any tax I need to pay. Also, maybe it is better to have as much as possible in super when you reach preservation age, so contributing each year reduces the amount that you would add in the last year . What thoughts do people have?

which leads to the next question...

2. Is it better to have as much as possible in super when you reach preservation age?

I think it still gets more favourable tax treatment than normal savings so maybe I should put everything I can there, but maybe not. What considerations should I take into account, or is this a no-brainer?

and the third...

3. So now it gets interesting. If I have everything in super at preservation age, I can divide my superannuation up into two parts - a pension part and an accumulation part. How would you divide this up? I could have exactly 10 x my budget in pension phase, and take out 10% as income (I can take out more as a lump sum if I need more). I could have 25 x my budget in pension phase, and take out 4% as income. Or some other random amount. Anything in pension phase has no tax, while everything in accumulation still has 15% tax.

and finally...

4. As I get older I have to take more out of my superannuation that is in pension phase - for instance, at 65 it is 5%. Does this alter what I should be doing earlier?

I can still have superannuation in accumulation phase (I went to an ATO seminar where there were people in their 90s with superannuation still in accumulation phase), but I think you can't change it back into accumulation phase after you are 65.

happy

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Re: Australian Superannuation Post Fire
« Reply #1 on: June 20, 2015, 10:00:04 PM »
 Hi Deborah, I'm hoping there are some accounting/financial planning types who will weigh in on these questions since I'm getting closer.

I have a few comments but probably not much help

1. As far as I am aware, you could only contribute post FIRE if you pass the work test, which doesn't require too much work, but still it exists.

2. Currently still working and putting everything into super because I'm in a high tax environment.  Once retired, one could keep enough outside super to generate income up to the tax free threshold i.e. pay 0% tax on the income - same as the pension phase. What I don't know is whether one would still pay capital gain on the shares if/when one sold them.  If that is the case, then super has an advantage. 

What concerns me is that no doubt the super rules will tighten….will us oldies stay grandfathered into favourable conditions or will they change? Intrinsically I feel uncomfortable with all my eggs in the governments basket, with limits on how I can access it.

3. I'm planning to put most of mine into the pension phase at 60  and take out 4 %. Initially there might well be a window where I'm still employed so I will put it back into the accumulation side.

4. If I end up having to withdraw more than I can spend, and unable to put more in because I have ceased working, I will invest outside super since I'm unlikely to be paying much tax. However due to my late start I'm not likely to end up with the problem of too much money.



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deborah

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Re: Australian Superannuation Post Fire
« Reply #2 on: June 20, 2015, 10:16:45 PM »
Hi Deborah, I'm hoping there are some accounting/financial planning types who will weigh in on these questions since I'm getting closer.

I have a few comments but probably not much help

1. As far as I am aware, you could only contribute post FIRE if you pass the work test, which doesn't require too much work, but still it exists.
No, that only applies past 65 (currently - will probably change to 67 or the pension age at some stage). For now, of you are not working at all you can still add to your superannuation until you are 65, as long as you have somewhere to put it (you have to put it into an accumulation phase fund).

2. Currently still working and putting everything into super because I'm in a high tax environment.  Once retired, one could keep enough outside super to generate income up to the tax free threshold i.e. pay 0% tax on the income - same as the pension phase. What I don't know is whether one would still pay capital gain on the shares if/when one sold them.  If that is the case, then super has an advantage.
There is no capital gains tax on assets in pension phase, so super does have the advantage. 

What concerns me is that no doubt the super rules will tighten….will us oldies stay grandfathered into favourable conditions or will they change? Intrinsically I feel uncomfortable with all my eggs in the governments basket, with limits on how I can access it.
At the moment, they WANT you to access it. The sooner you take it out the more they tax you, and the less old age pension you can claim (until the new rules come in, and pass parliament) - and they make sure you take a lot out by upping the % you have to take out as you age.

urbanista

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Re: Australian Superannuation Post Fire
« Reply #3 on: June 21, 2015, 03:26:23 AM »
You can only get government co-contributions if at least 10% of you taxable income comes from employment.

potm

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Re: Australian Superannuation Post Fire
« Reply #4 on: June 21, 2015, 03:54:05 AM »
The split between pension or accumulation phase is interesting. Pension phase means 15% tax versus 0 but then you are forced to withdraw it. The optimal split will depend on how much you have and how much you need and the exact super laws at that time and in the future.
As it is, no matter what you do the tax laws are very generous so it's not too much of a worry.

