Need Help with Retirement Planning, Structuring Superannuation / Savings etc

• 

  mskeggs on 27/01/2022 - 19:08

  Depends if they are broke or have a pile of cash.
  If you have plenty, it is well worth paying for accounting/tax advice to maximise your wealth.
  If you are broke, not so much.

  • 

    ccrap on 28/01/2022 - 11:49

    Yes they have a good pile of cash so have no issue paying for advice. Just need a recommendation for a great advisor as there's plenty of mediocre and/or dodgy ones out there.

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  tsunamisurfer on 27/01/2022 - 19:12

  +2

  Easiest most comprehensive answer would be for your relative to seek consultation with a financial planner.

  They will look at their assets, goals, risk profiles, and circumstances and design a financial plan catered for them.

  It will cost around $3000 for a basic Statement of Advice, which is high but financial advisers are no longer able to charge a trailing commission so they have instead levitated to the pay for service model, either way you pay.

  • 

    ccrap on 28/01/2022 - 11:51

    Yes, thanks TS, that's the plan. From what I can see, advice is generally in the range of $2.5k to $4.5k, which is fine as they have the cash for it. Just need some good recommendations from the community

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  bemybubble on 27/01/2022 - 19:20

  Have they got any debt?? Retirement 101 is to pay out any outstanding debt

  • 

    ccrap on 28/01/2022 - 11:52

    No debt at all, own house, solid savings, ok super.

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  Dominus on 27/01/2022 - 19:39

  +1

  Have you/they started with some of the basics like SuperCalcs or MoneySmart.gov? Not trying to be patronising here, but starting with the fundamentals is really important and will get you thinking about pertinent questions like how much do you need vs want to live on, what assets do you have, etc. The SuperCalcs link in particular is great, it has a tutorial and simple sliders you can play around with.

  One of the other important questions to ask is are they planning to fully retire, or do they want to or are they willing to work casually/part time to bring in a bit of income. This is especially important if they're not yet eligible for the aged pension which is 67, meaning they'd be fully reliant on their super (from 60) or savings (pre 60). The pension is indexed twice a year to keep it in line with inflation, but it's currently around ~$24k p.a. This may not sound like a lot, but as bermybubble says clearing debt is key for retirement, so they own their own home outright and live a modest like that pension isn't awful.

  Most people want more of course, and that's why starting with the calculators is a great kick-off point for the conversation. Work our your current expenses and what you need, and plug in what your ideal retirement income is and you've done the easy bit!

  • 

    ccrap on 28/01/2022 - 12:02

    Thanks Dominus - that's really helpful, not taken patronisingly at all :) Hadn't looked at those 2 sites, will definitely check it out and use that as a starting point to work out ideal retirement 'income'. To address your other points:

    • they will turn 65 this year and are currently working full time. At the moment they are planning full retirement (and then volunteer/work casually in 'giving back' type roles so not really a solid income stream, if any, post retirement).
    • given planning to work for maybe another year, they will most likely continue working full time, or possible scale back to part time in the wind down if that's a better idea.
    • house is owned outright, no debt, solid savings, happy to pay for good quality advice.
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  MrMarket on 27/01/2022 - 20:12

  are they on defined benefit? or industry super?
  boomers and some Xers some of them have defined benefit super (Super Gold standard, no longer exist for younger generation)

  if they have government Defined benefit super, there isn't much they need to do but retire in style and never run out of money

  • 

    ccrap on 28/01/2022 - 12:03

    Boomer and state gov employee, but unfortunately on industry super, not defined benefit.

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  Ocker on 27/01/2022 - 20:17

  Tough call!!
  In my eyes Financial planners fall into the same category as car salesman and real estate salesmen - they work on a commission basis for THEMSELVES and not YOU.

  Tread carefully, but the bottom line is you are going to get screwed in using a broker/advisor- it is only a question of how much

  • 

    plmko on 27/01/2022 - 22:14

    Obviously you haven't been paying attention to how their industry has changed and standards the planners must follow now.

  • 

    avoidfullprice on 27/01/2022 - 22:48

    -1

    Still doesn't know the difference between a planner and an advisor.

