Dad Panicked and Withdrew All Super When Covid Hit, Now What?

Jase83 on 17/12/2020 - 09:19
Last edited 17/12/2020 - 13:12

So my Dad (age 65) panicked after seeing his super drop about 20% in March when the first Covid crash happened. Without telling anyone he withdrew it all (~100k) and put it in a term deposit earning basically nothing. Only told me a few months later.

Not looking for specific financial advice, but in general what are his options for a very safe place to park the money and start to withdraw some over the coming years. Can he put it back into super now? The best savings rate I've seen is UBank just over 1%, barely seems worth it.

It's kind of a touchy subject, I don't want to come across as lecturing or judging, just try and help steer him in the right direction.

Edit: Couple of other bits that may be relevant

  • Owns a basic house (400k) with partner (think they still have a small mortgage) + maybe 75k in total assets, I doubt any cash savings other than this ex Super money.
  • Not working anymore (partner works part time), has some health issues. Was getting jobseeker during Covid but looks like that might run out as they push him to apply for and be prepared to work in jobs which are completely unrealistic.
  • Will be eligible for age pension at 66 as DOB is between (1 January 1954 to 30 June 1955) https://www.servicesaustralia.gov.au/individuals/services/ce…
  • It was just a regular super fund, maybe Australian Super. No defined benefits, etc.
  • Term deposit is about to finish so he is free to move it

Thanks!

Financial Superannuation

Comments

  • berrycrush on 17/12/2020 - 09:27
    +34

    How long is the term deposit for? Ultimately, would suggest getting a financial advisor for 'transition to retirement' strategies and not rely on the advice of random internet people as you have no assurances over their financial acumen or cognitive biases :)

    Annuities might be something to look into though. Lower return and safer than other financial products, particularly considering his age and stage in life.

    Either way, good luck to you! My mum almost did the same thing.

    • capslock janitor on 18/12/2020 - 16:36
      +2

      chuck it all in Raiz 🚀

    • Charity on 19/12/2020 - 23:18
      +2

      I would actually value the advice of 1000 diverse opinions over 1 unknown "financial advisor". Most financial advisors are doing no better financially than the people they advise. Let's be honest, the average affordable financial advisor isn't exactly Warren Buffet lol.

      • pilchard on 20/12/2020 - 09:40
        +3

        Don't pick an unknown one then. There's a helpful guide for picking a licensed one here https://moneysmart.gov.au/financial-advice/choosing-a-financ…

      • Alligate on 20/12/2020 - 10:42
        +8

        And they shouldn't be. That isn't what you are going to them for, and you are barking up the wrong tree if that is what you are asking for.

        What you want is someone that can give your dad sound advice about what he can do with the funds he does have, not a suggestion on get rich quick schemes. Does holding the funds outside of super vs inside of super have any negative impacts on the centreline assets/income tests? Could structuring things in a different way provide him an extra amount of income? What is his risk tolerance so they could find him an appropriate investment that isnt going to result in this same situation the next time things get rocky. That is what a financial adviser can (and is qualified to) advise on.

  • tyarrhea on 17/12/2020 - 09:41
    +16

    Definitely seek financial advice now, especially since your dad is approaching the qualifying age for the pension. The amount of 'income' and 'assets' he has will impact on how much pension he receives.

      • p1 ama on 19/12/2020 - 20:54
        +11

        great way to blow 3k on a statement of advice telling him to do something boring and low risk

        As someone in the industry who's had plenty of experience with financial advisors, I have no idea why you're being downvoted, this is actually absolutely 100% true.

        There's no secrets to investing - the only two rules are:

        1) High risk, high return; low risk, low return
        2) Diversification good - diversify across assets, geography, income streams, duration (time to cash flow)….etc.

        There's nothing more a financial advisor can tell you apart from potentially trying to sell you stuff. All the rules are there if you want to spend the time to read it. If you want someone else to read it to you, then yes, you will have to pay for that.

        • Franc-T on 20/12/2020 - 04:03

          Yes, but theres a whole of of implications around tax etc. There are financial advisers and good financial advisers.

          Problem is you cant tell which is which.

          • p1 ama on 20/12/2020 - 17:43
            +2

            @Franc-T:

            Yes, but theres a whole of of implications around tax etc. There are financial advisers and good financial advisers.

            If you're rich, yes. Not if you have $100,000 in savings (as OP's dad does here).

            If you have $100,000, you need someone to tell you to put that in a diversified equity ETF, with maybe a small part in fixed income to have some short term reliable income streams.

    • rily001 on 18/12/2020 - 22:23
      +1

      This comment. You should read up on qualifying for age pension as i know they do an asset and income test.

      If he has a mortgage maybe put it in the offsetting account for now (i.e. if he has an offset account) to minimise interest payments he has to make to the Bank.

      And definitely try to seek some financial advice - there is no shame in doing so. I would suggest you do as much research and reading before seeking financial advice; otherwise the financial advice may be confusing. There are government tax hotlines you can call (for free) to get 'tax' advice / implications on what your dad has done.

      It would also be useful to understand and anticipate how much your dad and mom need in 'retirement' - this will help you understand what the best option is for them financially.

      Im sorry to hear but best of luck!

  • holdenmg on 17/12/2020 - 09:43
    +36

    Hey,

    I’m not saying your Dad was wrong, but it did look bad there for a bit. That is, if it is over…

    Anyhoo, there are Tax Implications for withdrawing Super “early” that aren’t pretty and as has been said above, if your Dad is in a Term Deposit, then time to focus on what to do when this becomes available, unless you receive advice that the penalty for withdrawing early is minimal.