Rob_S

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Re: Australian Superannuation Post Fire
« Reply #5 on: June 21, 2015, 04:00:06 AM »
1. As far as I am aware, you could only contribute post FIRE if you pass the work test, which doesn't require too much work, but still it exists.
No, that only applies past 65 (currently - will probably change to 67 or the pension age at some stage). For now, of you are not working at all you can still add to your superannuation until you are 65, as long as you have somewhere to put it (you have to put it into an accumulation phase fund).

I think Happy is refering to this:

https://www.ato.gov.au/Individuals/Super/In-detail/Contributions/Super-co-contribution/?page=2

10% or more of your total income comes from eligible employment-related activities or carrying on a business, or a combination of both, otherwise you dont qualify for the co-contribution.
« Last Edit: June 21, 2015, 04:02:01 AM by Rob_S »

deborah

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Re: Australian Superannuation Post Fire
« Reply #6 on: June 21, 2015, 04:13:44 AM »
You can only get government co-contributions if at least 10% of you taxable income comes from employment.
I didn't know that - thanks!

One reason for adding money after FIRE I missed out is that if you contribute after tax money, you dilute the ratio of pre-tax to post-tax contributions. This means that you will have to pay less tax on any money you receive from your superannuation accounts.

deborah

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Re: Australian Superannuation Post Fire
« Reply #7 on: June 21, 2015, 04:19:33 AM »
1. As far as I am aware, you could only contribute post FIRE if you pass the work test, which doesn't require too much work, but still it exists.
No, that only applies past 65 (currently - will probably change to 67 or the pension age at some stage). For now, of you are not working at all you can still add to your superannuation until you are 65, as long as you have somewhere to put it (you have to put it into an accumulation phase fund).
I think Happy is refering to this:

https://www.ato.gov.au/Individuals/Super/In-detail/Contributions/Super-co-contribution/?page=2

10% or more of your total income comes from eligible employment-related activities or carrying on a business, or a combination of both, otherwise you dont qualify for the co-contribution.
Yes, it's all very confusing. There is the co-contribution (which I thought you could get whether you were working or not, but as you and Urbanista say you can't)

Then there is whether you can actually contribute at all. This currently cuts out at 65 if you are NOT working or at 75 is you are working 40 hours in one month of the year - see http://www.superguide.com.au/how-super-works/i%E2%80%99m-retired-can-i-make-super-contributions

steveo

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Re: Australian Superannuation Post Fire
« Reply #8 on: June 21, 2015, 03:17:28 PM »
There is no capital gains tax on assets in pension phase, so super does have the advantage. 

I didn't know this. So I should probably have a greater percentage in Super.

In stating that you need to have enough to get to 55. I'd also like a cash buffer outside of Super.

happy

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Re: Australian Superannuation Post Fire
« Reply #9 on: June 21, 2015, 03:21:50 PM »
 The preservation age is gradually rising - you'll probably need enough to get to 60, (not 55), if they haven't raised it further by then.
In any case even if you are 55 now, you pay 15% tax on both accumulation and pension phase.
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deborah

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Re: Australian Superannuation Post Fire
« Reply #10 on: June 21, 2015, 03:50:27 PM »
The preservation age is gradually rising - you'll probably need enough to get to 60, (not 55), if they haven't raised it further by then.
In any case even if you are 55 now, you pay 15% tax on both accumulation and pension phase.
Inside superannuation you pay 0% tax on pension phase. When you get it out you pay a different amount of tax if you are under 60 to if you are over 60, but the capital gains tax is an inside super tax, because it is not what you are actually withdrawing.

happy

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Re: Australian Superannuation Post Fire
« Reply #11 on: June 22, 2015, 05:26:37 AM »
Ah, Ok I hadn't realised that.  In any case my response on that part of the question wasn't great because you can pay even less if you have a lot of after-tax contributions.
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steveo

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Re: Australian Superannuation Post Fire
« Reply #12 on: June 22, 2015, 02:14:48 PM »
The preservation age is gradually rising - you'll probably need enough to get to 60, (not 55), if they haven't raised it further by then.
In any case even if you are 55 now, you pay 15% tax on both accumulation and pension phase.

