I've just turned 40 (female) and feel like I should be thinking more about the next phase of my life and Superannuation has been on my mind. I have just changed to another fund from always being in an industry super fund and I am hoping this one will do better for me.
My balance worries me a little, I have done some comparisons and although it says my balance is a little higher than average ($130k) I still don't believe that I will have enough.
Does Your Superannuation Balance Worry You?
ELH05 on 04/06/2019 - 13:17
Comments
My understanding is that my wife earns above the threshold for any govt co-contribution. The info says:
"If you earn less than $52,697 per year, the government can contribute up to $500 to your super account in a year."
My wife earns above this threshold so correct me if I am wrong but I don't believe this is an option?and regarding spouse contributions. The link says "Spouse superannuation contributions can now be made for spouses earning up to $40,000 per year. If your spouse has earnings below $37,000 you can claim the maximum tax offset of $540 when you contribute $3,000 to his/her super. These higher earnings thresholds started on 1 July 2017."
Again, my wife earns above this threshold so not sure of any benefits?
I have more savings than super. Should I look to be putting more into a super fund, or a savings fund?
————————— that there is a piece of string
it was more of a general question, is it wiser to have more in savings than super?
For most people who are saving for retirement super is a good option. Whether it good for you depends on your circumstances and financial goals.
Super has tax advantages. You can make optional contributions from your pre-tax income that will be taxed at 15% rather than your marginal income tax rate. You are not taxed on the investment earnings of super. On the other hand supe comes with a bunch of rules. You are not supposed to access it before the age of sixty (but there are exceptions for people with serious illness or disability). You have to pay management fees for super funds. These are often criticised for being too high compared to global benchmarks. Most people have a choice of funds - some are better than others. Most funds give you the option of different investment mixes.
With personal savings, you have probably already paid more than 15% income tax. You can also be taxed on interest earnings or capital gains. You have freedom to invest in whatever you want. You also have the flexibility to spend the money at any time.
@trongy: If you want control and tax savings, do the Self Managed Super.
Esuper and other online products can do a lot of the compliance stuff for you. It will restrict your choice of investments (to a degree), as they need electronic access to do the books.
If you want art, collectibles, wine, exotic investments as part of your super, you will have to pay for the compliance stuff.
You can invest in index funds, etc via CommSec, etc to try to lower fees. But direct investment and managing lots of individual shares is going to be hard work.
You still have wait until you retire to access, whilst investing directly in your own name.
If you want to get super-complex, create off-shore holding companies and do all the investing, etc; and only pay dividends when you need it (and pay the subsequent taxes) and hold all other assets within that structure. But non-Australians have to pay with-holding tax, so it gets even more complicated.
Saving, rather than spending is a good thing in the long, even if you have to pay taxes (eventually).
ymmv.
If you want control and tax savings, do the Self Managed Super.
No-one's income from super is taxed - a self managed super is not required - everyone gets this.
Most people can take advantage of salary sacrificing super - a self managed super fund is not required for this. It's simply a matter of asking your employer to make deductions from pre-tax income and pay it onto your chosen super fund.
If salary sacrificing is not available, people can still make personal super contributions and claim a tax deduction. Again, anyone with a super fund can do this, a self managed super fund is not required.
As you point out, self managed super funds can be complex to manage. However, the tax advantages I was referring to apply to anyone with a super fund - a self managed super fund is not required.
OK, let's go through it again, slowly this time.
When you retire……
Income from general investments (properties, shares, savings etc) counts towards your taxable income.
In other words, if income from these sources exceeds the tax free threshold (currently $18,200 pa) you will be TAXED on it.
If you have all your investments in Super and then draw it out in retirement, it is TAX FREE income.Now, do you want me to go through that again?
i'm in a similar position too (age and super balance). I can add more to my super via salary sacrificing, but i'm sceptical that the investment will actually pay off some 3 decades later. That is management fees seem to be excessive and we are probably due for at least two major recessions or financial crises between now and retirement.
Another consideration is the purchasing power in three decades, lets say we accumulate $700, 000. That may not go very far if inflation is not controlled.
OP all I can say is that you should forget your super balance and focus on owning your own house, then another investment property. If you can reach retirement with two houses paid off then you'll be in good stead.