    Also, I’m assuming your Dad is approaching Retirement or replanning for it, so worth developing a Strategy now that puts him in the best possible position.

    Check if Withdrawing Super has affected his Income Protection, Life Insurance and TPD Cover as you might need to check that is adequate.

    Suggest he finds an Independent Financial Planner that understands the Tax Situation from withdrawing Super early unless this has already been dealt with in his most recent Tax Return.

    Don’t focus on trying to get back any money he has “lost” just develop a plan that lets him sleep at night.

    • S2 on 17/12/2020 - 10:16
      +26

      Really well written with great considerations suggested.

      I’m not saying your Dad was wrong, but it did look bad there for a bit. That is, if it is over…

      It's easy to judge with hindsight, so I think this is a very welcomed opening.

    • watwatwat on 22/12/2020 - 12:19

      but it did look bad there for a bit.

      And thus he should have been gradually adjusting his asset allocation as he was reaching retirement. Any financial decisions done in a panic typically don't result in great outcomes.

      At least he sold down $20k and not $35k.

  • Jase83 on 17/12/2020 - 09:59
    +11

    Hey thanks. Yes I know he should get financial advice, but he is not a financially advanced person, and I think he feels embarrassed or stupid about it now.

    He is not the type of person that would go and research on the internet. He is a hard manual worker who only started getting super later in life. I know just hooking him up with a random adviser is going to overwhelm him and he would probably be railroaded into whatever they say, even if it's in the advisors best interests and not his.

    Hence why I am trying to get a general feel for the options, before we get more specific advice.

    • holdenmg on 17/12/2020 - 10:03
      +26

      Currently Centrelink are not offering their free Financial Seminars because of COVID-19.

      But, you can call the Centrelink Older Australians Line on 132300 and speak to an FIS officer.

      The wouldn’t railroad him and are quite good at understanding his situation.

    • AustriaBargain on 17/12/2020 - 11:27

      He should find someone who is legally bound to do the right thing with his money for him, if that really is all the money he has to plan the rest of his life with. I bet being old and poor will be miserable for a long whiles yet. Would piss me off if I became too feeble to drive myself anymore in my advanced age, but I couldn't afford one of the fancy new self driving cars finally approved and available to buy. Or if I couldn't get on the toilet anymore, knowing that robots that could help me do everything I used to do, except I can't afford one, would grind my gears.

    • berrycrush on 17/12/2020 - 13:14
      +2

      Gotcha! Thanks for the additional information. The financial advisors can actually be quite daunting if you aren't feeling confident, so completely get it.

      My understanding is you can re-contribute to your superannuation (there used to be work tests required on this, but your father was recently working and the tests on these were also changed in 2019/20). But speak to your father's previous superannuation provider about this and to confirm tax/insurance/age pension implications (there are caps on superannuation contributions which are taxed differently, superannuation normally has a life/TPD insurance cover attached to it but given your father withdrew it is likely now void, and the recontribution to your super may also impact your age pension). While they cannot give you financial advice (i.e. advice personal to your circumstances), they can give you enough information about the superannuation product to give you a better idea of next steps and fees. I'd do this sooner rather than later, as there often timing rules so best to know asap.

      Other things to consider:
      - Would only keep it in savings if I was still figuring out wtf was going on. Macquarie Bank just opened one with a higher savings rate than Ubank, which you might want to consider - https://www.macquarie.com.au/everyday-banking/savings-accoun…. The low interest rate environment makes for shitty savings accounts.
      - Diversified financial product - ETFs or index funds might be options to look into. Effectively they're investing your money into a broad number of companies/assets, then paying you a dividend. Effectively your superannuation is doing the same thing with your money. ETFs/index funds would be paying anywhere in the 5-10% return rate as a combination of a) increased value of the asset and b) dividend payments, but effectively only b) would be in your pocket.

    • Chong on 18/12/2020 - 12:53
      +3

      My lay man advice is paying off the mortgage could be safer, put the rest in an equally weighted index ETF. Hopefully the pension is sufficient for bills and food.

      But yeah speak to a good financial adviser might be best.

  • FoxJump on 17/12/2020 - 10:15

    I moved my super from juicy to safe when it dropped 10%.
    I am not yet convinced to move it back to juicy.

    • brendanm on 17/12/2020 - 11:12
      +48

      You've already missed the bus.

    • ihbh on 17/12/2020 - 12:04
      +5

      I am not yet convinced to move it back to juicy

      You're right. The time to move to "juicy" is when there's blood on the streets (brokers jumping out of windows because the market crashed, etc.) - March/April. Could be a while before we get back to those times or could be just around the corner.

      It is not when the market rises 50%, etc and you and everyone is talking about the rising market. If you have that mindset, be prepared to jump out of the window yourself.

        • Gareth on 18/12/2020 - 11:45
          +9

          If you don't want to play the market, you don't take it out to begin with.

          (… With the potential difference only if you're going to retiring in the next few years)

          • Vote for Pedro on 18/12/2020 - 13:57
            +1

            @Gareth: But my favourite right wing radio station was advertising grenfells securities and huge returns. I didn’t know I could lose everything. Its so unfair. Everyone come to my rescue.

        • Piranha2004 on 19/12/2020 - 08:41

          Best time to buy is when it went low. My super actually made money this year because I didnt panic and kept the same investment strategy. Any losses were eventually recouped by buying in at a lower price.

          • R4 on 21/12/2020 - 01:15

            @Piranha2004: I put all my super into cash just as Covid was starting and put it back in to growth a few months later - end result being it went up just under 6% last FY - when most funds went backwards. This year it's currently running at just under 7% growth - which considering the state of the world, I'm pretty happy with.