Does this mean that on all withdrawals you pay 15% ?

That seems a lot to me.

Rob_S

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Re: Australian Superannuation Post Fire
« Reply #13 on: June 22, 2015, 02:47:48 PM »
I think Happy is talking about tax paid on income earned by the superfund. So if your super earns 10,000 in the accumulation phase you pay 15% tax on the earnings and on your statement it will say you earned 8500 for the year. I guess you could consider it the marginal tax rate applicable to all Superfunds. When your super moves from accumulation to pension phase the tax on earnings drops from 15% to 0% which is generous.

There is the 15% contribution tax as well when the money gets paid in.

There is no tax on a withdrawal from super as long as you've reached perservation age.

https://www.moneysmart.gov.au/superannuation-and-retirement/how-super-works/tax-and-super

marty998

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Re: Australian Superannuation Post Fire
« Reply #14 on: June 22, 2015, 03:52:57 PM »
The preservation age is gradually rising - you'll probably need enough to get to 60, (not 55), if they haven't raised it further by then.
In any case even if you are 55 now, you pay 15% tax on both accumulation and pension phase.

Does this mean that on all withdrawals you pay 15% ?

That seems a lot to me.

Abbott banked on that being the understanding in the community in order to shout down Labor's proposed changes. Labor's proposal was to tax earnings above $75,000 within super at 15% (i.e. you can still earn $75,000 tax free).

Abbott's spin was to essentially say your entire super balance would be hit with 15%.

Happy is correct - tax free in pension phase after 60. If you are still in accumulation phase after 60 then you are still hit with 15% tax on earnings.

If you are taking a transition to retirement pension between 55 and 60 then you will pay tax on the taxable component and receive a rebate of 15% in your income tax return? Been a long time since I worked in the SMSF sector :)

These will become less and less in use as happy said - the preservation age is steadily rising to 60.

happy

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Re: Australian Superannuation Post Fire
« Reply #15 on: June 22, 2015, 06:00:36 PM »
To clarify  ( or make it worse) - I investigated taking a TRIS between 55 and 60 pretty closely ( see my journal Happy Aussie Downshifter) and it seems the rules are different for  TRIS versus retire between 55 and 60. I do apologise when I responded to Deborah,  I think I did not fully recall/realise that rules between 55- and 60 for retirement are different to taking a TRIS.

If you take a TRIS between 55 and 60 - 15% contribution tax and 15% tax on earnings in the accumulation side. Pension phase 0%. Withdrawals are taxed at marginal tax rate minus 15%  for withdrawals that are before tax contributions. No tax on withdrawing after tax contributions. Worked out pro - rata proportional to what you have put in i.e. if you have 50% after tax contribution, then on withdrawing you only pay tax on  50% (from the  pretax contributions).  Whether this helps depends on your personal numbers -  in my case the money saved on earnings in pension phase was negated by increased tax on withdrawal, and the only advantage would be to increase aftertax contribution by putting the withdrawn amount back into accumulation.  This is only of value until you turn 60, or for estate planning purposes.