If you retire at least one property should be able to provide a return to live off, or even renting the two out might be able help make ends meet.
Anything in the super account should be considered a bonus, or a stop gap to pay off that second mortgage if you don't quite get there on the second one in the next 30 years!
Sorry, couldn’t let this one slide. Withdrawing money from super (tax free environment in retirement) to pay down an investment property loan just before retirement is just about the worst possible thing you could do.
That is probably the worst advice you could give someone about retirement investment. Hope you’re not an IFA.
Buying a second property means you will be taxed on both the income from it (rent) & then you will have to pay CGT if it increases in value and you sell it.
This post is one very good reason why people shouldn’t come to OzBargain to get advice.Holy moly chill everyone. Simply I'm saying to try and have two houses paid off before retirement. If you, you will have two rents to fund your retirement plus any left over super. I never said it was the most efficient use of capital, but two houses is something easy and tangible to understand. Plus when you get to retirement there are strategies to minimize cgt if you need to sell a house.
BTW I'm still a believer that house prices will at least double again in the next 20-30 years.
Put the investment property into a SMSF. Two houses paid off is okay, but pay 15% tax on the way in, and nothing on the returns later down the track. Most balanced funds will have exposure to Australian property (residential and commercial).
Plus you will miss out out on the tax-free super, partial/full pension (with all the discounts, discounted medical care, electricity, gas, various services, public transport).
ymmv.
My parents have no super at all. Their investment is their kids. We'll be looking after them.
And if we were to pass before them, they would not give a stuff. I kind of wish I was as laid back.
Considering the cost of raising kids having fewer kids could mean the difference of retiring self sufficient (control of a pot of money) or begging someone else for money (kids).
I'm worried about my balance. It supposed to go up exponentially. Mine is linear and mainly increases from mandatory contributions. This is despite tailoring towards aggressive investments and removing insurance.
I don't get how the government wants the average person to retire without relying on the pension. They limit how much you can put into super too.
It supposed to go up exponentially.
This is despite tailoring towards aggressive investments and removing insurance.
Well your super is basically invested in the markets. Markets were stagnant for a few months late last year but have rebounded somewhat. Growth is slowing in Australia that's for sure, and you could say that overseas markets such as the US are overpriced.
Just because you put it into an aggressive portfolio doesn't mean an exponential increase is guaranteed, especially in the short term.
Yeah put it all in super.. Then wait for the stock market to crash just before retirement and watch 50% of what you've earnt disappear.
Anything extra i put on the home loan to get debt free sooner. You cant live under a bond note but you can live in your debt free home regardless of its market value.
Why would you go for a fund that only invests in Australian stocks?
That's not even legal for the fund to do - you can go to town on them for violations of the Trustee Act. In fact, that's what the Royal Commission went off to enforce.
Anything extra i put on the home loan to get debt free sooner.
"Don't be highly leveraged on Australian stocks, be highly leveraged on Australian property instead!"
This is why I can't believe people knocked the first post here telling OP to go seek actual financial advise. The overwhelming majority of people here have no idea.
There are life-stage funds (ANZ had one, but I think they may have divested or sold off that business).
Depending on when you were born, they put a higher mix of fixed interest / low risk assets) the closer you are to retirement age.
If you are 10 years out, you may be xxx% in fixed interest
If you are one year out from retirement age, it may be 100% fixed interest.You still have some capital risk, but you could put it in an at-call account, but you are going to get money chewed away by inflation…
As some folks have said - seek professional advice.
Turning 33 in a week.
My current super balance is about $130K. It hasn't changed much for the past two years because I relocated to another country. In the new place, I accumulated about $35K in a similar retirement savings plan. So in total I have about $165K in super/retirement accounts.
I always know I cannot rely on super or pension for retirement. Since my first full-time job, I have been putting at least a quarter of my annual after-tax income into savings. My personal savings balance is well above my retirement savings.
Although I don't have a property at the moment, I sold one when I moved overseas and made about $300K profit. Property is quite cheap here ($300K medium price for houses) but haven't made a purchase yet for a few reasons.