        • pandamninator on 19/12/2020 - 17:20
          +3

          I know you need to rationalise it to yourself so you don't run the bath and reach for a toaster, but what you did was literally playing the market.

      • sund00bie on 19/12/2020 - 01:17
        +2

        No idea what "juicy" is but i started salary sacrificing an extra 100 per week (on top of what i already had) when market crashed.

        When people sell, i buy. When people buy, i sell :D

      • entropysbane on 19/12/2020 - 07:38

        That is what my mate did. He actually had his money in one of those old public service defined benefit schemes, closed it and pulled $1.2 million out when the stock market crashed. And went all in on a variety of normally secure stocks that had fallen up to 30%.
        Six months later he had added $650k in value.

  • bobbified on 17/12/2020 - 10:16
    +11

    …after seeing his super drop about 20% in March when the first Covid crash happened. Without telling anyone he withdrew it all..

    I don't know exactly how the market has moved since then, but by withdrawing it, he's "realised" those losses (rather than giving the market a chance to bounce back).

    He wouldn't have paid tax on the withdrawal since Lump Sum withdrawals for over age 65 are tax-free.

    He can put the funds back into a super account without the "work test", however, the contribution caps will need to be considered. Also, if he withdrew from a defined benefit fund, it's unlikely they'll allow him to go back into the plan (although some Trustees are quite lenient with the rules and may allow it). There is still the accumulation style plans that he can utilise.

    Most insurance cover already ceases at age 65, but some cover goes up to age 70. If he had insurance before the withdraw (and assuming closure of his account), then he will be required to be underwritten if he wants it back.

    Probably the most important point to note is that any earnings he receives on those funds outside the Superannuation system will not be taxed concessionally. They will be taxed at his marginal tax rate (so whether he's working or not or if he has other income is will have an impact on that tax). The tax rate on earnings in the Super system is 15%, whereas the marginal tax rate can be over 40%, depending on his income.

    The withdrawal amount may or may not also have implications for any Centrelink benefits.

    • che_97 on 18/12/2020 - 15:42
      +2

      Marginal Tax rate is 0% if you earn under the 19k threshold!

      • bobbified on 18/12/2020 - 16:27
        +1

        That's why i wrote "so whether he's working or not or if he has other income is will have an impact on that tax" :p

        Each person has a number of things to consider before proper advice can be provided.

    • macrocephalic on 18/12/2020 - 18:01

      The market is back up to basically pre-covid levels except for a few segments (commercial properites for example). The market went up about 8% just in November. I was lucky enough to have money to put in at the end of October, but I wish I'd had it earlier.

  • loke on 17/12/2020 - 10:21
    +2

    I've been reading reddit.com/r/ausfinance a lot lately, you can also post there for general advice, they'll sympathise too

  • Elppa8 on 17/12/2020 - 10:28
    +4

    With U Bank you need to add $200 a month to get the current 1.1% and from next year the end of month balance has to higher than the start of month balance to get the interest as well so it might be something to consider. Macquarie Bank currently has a introductory rate of 1.35% for four months then reverts to 1.2% with no conditions AFAIK.

    • wortho on 19/12/2020 - 19:31

      Are you able to share where Ubank state that "from next year the end of month balance has to higher than the start of month balance to get the interest" I have not heard of this and have a couple of accounts with them. Thanks

  • avoidfullprice on 17/12/2020 - 10:33

    Can he put it back into super now?

    Unsure if he can put back into super, unlikely in an Accumulation account and not sure because of that, if it can be turned into a tax-free / mean test-free pension. This is the part you need professional advice.

    Are you in position to personally reimburse his losses and let him feel better?

  • whooah1979 on 17/12/2020 - 10:43
    +6

    20% in March when the first Covid crash happened. Without telling anyone he withdrew it all (~100k)

    It hurt my eyes just reading that.

    He could've made a killing sitting on so much fiat if only he had the courage to tell you guys right after it happened. April was the best time to dump all the fiat back into the stock and/or digital asset markets.

    • gakko on 17/12/2020 - 10:47

      never mind

    • 424242 on 20/12/2020 - 04:16
      +1

      what does fiat mean here?

      • pilchard on 20/12/2020 - 09:44

        govt-issued currency - AUD

  • mskeggs on 17/12/2020 - 10:44
    +55

    I find it extraordinary how the answer is always consult a financial advisor here.
    The reality is your Dad has very meagre super savings and will rely on the age pension for most of his retirement income.
    This isn't the disaster many seem to think, as he will have a reliable source of income for as long as he lives, and will be eligible for health care concessions and other things.

    If he consults a financial advisor, he will have to pay the fees to do so, fees he can ill afford, and frankly, it will be a waste of his money because he doesn't have enough already saved and won't earn enough from any future employment to make it worthwhile.

    If he is still working, or has worked enough to meet the employment tests, he should probably put this money back into super. The super funds are tax advantaged if he is still earning taxable income, and he should likely choose one of the more conservative investment options - called something like balanced or income. This will give his savings a better return than just case, and will likely provide him with a top up to his pension of $400 - $500 a month or so for years to come.

    If he is already retired, this changes a bit as the super tax benefits aren't meaningful, but the core advice is to invest in a diversified investment product that pays an income so he gets the benefit of the growth of his investment as he slowly draws it down. A super fund might still be the best place to put his money, but check the fees.
    In any case, it is very important he puts his money in an investment that offers a better return than a bank. Think of it this way - if he puts his $100k in the bank at 1% and withdraws $6000 p.a. he will hit a zero balance after 19 years. But if he puts it in an investment that returns 5% his money will last 37 years.

    If he wants some specific discussion, without seeing a private financial adviser, his super fund (he might still have the account, even though he withdrew) probably has a people he can talk to. Most of the industry funds do.