The discussion does underline how complex the rules are…at each age/stage it changes…have to keep doing your own math.
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Ozstache

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Re: Australian Superannuation Post Fire
« Reply #16 on: June 22, 2015, 07:47:14 PM »
Being 13 years out from being able to access super at my preservation age of 60, and thinking the Government won't be able to resist either taxing it more, delaying access to it or forcing conversion of at least part of it to an annuity in the intervening time, I am not planning on adding any more to my super stash at this time. As it currently stands, excluding my Defence pension, I have about half my stash in super and half out and half of that super is unrestricted non-preserved, ie. I have reasonably ready access to three quarters of my total stash. As I get within the last 3 or so years of preservation age, I will review the super rules of the day and see whether it is then worth loading my super up to see me through the traditional retirement years.

happy

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Re: Australian Superannuation Post Fire
« Reply #17 on: June 23, 2015, 12:48:40 AM »
Thats what I'd do in your shoes too.  If the govt is going to annuitize it, I'd only want enough in there to cover basic expenses e.g. something like 5-600k to annuities to about 20k a year for a single. 
I'm less than 5 years from 60, so I really hope I'm going to make it to 60 without too many rule changes…but I'm watching the super arena closely.
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steveo

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Re: Australian Superannuation Post Fire
« Reply #18 on: June 24, 2015, 04:46:47 AM »
Just a quick thanks for the info.

Ozstache

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Re: Australian Superannuation Post Fire
« Reply #19 on: October 20, 2015, 04:16:58 PM »
If the govt is going to annuitize it

It has begun! http://www.theage.com.au/business/banking-and-finance/annuities-and-private-pensions-to-replace-lump-sums-as-default-for-retirees-20151020-gkdm2y.html

It supposedly won't be compulsory but I reckon we're only a good recession or a GFC Mk2 away from it becoming so.

happy

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Re: Australian Superannuation Post Fire
« Reply #20 on: October 20, 2015, 04:37:33 PM »
Interesting. Not a lot of detail, but whilst I'm good with the move away from lump sum as a default option, an annuity is quite different to the current pension phase arrangement whereby you only with draw a nominated percentage  within a mandated range, every year. I thought we would move towards pension phase, rather than jumping to annuities, which at the end of the day make money for private business. Of course so do super funds, but I think annuities are more "costly" than the current pension phase arrangements, unless of course you are pretty sure you are going to live a very long time.
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marty998

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Re: Australian Superannuation Post Fire
« Reply #21 on: October 20, 2015, 06:17:57 PM »
Yep annuities are more costly - the risk is transferred from you to the provider so you pay for that in spades.

With the introduction of MySuper screwing down fees, the industry has to come up with a new way to make money. This looks like the 1st shot across the bow.

They've even given it a funky name with an acronym... a CIPR - Comprehensive Income Product for Retirement.

Anything with the word product in it means you are going to be paying for it. Only in the world of finance can a banker come up with a product that takes your money up front, takes an annual cut and drips a little bit less back to you over the rest of your life.

(yes I understand annuities have a place in the world, but dumb cut-through logic like the above can stop a lot of stupid costly decisions being made)

happy

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Re: Australian Superannuation Post Fire
« Reply #22 on: October 20, 2015, 09:34:41 PM »
Only in the world of finance can a banker come up with a product that takes your money up front, takes an annual cut and drips a little bit less back to you over the rest of your life.
Yup, crazy funny :D
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Ozlady

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Re: Australian Superannuation Post Fire
« Reply #23 on: October 21, 2015, 10:51:13 PM »
When my mum retired, we bought her an annuity product ( she lives overseas...) with her superannuation....it gives her an income for life...

She loves the monthly income straight into her bank account..no fuss, no stress which at her age is all she cares about....of course the fact that she was determined to reach the age where she "breaks even" did not hurt at all !   

In Australia, there will be people trying to take out all their superannuation in a lump sum, blow it all and then get on to the pension gravy train....

If this annuity resolves part of this "problem" i think it is a good positive step!

Ozstache

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Re: Australian Superannuation Post Fire
« Reply #24 on: October 21, 2015, 11:08:48 PM »
In Australia, there will be people trying to take out all their superannuation in a lump sum, blow it all and then get on to the pension gravy train....
If annuities become compulsory, that's exactly what I'll be doing. Not to blow it all though, rather I want to manage it and perhaps pass some or all of it on in my estate. As far as I am aware, annuities die when you do.

happy

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Re: Australian Superannuation Post Fire
« Reply #25 on: October 22, 2015, 01:43:12 AM »
@Ozlady yes this is why I'm in favour of stopping  carte blanche lump sums

@ Ozstache Correct, annuities cease when you die..although there might be a product that passes it onto your spouse (I've not looked into that since I'm single).