I do worry about medical cost (or insurance premium) once I retire, but pretty much nothing else.
https://forums.whirlpool.net.au/thread/9w0vlqn3
Similar thread on Whirlpool which you may have already seen. As with anything online take it with a grain of salt and do your best to exclude the outliers.
Why is people telling other people your super balances?
The correct answer is how much you want to retire on (ie 60k per year) multiply it by (expected life expectancy + say 10 years minus age you expect to retire). That is your balance at retirement age.
THEN discounting that big number by (1 + % return pear year in decimals) to power of years remaining in the workforce.
Simple arithmetic.
So for a person 40 years and over…
Coming up to the end of the financial year, which would be financially smarter, keeping extra repayment money in the mortgage account, or putting that extra money ($25,000 minus employer contributions) into superannuation?
I would not borrow money to invest unless you can guarantee what you earn will always be more than what you pay in interest. Superannuation is highly variable. It can lose money as well as well as make money.
I did once borrow money from a bank to invest in a high interest savings account. I used a 0% on balance transfer credit card to borrow some $50,000 getting the money in to my bank account then I put the money in to a savings account earning about 3%. That earned me about $20 per week for a year. I had to make the minimum credit card payments each month for the year so at the end of the year when I had to pay them off in full I had even more saved up.
Always pay off your mortgage first.
If you are 55 and above I think different rules apply? But for a 40 yr old. reducing debt is always your first priority.
I think this is bad advice.
Say you pay an extra 10k off your mortgage over a year and your interest rate is 5%, you've saved approx. $500 for the year.
If you pay an extra 10k in to your super and you're in the 37% tax bracket you're instantly saving $2200 on your tax, plus most super funds average approx 8% return a year. So 3k all up.
$3000 vs $500, I know what i'd rather have.
I see your point, but I wouldn't use 8% as an average return figure for Super.
Personally I wouldn't invest money into anything I couldn't touch for another 25-30 years. I'd rather work on reducing interest (which would be slightly higher than 5% given you'd be paying it off weekly or perhaps sitting in an offset account.)
@serpserpserp: It's all personal preference, I'm just saying financially you're better off investing in super, especially if you're in a higher tax bracket. The money you save on your tax can then be put in to your mortgage or invested elsewhere.
The beauty of Super is compound interest over the long term, leaving your super until the last 5-10 years is not a good idea, plus with a hefty super balance you can instantly pay off your mortgage when you retire at 60 and have plenty left over to enjoy your retirement.
The beauty of Super is compound interest
I would say the majority of super accounts have the tiniest portion assigned to fixed interest. So the reality here is that CI is not your friend. If the market has a crash the year before you switch it all over to cash you could wipe out 10 years or so of gains (not taking into consideration the money you have lost on super fees etc.)
I think if your personal circumstances can allow you to take that tax break every year, then do it and put that money back into your mortgage. I'd personally would like to have paid off 100k of my mortgage (plus accumulated interest expense) in the next 1o years as opposed 22k and potentially a bunch of money in my super balance (or potentially not depending on the market and your super preferences).
But your suggestion is not without merit and is great for people that want to accumulate a strong super balances all things being equal.
@serpserpserp: No other investment will give you a guaranteed 22% return and even more if you're in the next tax bracket up, for me it's a no brainier.
Lets do the sums over 10 years, $833 a month x 12 @ 8% average return = super balance of $152,396 after 10 years. The tax savings of $2200 is then deposited in to your mortgage each year and saves you approx $110 year in additional interest payments for a total of $23,100 paid off your mortgage.
Paying that $833 per month in to your mortgage will equate to $100,000 paid off your mortgage and approx 5k saved on interest for a total of $105,000
Instead of paying that extra $2200 saved in tax on to our mortgage lets also pay that in to super for an additional $31,873 after 10 years in our super balance. Your position after 10 years is $184,269 in super balance vs $105k paid off mortgage. You're 80k in front.
When interest rates are this low it makes even less sense to me to pay off my mortgage quicker as you can get much better returns on your money elsewhere.
@RonDMC: I get the blue sky scenarios, but I just don't believe I am going to get 8% p.a returns for the next 10-20 years. I agree it is a great strategy if you can afford it and even greater if you are straddling tax brackets.