    • gakko on 17/12/2020 - 10:48
      +5

      yeah the old 'see a financial advisor'. That would cost what, 1-2% of his entire fund?

    • avoidfullprice on 17/12/2020 - 10:57

      his super fund (he might still have the account, even though he withdrew) probably has a people he can talk to.

      That being a financial advisor.

      If OP dad makes a decision based on what we suggested, that is taken as advice, and we don't have a licence, we are in deep shit?

      I assume you have a licence by providing OP advice here.

      • mskeggs on 17/12/2020 - 15:48
        +22

        Do you really think the laws to protect people from predatory financial advisors are intended to prevent people seeking the opinion of others?

        Do you really think when somebody says "Talk to a Financial Advisor" the person asking the question takes that to mean "I should call my super fund and have a chat with their team to get an understanding of the general options open to me".

        And do you really think a statement of advice produced by a licensed financial advisor that will soak up a couple of percent of this man's limited capital will give him greater benefits than following some general advice to target a diversified investment that pays a reasonable return to allow him to top up the pension?

        Financial advisors are potentially useful for people with good incomes and growing assets. They are likely useful for people retiring with large assets. They are probably necessary for people with large incomes and large assets and complex affairs. You will notice that people with modest means and assets aren't in that group.

        Financial advice won't tell this person to put $100k in ASX:WAM or whatever, they will suggest tax strategies, asset class allocations, insurance approaches, financial goals etc.

        With $100k and limited income opportunities at retirement age, nearly all the financial advice strategies are meaningless. They need a fairly safe place to stash their nest egg that will produce reasonable returns to supplement their pension.

        • Crow K on 17/12/2020 - 16:52
          -3

          "Do you really think the laws to protect people from predatory financial advisors are intended to prevent people seeking the opinion of others?"

          Yes, that's exactly what they're there for - to prevent the damage of someone relying on unqualified advice. That's why it's an offense to provide financial advice if you're not a licensed financial advisor. They don't want people who haven't taken the necessary steps (education and training on things like types of investment, risk profiles, etc) telling unskilled/uneducated/trusting people things that may turn out to be severely harmful.

          It's exactly why vitamin companies and 'alternative health providers' (or whatever we're calling the quacks this week) have very specific instructions on what they say their products can and can't do. And why Pete Evans got pinged for telling everyone his sunlamp cured COVID-19.

          It's great to want to help people, and the comments you've made in the thread are (I'm sure) made in good faith - but everyone needs to understand financial products, like legal advice, medicine, architectural services and a ton of other career products are regulated for a reason.

          I agree there's a lot of dodgy financial advisors out there [hence the royal commission]. But there are also dodgy dentists who touch up their patients when they're sedated. Is the solution to the problem to prosecute the bad dentists or hand around the pliers and tell everyone you might as well yank your own teeth out?

          • mskeggs on 18/12/2020 - 07:19
            +11

            @Crow K: I think you have got the wrong end of the stick about financial advice. A financial advisor needs to have a license if they are recommending products or making a living out of it - there isn't anything in the rules with the intention of preventing people offering their opinions.
            Its a bit like if my Mum says have some honey tea when I have a cold - it isn't her practicing medicine, just giving her opinion, which happens to be a correct one.

            I still don't see what you think a financial advisor is going to do in this case. They don't have access to secret asset classes that yield more for less risk, and the OP has already said their father will be reluctant to see one.

            All a financial advisor will be sure to offer here is additional fees, just like doctor would if I consulted them about a head cold.

            • Crow K on 18/12/2020 - 10:00
              +1

              @mskeggs: I'll preface this by saying I'm a combination of worrywort and pessimist. I always want to mitigate the worst possible harm that can befall. ANYWAY.

              "ink you have got the wrong end of the stick about financial advice. A financial advisor needs to have a license if they are recommending products or making a living out of it - there isn't anything in the rules with the intention of preventing people offering their opinions.
              Its a bit like if my Mum says have some honey tea when I have a cold - it isn't her practicing medicine, just giving her opinion, which happens to be a correct one."

              I guess there's likely some meaningful distinction between "I have an opinion on this, and you should/could do-" and "I think you should/could do-" in your head, but that's not honestly not how the laws work. Pete Evans had some very strange opinions on the effectiveness of his sunlamp (cf. your Mum example) and we know what happened to Pete Evans.

              Sticking with the medicine analogy, the health industry has a problem with cyncial snake oil salespeople exploiting desperate/uneducated people. These are the dodgy financial advisors/price gougers we need to stop. But the health industry also has a problem with uneducated "drank the Koolaid" faith healers who are offering medical advice outside their knowledge or experience, that's either harming people directly or preventing people from getting proper care. These are the non-financial advisors telling people what to do with their money. The rules are there to stop both of these things happening.

              Someone came onto a forum with a financial problem (which seems to be their entire super balance/life savings, holy shit, this is something we should be taking seriously, yes?) and needs advice on what can be done about their father's super. While everyone has the right to an opinion, that doesn't make them of equal merit. It's outright dangerous to even pretend it's the case. If someone came onto this forum complaining about sharp stabbing pains in their lower spine and lower abdominal pain one of the posts said "Get to an emergency room" and one said "Shopping malls usually have a good rate on your first Thai massage session, it worked fine for my uncle, do that", you (hopefully) wouldn't shrug and go "Valid, both valid, sure".

              Anyway, I've either convinced you (and everyone) on this point now, or not, I'm not going to discuss that aspect further. But finally, if your natural instinct is to tell someone "don't ask on this forum, you need to speak to a solicitor or legal aid" when someone comes here with a complicated legal problem, I don't see why there's a disconnect to suddenly disregarding that instinct when someone says "So, just did something weird with my life savings.."