Some US folks recommend  certain types of annuities  (SPIAs I think)e.g. Nords, as a way of being certain of covering baseline expenses for life if you don't have a pension. In your case Ozstache your pension would cover this so no need for you. Personally I'm not sold on the idea, but I am thinking about it. When I looked up rates to purchase they are quite expensive, equivalent to about a 3% withdrawal rate. By this I mean if you have 1mill to spend on an annuity you'll get 31-2k indexed to CPI for life, starting at age 65. So if you believe in the 4% rule there is no need - why would you pay to decrease your withdrawal rate if you are certain you can safely withdraw 4% i.e. 40k on 1mm.

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Ozstache

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Re: Australian Superannuation Post Fire
« Reply #26 on: October 22, 2015, 02:45:40 AM »
When I looked up rates to purchase they are quite expensive, equivalent to about a 3% withdrawal rate. By this I mean if you have 1mill to spend on an annuity you'll get 31-2k indexed to CPI for life, starting at age 65. So if you believe in the 4% rule there is no need - why would you pay to decrease your withdrawal rate if you are certain you can safely withdraw 4% i.e. 40k on 1mm.
Also, if you are prepared to take a 3% SWR annuity, you may as well just cut out the middle man and self-impose a 3% SWR on your own stash and keep the extra 1% as self-insurance.

happy

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Re: Australian Superannuation Post Fire
« Reply #27 on: October 22, 2015, 04:41:43 AM »
Exactly.
Not only that, if that is  the rate for  65 years up, if you live to 90, thats 25 years. That is, 25 x your withdrawal amount, so you only need to keep the stash growing at COL/CPI if you live to 90 ( i.e. stick it in a term deposit unless you live in US). If you make anything above that  with compounding you should fairly easily get your stash to last to 100. So you don't have to be a great investor making 7%, to come out ahead. One is paying an awful lot for "certainty"….which is not really certainty because if the insurance company goes broke, then I'm not sure you're guaranteed get your money.
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happy

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Re: Australian Superannuation Post Fire
« Reply #28 on: October 22, 2015, 04:43:07 AM »
Hmmm, think I just talked myself out of an annuity.
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Ozstache

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Re: Australian Superannuation Post Fire
« Reply #29 on: October 22, 2015, 04:47:10 AM »
Hmmm, think I just talked myself out of an annuity.
Lol. Glad to have helped you along!

happy

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Re: Australian Superannuation Post Fire
« Reply #30 on: October 22, 2015, 04:48:17 AM »
:D
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deborah

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Re: Australian Superannuation Post Fire
« Reply #31 on: November 26, 2015, 03:30:46 AM »
I was looking into the best options for my parents last year, and annuities appeared to be very good value. As you get older, annuities pay a greater percentage, so when you get to their ages, an annuity is a much better deal. Dad's was going to pay 9% per year, and go back to the estate if he died in less than 15 years.

happy

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Re: Australian Superannuation Post Fire
« Reply #32 on: November 26, 2015, 03:56:32 AM »
Oh, then I must investigate further. The one I priced was one where you get a CPI indexed return,  from age 65, and it finishes when you die.
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deborah

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Re: Australian Superannuation Post Fire
« Reply #33 on: November 26, 2015, 11:52:43 AM »
I meant that the older you are when you take them out, the better the returns are, so if you are as old as my parents when you take them out, they are a reasonable alternative.

happy

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Re: Australian Superannuation Post Fire
« Reply #34 on: November 26, 2015, 03:35:33 PM »
Ok, whenever someone says "older" on this forum I assume they are talking about me!
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Astatine

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Re: Australian Superannuation Post Fire
« Reply #35 on: January 12, 2016, 03:31:04 AM »
Belatedly posting to follow.

alhart345

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Re: Australian Superannuation Post Fire
« Reply #36 on: January 19, 2016, 01:57:54 AM »
I have been pondering the same issues, my mustachian thoughts are only measured in weeks so far, hope from some feedback.