@serpserpserp: It's reality, history has shown those returns over decades so it's not some figure I'm making up. The 8% average is an average, it takes in to account the negative growth years. Paying off debt is never a bad idea but I'd prefer to hold on to that extra $2200 a year instead of donating it to the tax man.
Agree. Paying mortgage off is not always the best option.
Was an interesting read this thread.
Motivated me to consolidate my 3 supers into one and see how i compare to where i should be, I'm just ahead so might contribute a little more and see how that goes.
Im 47
I had $105K but my Ex Just took Half.
Biggest Ripoff. Ive put away over the years and a Ex can just take it after a split.
Biggest Rort Ive Ever Had To Deal With…. Bloody lawyers are just As bad..What happens in these circumstances? Does she get paid the money to her bank account? Or to her super account?
Super.
It really is scary what can happen in a divorce.
No. You have both put away into your shared super fund.
Could you really have put so much in super or maintained your job or standard of living without your ex ?
Was the lawyer bloody before or after you saw them? I would avoid a bloody lawyer if that's how they were at the first meeting, they were probably bashed up by their previous client for doing a crappy job.
Yawn.
35, Currently at $56k super, have only worked in Australia for ~8 years though.
Does Your Superannuation Balance Worry You? my answer would be: "A lot less than my mortgage amount worries me".
Just by luck I am on a defined benefits scheme. After high school I did a temp job in commonwealth public service in early 05 and even left the public service but when I came back I was put back on pSS. I have not planned for retirement as I am a long way off but a few people including the bank when I went for a home loan said I was on a very good super.
Also in the PSS. Paying in for nearly 18 years so far. If I go all the way to 60 I'll probably retire on ~80% of my final salary. Sometimes you just get lucky…
I used to work at a software company that provide software to manage super funds. I am not here to advise anything but just want to tell you what I saw in our system. Here is an example of the stories I saw:
A couple was around 50 at 2007 and they had super balance around 200k in total. They started a SMSF. They bought 3 property with 200k as deposit and take loans within the SMSF (yes you still can as back then as price is not that high). In 2017, their asset balance became a problem as under the new 2017 SMSF reform, their balance is too high….
And this happened a lot. I am not suggesting anything, and property is not a easy win now. But think about it. The idea is always tried to get other people's money to invest and maximise your negative gearing if you need to…
I only have 47k and my wife has 50k (mid 40s), dont think I will be retiring soon…. at least my house is nearly paid for.
the long term goal for us to retire was to pay off our investment house and sell it, not sure how that's going to work out.
Super is low as we run our own business and I dont really contribute to super, slack I know.
Its ok, I know the feeling, my husband had his own business for 6 years, his balance is low due to the same thing, we didn't make contributions.
some dumb numbers: assume that you own a home and it is paid off (no mortgage) and retire at 65 years old:
. total monthly living cost $2000 (not everyone needs to buy a brand new bmw and start travelling first class around the world upon retirement).
. yearly living cost = $24,000
assume you will drop dead at 85 years old. therefore you will need 20 years of living costs.
$24,000 a year x 20 years = $480,000 needed to retire
lets assume you start working full time at 25 years old, and retire at 65. thats 40 years of work. to save $480,000 you will need to save approx $12,000 a year
once again, dumb numbers, however most people get so overwhelmed by all the crazy recommendations in regards to super they file it away in the too hard basket and go back to netflix and chill. i dont blame them. however, ignore the people saying $1m, even $2m isnt enough to retire on.
optional: you may also get some form of government assistance: pension, centerlink etc. this might be worth $1000 a month. add this to your current $2000 a month and your laughing
anyone that says they cant live on $3000 a month isnt worth listening to.
And that's not even including interest. If you had $480,000 in your super at 80 years old, making a 5% return every year, you could spend $37,000/year and make it last for 20 years.
Saving $12k/year for 40 years would net you $1.36 mill @ 5% interest. To get $480k with 5% interest you would only have to put $4,200/year into your super.
compound interest. a beautiful creature.
Problem is the cost of living now.
Rough numbers here for Melbourne as guide:
Rates for your property: $3k to $4K p.a.
Utilities: $3K p.a.