              "I still don't see what you think a financial advisor is going to do in this case. They don't have access to secret asset classes that yield more for less risk, and the OP has already said their father will be reluctant to see one.

              All a financial advisor will be sure to offer here is additional fees, just like doctor would if I consulted them about a head cold."

              Alright, here's about six things a financial advisor would be required to do/consider with the client based on the evidence above, none of which has been adequately covered (or in most cases, mentioned):

              • about to retire, enter new stage of life
                -new risk profile? ongoing expenses/lifestyle costs? is there anyone left to provide for? plans? (is a will in place?)
              • client is 66 and has 'health problems'
                • are these the sort of problems that would require moving to a care facility in the next, say, five to ten years? How is that going to be financed? Sell the family home? -Then where does the partner live? [Also, how much longer is the partner planning on working? What are their retirement plans?]
                  -Would it make better sense for the partner to quit their job and become the 'live in carer', get the govt allowance? Alternately: should they continue working and hire a live in carer? Does one of their children want to take that work on?
              • If both people moved to the care community/serviced apartment/retirement whatever, what would the costs be (versus the above). Can a better daily rate be established now (while client is reasonably healthy), rather than try and arrange accommodation in 6 years time (e.g. if health condition has progressed, the accommodation rate will be X, not Y).
                • In that situation, living in the care community, what would be the return on renting their house out? How would that affect their pensions? Their care rate?
                  -Should the house be kept empty/gifted/sold to a child? When? How will the other children feel about this?
              • Is it worth it trying to get <1% out of a term deposit while you're still paying a significantly higher rate in mortgage interest? Isn't that just bleeding money? Would it be better to own the house outright and then use that equity to get a <<insert one of several researched secure asset investment type here>>

              It's possible none of the above is remotely important to the person (plot twist, the guy had some honey tea and the health problems disappeared), but it's also possible it's one of the most important discussions the person ends up having this century. This is why you need to speak to professionals, and not people at barbecues who daytrade etherium.

              • mskeggs on 20/12/2020 - 13:49
                +1

                @Crow K: I understand your point, and I am not some absolutist for free speech that thinks Pete Evans is hard done by, and I report the ads on social media for bitcoin scams that use news readers and rich people's images as bait.
                I also understand that being risk averse is quite sensible, and taking measures to reduce risks is a good idea.

                But if people don't hear from normal people about things like finances or health or other things, they aren't in a good place to assess the professional advice they do receive. So I think it is good to have discussions like this out in the open, and it is encouraging to see lots of people chime in - even if some are advising OP to put it all on black at the casino, or some other not very good advice.

                It is very clear that the best advice changes. In the health sphere, the gov and top medics recommended against wearing masks in March, because they were in short supply and provided limited protection for the wearer. But 9 months later the advice had changed, and I think the early advice did more harm than good by giving some people false platforms to refuse the current best advice. Some advice was to inject bleach!

                Similarly, professional financial advice previously had a number of operators not working in the best interests of their clients. You can well argue this has been cleaned out. I agree it has, to a point, but it also reminds me to consider the value of professional advice. And if the advice advisors give now hasn't been adapted to consider the asset inflation in the past few years and low CPI, then that is another failing that will show up in future (in other words, where will the next doubling in asset prices come from to justify negative gearing, for example).

                The ultimate decision about investments will be with the individual, so I think having considered a range of ideas will be to their benefit, whether they get professional advice or not.

                You make some really good points about how to structure things given access to aged care, and this is a great example of where a financial advisor can add value - but the range of options available in this case is going to be pretty narrow - there aren't enough assets to make big differences.

                That said, you have changed my mind - so I will say to OP that if they consider their father would find this broader type of advice useful, as opposed to what to do with $100k, then a financial advisor might be a good move. But they should go into it with realistic expectations that the difference a financial advisor can make at this point is going to be limited. That said, if they got advice that netted an extra $3k p.a. in optimised welfare arrangements, that would be meaningful and worthwhile.

        • avoidfullprice on 20/12/2020 - 09:46
          +1

          @mskegg: To your fans out there: read what I typed, I didn't disagree with your financial opinions. I disagree with the part you say OP shouldn't pay fees to get financial advice, but look for free non specific professional in the industry to talk about general things. i disagree with your post including words like "the core advice here is …", that is advice not opinion, regardless how general nature that is.

          This is a specific financial situation and warrant specific professional advice - simple or complex, free or not, product recommended or not. He needs to know if he can use his now withdrawn super account to do exactly what you suggested as "core advice", and if not, then condider put money into outside super investment. We all have our opinions as to whether the OP dad should, some of us think he can and so forth. He should ring up his fund to ask if he can at least. I would be interested to hear what he gets out from the super fund in general nature.

          But if he puts it in an investment that returns 5% his money will last 37 years.

          You and I both know that with investment with this kind of return, there will be fluctuation with price, and that 5% is the average return and not a steady yearly growth. You and I both see him needing to draw out the capital as well as dividends, do the years remaining will be less.

          To be clear, I'm not suggesting OP dad to get financial advice on this. I'm all for OP and dad to absorb wise opinions like yours to make informed decision. That said, I'm not confident the dad knows what to do with that information? What is this 5% investment that will protect my nested eggs? We are talking about a person who withdrew his money at the dip of the market (sorry OP to bring it up again). OP asks about what dad can do now, knowing uBank 1% is a shit return for his withdrawn super.

          Financial advice won't tell this person to put $100k in ASX:WAM or whatever, they will suggest tax strategies, asset class allocations, insurance approaches, financial goals etc.