I am 42, been living outside Australia is various places and in 3 years planning to move my family back to Perth, get a house and FIRE away.  I worked in Australia for 5 years in my twenties and the value of the Super is about 70k.  The Stache should be fine to support 40-50k AUD per year in largely franked investments (say 45k grossed up, 15k imputed credits), tax is minimal to refunded after 2012 change in brackets.

If tax is minimal, is there point adding to Super?  Most Australian mustchacians would have a solid bunch of super, but from a FIRE point of view, is it relevant?



faramund

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Re: Australian Superannuation Post Fire
« Reply #37 on: January 19, 2016, 02:09:22 AM »
I believe you can take some super at ages 55-60, so that gives some point to adding to it. But obviously if you're retiring before that, you need extra-super investments, and if that supports your lifestyle, then there doesn't seem much point in adding more to super.

deborah

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Re: Australian Superannuation Post Fire
« Reply #38 on: January 19, 2016, 02:25:49 AM »
If tax is minimal, is there point adding to Super?
Maybe not. Some things are better in super. If you have an investment property in super, it CURRENTLY doesn't have any CGT when you sell it if it is in pension phase. In fact NONE of your investments attract CGT if they are sold in pension phase (of course, if you already own them outside super, they WILL attract CGT when you put them in because your superannuation is a separate tax entity). So if you might sell a lot of investments at once (for instance to pay for entry into an old peoples home), you would get taxed if the investments being sold were outside super, and incurred a lot of CGT.

Most Australian mustchacians would have a solid bunch of super, but from a FIRE point of view, is it relevant?
It is relevant when you think that Australians live to about 83, and if they are a couple, one of them will probably live into their 90s. That means super is probably relevant for at least the last 23 years of your retirement. If you retire tomorrow (rather than in 3 years), you will still have more time after super is available to you than before. And you might only need to budget for the first 17 years of retirement (because you have enough super), rather than go through all the calculations for the entire 41 years that you, on average, will be retired.

Aussiegirl

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Re: Australian Superannuation Post Fire
« Reply #39 on: January 26, 2016, 02:04:06 PM »
If tax is minimal, is there point adding to Super?
Maybe not. Some things are better in super. If you have an investment property in super, it CURRENTLY doesn't have any CGT when you sell it if it is in pension phase. In fact NONE of your investments attract CGT if they are sold in pension phase (of course, if you already own them outside super, they WILL attract CGT when you put them in because your superannuation is a separate tax entity). So if you might sell a lot of investments at once (for instance to pay for entry into an old peoples home), you would get taxed if the investments being sold were outside super, and incurred a lot of CGT.

Most Australian mustchacians would have a solid bunch of super, but from a FIRE point of view, is it relevant?


It is relevant when you think that Australians live to about 83, and if they are a couple, one of them will probably live into their 90s. That means super is probably relevant for at least the last 23 years of your retirement. If you retire tomorrow (rather than in 3 years), you will still have more time after super is available to you than before. And you might only need to budget for the first 17 years of retirement (because you have enough super), rather than go through all the calculations for the entire 41 years that you, on average, will be retired.

+1 for what Deborah says.  Lots of guys I work with don't pay any attention to their super, don't add anything to it outside the 9.5% because "the government will take it all".  I think this is the wrong attitude.   I certainly hope to live more years after I can access my super than between now and then. 

faramund

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Re: Australian Superannuation Post Fire
« Reply #40 on: January 26, 2016, 03:38:53 PM »
I have both super and non-super investments, and in my "well what if I quit work tomorrow plan", the non-super investments act as a bridge, that gradually get used up, to be practically zero, until I can start using my super investments.

Even in my intended work until 2022 plan - that's when I hit the mark that my super, and non-super investments together will hit 25x expenditure, so there will still be a slight rundown of my non-super investments - it just won't be total.

Eucalyptus

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Re: Australian Superannuation Post Fire
« Reply #41 on: January 26, 2016, 04:39:50 PM »
Super/non-super investment ratio...
...what we need is a solid (Australian relevant) FIRE calculator to work out the best way to have super and non-super distributed. The different taxation on the super stash, plus the option of doing pretax super contributions, etc, makes it tricky with current calculators to determine the ideal ratio for each person.