House insurance: $1K p.a
Car rego & insurance: $2K p.a
Mobile & home internet: $1K p.a
Groceries, fuel & eating out : $10K p.a.= $20K p.a.
That's only the basics. Doesn't include health & wellbeing costs and loads of other things
Need at least $35K p.a to live somewhat comfortable in retirement
Best retirement plan is what my parents did
Encourage your children to study hard at public selective high school to achieve high atar. supplement with tutoring but it will still end up a fraction of the cost of a private school
Kids study med/dent/law - will require an outlay of 15-20k per kid year if they study interstate
By the time you retire, your middle aged children will have mature professional practices and will be able to support you through your retirement
Instil similar values into your children and grandchildren to continue the cycle.
This is not really the 'ocker' way of doing things but seems to work. Otherwise you can seek additional income by shipping baby formula to china on warships
25 and have about 28k in Super.
I could definitely put more into super to take advantage of 40+ years of compound interest, but I'm concerned over this time the government will change preservation age and when we can access it.
I feel more comfortable investing more in property and keeping cash on hand.
You’re right to be worried about govt, but preservation age isn’t really any concern. Preservation age is simply the minimum age where you can start to draw down your super ( currently 57, but mandated to increase to 60 over next few years).
You can really only play the rules as they stand today. That means sticking everything you can in Super and letting it grow.
Lots of people on this thread recommending buying investment property. While that may be a good investment strategy it’s a terrible retirement strategy.
Investment property slams you for tax twice. Once through earnings and then again through CGT if you sell it.
Super is in a tax free environment (after initial 15% contributions tax), so you can enjoy all the proceeds tax free.
In your situation, you should pay into Super now, provided govt mostly leaves it alone, it’s a sound strategy.I think the advantage with investment property is due to you having more control over it.
Super to me is too risky as I have no clue what might change and when the government might allow me to access the funds. I’d rather have it as a last resort and do everything I can right now to set up my retirement.
As long as retirees and soon-to-be-retirees remain a powerful voting bloc Governments and Oppositions will be loathed to touch Super. Just look at how Shorten and Labor got destroyed for having a supposed "retirees tax".
With respect, that’s a pretty short-sighted outlook. If you ignore Super as a future provider of income for retirement then you are effectively throwing away the chance to have huge tax-free income for 25 to 30 years or so.
Super is much less risky than buying property, in fact it’s as risky as you want to make it because you can choose how to invest it (property, equities, cash, small/large companies, domestic/offshore etc).
If you invest in say one investment property there are a lot of things to worry about. Stamp duty, maintenance, tenants, shire rates & the list goes on. And like other investments the value can also go down. In fact, property can not only be an expensive investment it can also be very volatile.
And if you sell it, you’ll have to pay CGT on the gain.
For me super is a no-brainer. Money goes in, it is taxed at 15%, then it grows and I get the whole lot back tax free at the end.
First world problems.
so your ok to spend the last 20 years of your live under a bridge? im not. ill wave as i drive past you while you hold your hand out asking for 20cents
I am less worried about my super balance and more worried about the changes the government of the day will implement to erode it.
Focus on getting into a job/industry that you really really love, because the reality for most of us is that we will be working into our 70's anyway.
Also 100k in super is more than offset by 1 extra year of work before retiring, typical end-career wage will be +300k in 20 years.
If I am still working in my 70's I will move to a country that has legalised euthanasia…
This thread has got me really worried now, between me and wife we have just about 80k in super. Both 37 with a mortgage of 425K. Savings about 50k + an overseas property worth 150k. any recommendations on a good finance planner in Brisbane north?
Depends if you have had kids already or are planning to in the next couple of years.
already have a 7yr old :)
Well you're doing fine in that case.
Next time we have both a federal Labor government and a financial collapse, superannuation will be nationalised to stop the bleeding. Don't expect your superannuation to be there when you retire any you won't feel too upset when it's stolen by communists.
Around half of Americans have no retirement savings at all.
We have a strong super system. Keep chipping away through life and it should compound. Most importantly be in a low cost fund. When you have a large enough balance, say 150-200k do it yourself with a low cost self managed superfund, like esuper for example.
If you have an SMSF, I guess you need to source insurance (life, TPD, etc) outside super?