          But then in your reply below:

          "A financial advisor needs to have a license if they are recommending products or making a living out of it"

          Contradicting but will live with. Regardless, my view is for OP dad to know what vehicle he has available, because you and I don't know. And that comes from someone who can look into his specific situation. That to me, legally requires a licence. I say financial advice, but maybe an accountant is more relevant? That I don't know.

          And lastly, a repeat - I didnt say your opinions are not wise, or wrong. In fact it is the opposite and find your opinion is great and useful. There is a risk someone else less savvy than you take your opinion as formal financial advice. That's when we get into shit. Whatever I think about value of financial advice is irrelevant, as your return questions seem to prompt.

          • mskeggs on 20/12/2020 - 13:17
            +1

            @avoidfullprice: Thanks for your well considered reply, and I agree with the thrust of your comment, that the original poster's Dad needs to do something better with their money, and they are likely to need some advice about this.
            Whether that advice is a statement of advice is ultimately up to them, but they should probably give it some consideration before paying for it.
            My beef is that people are fast to shut down discussion about legal, financial, accounting, tax and related matters with "you need professional advice".

            I have accessed professional advice in some of these, and the value of that advice is much, much higher if you bring some knowledge and ideas along when you ask it. Note I am not suggesting you are in any way arguing against this, as I am positive you would also advocate for better personal research and financial literacy.

            So please take my original comment in that context. People who seek out professional assistance without a baseline of competency are most at risk of being fleeced, and that is why I routinely comment with opinions (which Financial Advisors also supply) and try and do it in a way that is helpful.

            Ultimately, the financial decision lies with the OP's Dad. He doesn't sound like a very sophisticated investor, and hasn't got the assets, income or time to sustain a very complicated strategy.
            It seems from my observations, it is often people in this circumstance who receive bad advice. Advice like 'set up a family trust" or "buy an investment property", and the advisor just happens to be able to provide those services for a fee.

            We had Xmas for my side of the family last week, and my sister said she would like to sit next to the kids table, so when the adult end starts talking about competing tax policy or monetary supply, she could turn to a more interesting conversation.
            I know most families aren't like that, so when I'm pretty free with chiming in with an opinion, it is partly how I was raised. But I think it helps too, for people to hear what others would do and when and who they should turn to for help. And if somebody advises OP to set up an SMSF or buy bitcoin, there is a very good chance the other people on here will point out the flaws in that idea - something that won't happen if they get flawed "professional" advice.

            And lastly, the spectrum of decisions the gentleman concerned can take here is pretty limited.
            They are demonstrably risk averse, have limited time and earnings, will pay no tax and have pretty modest assets.
            There just isn't that much variation available, if we rule out paths that are in conflict with these facts, and the 95% of good financial advisors will recommend they invest in a diversified investment with reasonable dividends and some capital growth. It happens we have closely regulated super funds with very transparent fees that specialise in just this style of investment, and are well set up for dealing with less financially literate people too, so I would expect those to be recommended, although there are similar investments outside of super.

            It may be that there is a factor that a financial advisor will uncover (the OP's father is terminally ill but doesn't want to worry OP, or they secretly have 8kg of gold buried in the backyard or something else) but this is a long shot, and the fees are a given. And a thousand or two in fees for a statement of advice is a big chunk of these assets, so I don't think they are good value in the stated circumstances.

    • StalkingIbis on 17/12/2020 - 10:59
      +20

      I have never seen mskeggs post anything that isn't great. Shoutout for all the free sage wisdom she provides to randoms on here.

      • Donaldhump on 17/12/2020 - 11:34
        +6

        i always thought mskeggs was a man.

        • whooah1979 on 17/12/2020 - 11:42
          +1

          They're Santa.

          • mskeggs on 17/12/2020 - 15:49
            +9

            @whooah1979: Ho, ho, Ho. whoah1979 is on the good list. Possibly for the first time ;-)

        • Laurana on 18/12/2020 - 21:10
          +1

          I’m pretty sure that he is and the username is meant to be M Skeggs and not Ms Keggs. Because (I think) he has previously referred to a Mrs Skeggs.

          Also a nod to Calam05’s comment. I’ve never seen mskeggs post anything that isn’t great. He’s one of the few posters here I make a point to read their posts in whichever thread I’m following.

    • slow on 17/12/2020 - 12:37
      +1

      Agree, the couple times I have tried to see a "financial advisor" I always felt that they were trying to sell me something or had some vested interest.
      No thanks

    • fredblogs on 17/12/2020 - 12:49

      "In any case, it is very important he puts his money in an investment that offers a better return than a bank." On the one hand, this is true. But on the other hand, it's not possible to earn 5% without assuming some risk.

      • mskeggs on 17/12/2020 - 15:52
        +3

        Very true. There is no risk free avenue.
        But the age pension will provide the main income for this person, so it is reasonable to suggest they invest this supplement in a way to gain some extra benefit.
        Nearly everyone in Australia is relying on the super funds core strategy or something riskier for their retirement savings, so it seems returns over 5% are achievable with risks deemed acceptable by the overwhelming majority.

        Obviously something the individual must decide, but whether or not they engage a financial advisor that doesn't change.

    • LarraineP on 18/12/2020 - 10:14
      +1

      The Centrelink Financial advice service is free and is not linked to any financial providers. I would encourage anyone to seek out their advice. I wish I had done it years ago.

    • netjock on 18/12/2020 - 22:42

      Short of the long (good advice)

      1. $100k withdrawal is zero tax, added with the 76k assets won't impact his pension entitlements.

      2. $100k whether he wants to blow it on a big bender or continue to try to grow it is the question.