I'm 31, aiming FIRE about 46-47 (yeah, long way off). I'm about to fill out the form at work to do pre-tax contributions, but its pretty hard to work out how much to put in, obviously not more than the maximum (not much point). I was originally thinking about 20% (of gross salary, this is on top of employers 9.5%), but now I'm thinking at the moment I should only put in about 10%, and wait and see how things go for a few years with both my super and non super stash, and PPOR situation. In a few years I should definitely be up into the next tax bracket (37%), so its more worthwhile for me to do pre-tax contributions then.

One of my supervisors, who is 63 (and still working), she has three different super accounts, all with quite different rules. Hard to understand them, but Super rules have changed in her lifetime. The earlier rules from what I gather are more favourable than the current ones. But, they are grandfathered. I won't be surprised if before I reach preservation age (which will probably get jacked up to something like 67 by the time I get there...) rules change, but I suspect that any super held under old schemes will be kept at the rules it was invested under. More likely any new contributions would fall under new rules from that point onwards. SO, I'm not too stressed about rules changing.

deborah

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Re: Australian Superannuation Post Fire
« Reply #42 on: January 27, 2016, 02:11:16 AM »
One of my supervisors, who is 63 (and still working), she has three different super accounts, all with quite different rules. Hard to understand them, but Super rules have changed in her lifetime. The earlier rules from what I gather are more favourable than the current ones. But, they are grandfathered. I won't be surprised if before I reach preservation age (which will probably get jacked up to something like 67 by the time I get there...) rules change, but I suspect that any super held under old schemes will be kept at the rules it was invested under. More likely any new contributions would fall under new rules from that point onwards. SO, I'm not too stressed about rules changing.
You'll find that they had both good and bad points, but our current one is about the best (apart from the earlier ones allowing you to take it out whenever you wanted to).

Aussiegirl

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Re: Australian Superannuation Post Fire
« Reply #43 on: January 27, 2016, 01:41:40 PM »
Super/non-super investment ratio...
...what we need is a solid (Australian relevant) FIRE calculator to work out the best way to have super and non-super distributed. The different taxation on the super stash, plus the option of doing pretax super contributions, etc, makes it tricky with current calculators to determine the ideal ratio for each person.

I'm 31, aiming FIRE about 46-47 (yeah, long way off). I'm about to fill out the form at work to do pre-tax contributions, but its pretty hard to work out how much to put in, obviously not more than the maximum (not much point). I was originally thinking about 20% (of gross salary, this is on top of employers 9.5%), but now I'm thinking at the moment I should only put in about 10%, and wait and see how things go for a few years with both my super and non super stash, and PPOR situation. In a few years I should definitely be up into the next tax bracket (37%), so its more worthwhile for me to do pre-tax contributions then.

Yep, good calculator would be sensational.  No way the superfunds will introduce one - they just want you to contribute max to their fund.   At the moment I'd just go with the ratio of planned years in "pre-retirement age retirement" to "life after 65" then deduct say 10-15% from the super allocation to give yourself some flexibility as per the earlier posts. 

My view of the stash is probably more conservative than some here - I think you need a paid off PPOR and 25x your nut.  So I'd be putting some thought into your PPOR situation.   I wouldn't personally rent in my old age - can you imagine having to move house every few years in your 80s because the landlord was selling?  This is unless you're going to move overseas or perpetually travel ...... but I'd still have the PPOR in Oz in case I wanted to come home for aged care, medical reasons.   Ours is the sort of market you could get priced out of if you sold up and then had to buy back into.   But like I said, I'm probably more conservative - I don't want to be poor when I'm old and the stories of pensioners not being able to afford to turn on the heating or cooling frighten the bejezus out of me!


happy

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Re: Australian Superannuation Post Fire
« Reply #44 on: January 27, 2016, 01:46:14 PM »
Quote
the stories of pensioners not being able to afford to turn on the heating or cooling frighten the bejezus out of me!