Yes if you want it. I don't have any.
I'm 38 this year and balance is currently sitting around $113K.
Started working and getting paid super quite early (16-17 years old) but have since had periods of time working overseas with no contributions being made and also during the startup phase of a business where my money was going towards establishment costs rather than paying myself super.
Not particularly worried about my balance. I own rural land which I intend to build on at some point in the future with a focus on self sustainability and reducing reliance on the monetary system as much as possible. And yes, I understand the irony of using superannuation to help achieve that, but if you work for someone in Australia unfortunately you can't opt out of the system and take the cash instead. I try to do the least amount of damage with my compulsory super investment by using an ethical scheme which doesn't invest in the traditional avenues that make big bucks (e.g. mining, fossil fuels etc.).
Currently working a job where my accommodation is provided and outgoings are minimal. Looking at a quasi self funded retirement date of around 2030 if I can hit my savings goals over the next 10 years. Having around $200K in my pocket would get me off to a comfortable start as far as establishing a property (self built).
I feel as if people on this thread are taking the piss. Doesn't seem as if many of you have the slightest reason to be worried.
To answer the question ? YES
Why ?
Because I think of what I could use the money for now and I HATE super. There is no choice. It should be opt in..
I don't think super should be compulsory. I don't get why I have to wait until 67 odd ( law now, will change by the time I get to "retirement" age…)
It depresses me. I have to work for another 20 plus yrs before I can touch it WTF ?
What happens if I want to retire now ? ( Mid 40's) ? I have means to support my family and myself. So why can't I access super ?
It should be that if you can substantiate that super is not your core means of income at retirement that you can access it.
I could conceivably "retire" in the next 2 years and contribute to super and still get $500k from it without trying ? so whats the point ?
What about the so called financial advisers ? An industry that exploded when the govt made super compulsory. The commission this industry has creamed off our money for no service ? we've seen how good those business are run..
What about the fact that the government will tax super on a beneficiaries marginal tax rate if you happen to pass away and have a balance that can be inherited ? A death tax of sorts that no one talks about…
I could go on..
SO I do worry about the opportunity cost of having money that I legally earnt looking at me doing not very much and can't touch it until I am nearly dead, and likely will never see because the government will legislate to change the retirement age.
Great..
It's so when you inevitably run out of money the taxpayer isn't on the hook for your poor decisions.
"inevitably run out of money" really ?…
"….your poor decisions"??
Troll comment that..
Personally I won't run out of money. Others may, you might, but I won't.
If you are set up financially you should be able to access your super. Sign / agree to some sort of waiver.
My family and I will not be a burden on taxpayers. I get irritated by the compulsory nature of it.
My wife and I have worked hard over the last 20 plus years to make that a reality. We don't owe anybody anything, won't need anything from anybody or the government and thats the way we like it.
We control our families financial future.
So the only poor decision I have made was to comment on the post originally…
Should have just let it go..
60 or less is your preservation age.
67 or less is the aged pension.These number being rubbery is a concern for me.
If you do genuinely retire early there are ways to access the money. But if no hardship or illness etc. I think you have to wait until your 50s (I think).
Super is paid by your employer tho, so technically not your money. You should be thankful the government is making employers pay contributions towards our super ontop of our wage.
Ahh it is your money.
It was legislated that employers put that money away in 1992 under Keating. Prior to that there was no such thing as compulsory super.
It was legislated due to perceived changes in demographics ie ageing population to reduce burden on the overall cost to government of increasing pension payments as time goes by.
It wasn't done to protect the individual, it was done to cut government costs.
The superannuation and financial advice behemoth that exists today didn't exist before then. Made lots of people rich, but not your average salary earner.
My question is what about those who expect to live a considerably shorter life than persons with average 80+ life expectancy.
I mean there are people with heart problems, etc who also have every other reason to be worried about their short life expectancy (e.g. 3 family members died of heart stroke in their 50s, bad eating/drinking habits, bad diet, bad temperament, stressful working conditions, etc).
As far as I know there is no rule that they could use to access super earlier unless they are diagnosed with end-of-life illnesses.
If I was her I would be insisting you topped up her super if only to get the co-contribution Gov bonus, spouse offset and other tax benefits.