      3. Above advice about diversified investment is correct. Examples are ETFs like global share index or ASX200 maybe iShare global 100 (biggest companies). I wouldn't recommend sector specific indexes or any narrower indexes than ASX200 or global top 100. Dividends are between 1% to 3% and capital growth long term around 4% - 6%. If your dad wants to spend more than dividends he would have to sell shares and volatility means it can be up 20% one year and -10% the next.

    • [Deactivated] on 19/12/2020 - 08:34

      Sound response by mskeggs. I'd do this. Call the super fund and talk to them instead.

    • Zachary on 19/12/2020 - 23:05

      The reality is your Dad has very meagre super savings and will rely on the age pension for most of his retirement income.

      100k is very meager? thats more than my lifes worth!

      • mskeggs on 20/12/2020 - 10:27
        +1

        I hope you’re wrong, not that you are dying soon.
        Economic researchers value life very highly, e.g.:
        https://www.pmc.gov.au/sites/default/files/publications/Valu…

        $100k is a small balance to be chasing up paid for financial advice - there are other options up thread that are better.
        If you are a younger person, I’d urge you to save for retirement. While I think it is a bad move, I very much expect the pension to be less generous for younger people when they retire, as almost all will have spent a lifetime contributing to super.

        It will be politically easier to leave those needing the aged pension behind than it is today where so many old people access it.

        • Zachary on 02/01/2021 - 13:24

          3 to 15 million huh? So if someone were to offer me a life threatening job, I should accept no less than 3 million for the job?

          HMmm, so we dont get pensions when we got old? So what happens when we dont have money to sustain ourselves and no one wants to hire us because we're old farts? I guess I better prepare onto how to live homelessly when I'm kicked out….

  • [Deactivated] on 17/12/2020 - 10:54
    -2

    There are alot of ETFs that will easily give you 10% per year, very safe

    Best idea if you have nfi

    • CyberMurning on 17/12/2020 - 11:26

      what is nfi?

      • polarq on 18/12/2020 - 15:58
        +1

        stands for "no Freaking idea" or replace it with the F word

    • fredblogs on 17/12/2020 - 12:46
      +1

      Completely untrue.

      • mskeggs on 17/12/2020 - 15:54
        +2

        Agreed. But there are ETFs that have reasonable diversity with assets like stocks, bonds, cash, property, international assets etc. But you swap return for diversity.

        And most super funds have similarly diverse options.

    • dust on 18/12/2020 - 14:11
      +1

      If only you could buy units in NFI you'd be doing pretty well!

      I wouldn't say "easily" 10% per annum but yes it's an easy option if you're not particularly financially savvy.

  • tsunamisurfer on 17/12/2020 - 11:21
    +2

    There is a lot more to this equation like:

    • Is your dad getting the Age Pension at the full rate? If yes does this impact his eligibility?
    • How much other assets does he have?
    • Did he get taxed on the way out?
    • Does he want to use some of the $100k in the near future?

    A financial advisor would be the safest bet for matters taxation, Centrelink and Superannuation / Pension.

    • whooah1979 on 17/12/2020 - 11:41
      +1

      A financial advisor would be the safest bet for matters taxation, Centrelink and Superannuation / Pension.

      The right person to speak to is a qualified accountant. A financial advisor is someone that peddle assets class for commission.

      • Crow K on 17/12/2020 - 12:18
        +2

        No, telling anyone what they can/could/should do with their money is financial advice [superannuation, insurance, term deposits are all types of financial products that only advisers can discuss a clients' needs about].

        Only licensed financial advisors are permitted to discuss this stuff. The best an accountant can do is comment on the tax effects of various decisions, and even then they'll emphasise heavily that they are not providing financial advice.

        You'll always find someone in the pub or at a barbecue that will be willing, perhaps even eager, to chat about this stuff, but unless they're a financial advisor, they're not qualified and permitted to.

        Personally I don't agree with the above (it's a little "nanny state" etc), but these are the steps to [attempt to] prevent the vulernable being fleeced in the market. Until we get a better way to enforce that, these are the rules.

        • whooah1979 on 17/12/2020 - 12:25
          +1

          [superannuation, insurance, term deposits are all types of financial products that only advisers can discuss a clients' needs about].

          We're not living in the 80s. All of this information can be found using DYOR and duckduckgo.

          The only reason to pay good money to a financial adviser is to have them promote product abc.

          • Crow K on 17/12/2020 - 12:30
            +1

            @whooah1979: Anyone can research any aspect of the above, if that's what you're saying, sure. Not sure exactly what that brings to the discussion.

            I only mentioned that above because I have clients who don't know that superannuation is a financial product and will ask "hey, should I.." and so on, without realising I'm about to shut the discussion down because we've left the Things I'm Allowed To Discuss Ranch, pardner.

            I'll say it again, slowly: if you want advice on a financial product, the only person allowed to give it to you is a financial advisor. Whether you can find one for free or not [e.g. the super fund has a pool of them to take questions], is another matter.

            • whooah1979 on 17/12/2020 - 12:42

              @Crow K:

              I have clients who

              I see why this is rubbing you the wrong way. Let's just leave it.

              Enjoy your 🎄.

              • Crow K on 17/12/2020 - 12:46

                @whooah1979: Yeah, I did reveal I knew about the industry. I don't think correcting your mistake is being rubbed the wrong way, but l've said what needed to.

                Merry [tree] to you too :)

        • Jase83 on 17/12/2020 - 12:36
          +8

          If I walk into a car yard, the salesman will tell me the cars they are selling definitely fit my needs better than any other option out there. If I walk into a clothes shop the salesperson will tell me whatever I try on looks amazing.