They used to scare me too, until I realised a mustachian can live very well , and certainly afford basic comforts, on the OAP. Provided, as you say, they have a paid off house. This was an incredibly freeing realisation.
Journalling at Happy Aussie Downshifter

steveo

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Re: Australian Superannuation Post Fire
« Reply #45 on: January 27, 2016, 03:12:55 PM »
Quote
the stories of pensioners not being able to afford to turn on the heating or cooling frighten the bejezus out of me!

They used to scare me too, until I realised a mustachian can live very well , and certainly afford basic comforts, on the OAP. Provided, as you say, they have a paid off house. This was an incredibly freeing realisation.

We just paid off our house and now I think I could live really well just off social security for the rest of my life. We won't do this and I doubt we will even take the pension when we get older however it does feel good to realize because our nut is low we should be fine.

Eucalyptus

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Re: Australian Superannuation Post Fire
« Reply #46 on: January 27, 2016, 06:07:20 PM »

Yep, good calculator would be sensational.  No way the superfunds will introduce one - they just want you to contribute max to their fund.   At the moment I'd just go with the ratio of planned years in "pre-retirement age retirement" to "life after 65" then deduct say 10-15% from the super allocation to give yourself some flexibility as per the earlier posts. 


Thanks, yeah I think this is good advice. I'll just play it by ear I think. I think I'll err right on the side of keeping funds out of Super for a bit until I've sorted a PPOR or made a decision on that, and just do an extra 10% pre-tax contribution for now while I'm in the 32% tax bracket.


Ozstache

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Re: Australian Superannuation Post Fire
« Reply #47 on: January 28, 2016, 03:32:02 PM »
Yep, good calculator would be sensational.  No way the superfunds will introduce one - they just want you to contribute max to their fund.   At the moment I'd just go with the ratio of planned years in "pre-retirement age retirement" to "life after 65" then deduct say 10-15% from the super allocation to give yourself some flexibility as per the earlier posts. 
I've toyed with the idea of putting together a detailed generic super/non-super balance calculator in the past, but have been put off by seeing enough variety of inputs in existing non-super calculators that cause great variability in output to think that adding more complex variables may simply render the model useless. This variability is further exacerbated by the (IMO) high potential for super rules to change in future, regardless of whether grandfathered or not.

Nonetheless, I like the idea of splitting the stash into pre and post super portions, however the maths of SWR shows that as the pre-super timespan exceeds 20 years, you end up needing to have most of your stash in non-super regardless of how long you think you will live post-super ie. it is not a direct ratio of the two time spans. eg. say your pre and post super time span estimates are 20 and 20 years respectively and you plan to draw down at the standard 4% SWR.



From a chart like the one above, the information from which aligns with my experience playing with cfiresim, a stash with a 20 year time span can endure a 5% SWR, the corollary of which is that you only need 80% of that stash to achieve the aforementioned 4% SWR. As such, for a 50/50 time span split like this, it turns out you really need an 80/20 non-super/super stash split. This is before even considering super's favourable tax treatment in both accumulation and access phases which further reduces the amount needed to progressively put into super because it grows faster and provides more tax efficient income when you get access to it.

alhart345

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Re: Australian Superannuation Post Fire
« Reply #48 on: January 29, 2016, 06:45:46 PM »
This conclusion that I was leading to also, much more clearly expressed! Those in 30 and 40s may be better off focusing on Stash outside super...

steveo

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Re: Australian Superannuation Post Fire
« Reply #49 on: January 30, 2016, 12:52:45 AM »
As such, for a 50/50 time span split like this, it turns out you really need an 80/20 non-super/super stash split. This is before even considering super's favourable tax treatment in both accumulation and access phases which further reduces the amount needed to progressively put into super because it grows faster and provides more tax efficient income when you get access to it.

I agree. It's tempting to state make your split 50/50 but the problem is you can only access that later in life and it has a lot longer time period to grow. I won't have an 80/20 split though. It will be more like 60/40. It sort of makes super the back-up option for FIRE. Ideally we could access it earlier but I reckon so many people would just spend it all and then go on the pension.