          How is a financial advisor and what they are pushing any different? I genuinely don't know, but are instinctively very sceptical.

          • Crow K on 17/12/2020 - 12:38
            +1

            @Jase83: Because at some stage the government realised that people were making lifetime decisions with their entire savings based off what advice they were getting and decided it was important to regulate who could do so.

            This is why it's harder to become a financial advisor than a salesperson, I guess?

            Financial advisors are required to consider the entire needs of their client, which includes financial products the client might not be aware of. They can be sued by the governemnt/client if they overlook things [e.g. "why didn't you tell me about government bonds 8 years ago? I could have made so much money by now had I known"].

            This is why they draft up their Statement of Advice that specifically lists what was covered [and especially if a client is confirming they do not want advice on an area].

            It costs a fee, but they are provided a service that has a level of risk attached to it.

            Are some of them dodgy and just push in-house stuff with commissions? Sure, we all saw the Royal Commission. Doesn't mean there aren't rules, etc.

          • whooah1979 on 17/12/2020 - 12:46
            -2

            @Jase83: They have a pool of products that they push for commission which makes them salespeople with a degree.

            • Ashbargin on 18/12/2020 - 09:34
              +3

              @whooah1979: What commissions are you referring to? Commissions on investments/super haven't been allowed for many years.

              • whooah1979 on 18/12/2020 - 09:47
                +3

                @Ashbargin: https://moneysmart.gov.au/financial-advice/financial-advice-…

                Commissions
                A commission is an amount earned by an adviser for selling specific products. The commission is a percentage of what you pay for the product.

                Your adviser can’t charge a commission on superannuation products sold after July 2013. They can still charge a commission on other products you buy, like life insurance.

                Insurance commissions
                Instead of an up-front fee for an insurance policy, an adviser may offer to charge you a commission. If you choose a commission, then you'll pay a higher premium for the life of your policy.

                You can reduce the commission by asking to pay a higher up-front fee to your adviser. This also reduces your premium.

                • Ashbargin on 18/12/2020 - 10:08
                  +1

                  @whooah1979: Yeah, I understand what a commission is. I referring to why you commented "a pool of products that they push for commission which makes them salespeople with a degree". The OP is talking about superannuation investments so there is no commissions as you reference these have been banned for over 7 years.

                  • whooah1979 on 18/12/2020 - 10:42
                    +1

                    @Ashbargin: Op is looking for investment opportunities for his father. Super is only one of many options that can be recommended by an adviser. Advisers may not charge a commission on super advice, but they're free to charge a commission when recommending term deposits, an Ubank low-interest savings accounts or other products from their pool.

                    • Ashbargin on 18/12/2020 - 11:32
                      +3

                      @whooah1979: No they cannot charge commissions on any investment. A commission is paid from a product provider and has been removed to ensure that there is no influence in the product(s) they may recommend. This goes back to your original comment that they "push products from their pool for commissions" which is factually incorrect.

                      • whooah1979 on 18/12/2020 - 11:41
                        -1

                        @Ashbargin: Your opinion is contrary to the advice on moneysmart.gov.au. May be you should write to ASIC and ask them to change their advice on moneysmart.gov.au to match your opinion.

                        https://moneysmart.gov.au/financial-advice/financial-advice-…

                        • Ashbargin on 18/12/2020 - 12:06
                          +3

                          @whooah1979: What are you seeing on the website that I don't? All I see is the following in regards to commissions. Which confirms my statement. Commissions have been banned on all new investments since 2013 and from December 31 2020 on all existing products regardless of when they commenced.

                          "Commissions
                          A commission is an amount earned by an adviser for selling specific products. The commission is a percentage of what you pay for the product.

                          Your adviser can’t charge a commission on superannuation products sold after July 2013. They can still charge a commission on other products you buy, like life insurance."

                          Are you getting a fee and a commission some how mixed up and not understanding what a fee is?

            • Ti-au on 19/12/2020 - 03:38

              @whooah1979: Well it was a diploma for a while.

    • Jase83 on 17/12/2020 - 12:07
      • He was doing contract work which dried up with Covid. Getting part payment jobseeker now and they are asking him to go to apply for jobs etc, but realistically I don't see him working again having some mobility issues in a regional area. Being 65 and 9mths now, I think he mentioned being eligible to submit paperwork for the age pension some time early next year?
      • Outside of his house (shared with partner who works part time) - maybe 75k?
      • No none that I know of as he was already over 65
      • I think just to supplement his pension income. Bit of extra spending holidays etc. No major purchases planned.
  • whooah1979 on 17/12/2020 - 11:26
    +2

    How is it even possible to withdraw a lump sum like that? The COVID limit was $10k 2019/20 and $10k 2020/21.

    • Donaldhump on 17/12/2020 - 11:35
      +6

      he has reached the age where he can withdraw!

  • seraphim2017 on 17/12/2020 - 11:38
    +1

    How long was your dad planning on that 100k lasting? Curious as I always hear that you have to have over a million (a couple of million now!) in super by retirement to be comfortable?

    • TheOtherLeft on 17/12/2020 - 11:54
      +1

      I'd say he'll be relying on the pension as well.

    • Jase83 on 17/12/2020 - 12:13
      +1

      Yeh I think maybe the average lower/middle income earner that started working in the 70's just wasn't thinking about retirement as much as we do now.

      The aussie dream was to have a family, buy a suburban home with a pool - which my parents did and pay a mortgage of about 17% in the 80's, scrape to send your kids to a private school and all the sports lessons, go on road trips for holidays, etc. The age pension was just a given after so many decades of hard work.

      I've just read the compulsory super rate of 9%+ as we know it now didn't come in until 2002/2003.

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