  • 

    Seraphin7 on 27/01/2022 - 22:50

    +1

    Realistically, you should treat every business … from doctors, to bakers, to salesmen, to financial planners and everything in between … as if they are attempting to maximise their profit (because they are).

    Yes, you should understand what you are signing up for, but simply because a business is operating "for profit" does not make it inherently bad (unless your name is Karl).

  • 

    ccrap on 28/01/2022 - 12:08

    Noted, and that's my exact trepidation going down this route. Unfortunately I am extremely time poor at the moment due to personal circumstance otherwise I would have researched the sh!t out of this like I do with almost everything else in life and helped out myself, which to be honest, I still will do that once we speak to a proper 'professional'. I just need them to give us expert advice and options, answer some questions, and we can probably take it from there.

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  RockyRaccoon on 27/01/2022 - 20:48

  One my relatives used to help them understand where they are in relation to eligibility for an aged pension

  http://www.agepensionsolutions.com.au/calculator

  Worth knowing before you speak with a planner or if one maybe needed.

  Noting.

  The reference is to the calculator. I have no idea of the quality of advice you might get if you decide to do more that just use the calculator and move on. My relative never mentioned using any other services they offered. (They are also avid ozbargainer lurkers).

  So no recommendations like that are made.

  • 

    ccrap on 28/01/2022 - 12:10

    Great, thanks for the calculator link RR, will check it out

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  Mokr on 27/01/2022 - 22:59

  -1

  Seems to me a tax accountant should be able to do the same thing as a financial planner.

  • 

    Zeph101 on 28/01/2022 - 09:12

    Tax accountants cannot give out financial advice except under very limited scenarios regarding setting up an SMSF. And even then they need to have a limited licence from a financial advisor.

    They can give it factual information in regards to tax implications of contributions and the taxable and tax free components of a members balance.

  • 

    ccrap on 28/01/2022 - 12:11

    Yes, I think a one stop shop type professional services firm might be able to do both but really seeking an expert in this space if any recommendations?

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  avoidfullprice on 28/01/2022 - 08:12

  I wonder if you will get any decent retirement financial planner recommendation here on ozbargain forum, given in my opinion:
  a) financial savvy people don't consider it a bargain to engage one
  b) people still assume financial planner is same as advisor who recommends investment to old people
  c) younger people make assumptions about what retirement budget looks like without considering other factors, so they overlook their benefit

  I don't know any financial planner to recommend. A suggestion is suck up the potential cost and get them to call their superfund for suggestions, which could lead to higher fee service, to start the budget. I wish your close family member all the best.

  • 

    ccrap on 28/01/2022 - 12:15

    Thanks for the wishes and helpful comment avoidfullprice! Certainly agree with your observations there but thought my fav forum would be the best place to ask first :) They have no issue with paying to engage a planner, just wanted to see if anyone had a recommendation for one here. Yes I had asked them to call both their super and bank today for some reccs - so will do some due diligence on that short list once at hand. Cheers

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  cashless on 28/01/2022 - 08:50

  +1

  Suggest you consider very carefully where your family member will be placing their funds upon retirement. If they are currently with a retail or industry fund provider (or combinations of those) it is easy to just leave the funds where they are and drawdown through a default pension account. Most of those drawdown accounts tend to be low risk, low interest investments - effectively cash, which is just eroded away as they get older. The drawdown account may also have fees attached depending on which one is used.
  The trouble with those types of accounts is that all their super is effectively sitting in a low interest account.

  Another option, dependent on the amount they have to invest, is to invest some/most of their super in a low cost pension account with the likes of Australian Super, Hostplus etc. There are flexible options available with differing levels of risk, but effectively you can continue to drawdown cash each year, but use the remaining balance to invest and try to grow your fund so that it will last a lot longer. That means buying ETF's or managed funds or shares using your fund.
  The beauty of doing everything within your personal pension account is that it is pretty much a tax free environment, so any growth within that fund will have minimal tax implications, potentially none.
  These types of pension accounts do have fees from the provider, the same as a super accumulation account, but they can also provide substantial growth, depending on how you invest.
  Just because your family member reaches the age of 60 or 65 and retires doesn't mean they have to stop investing for the future. After all, you could expect to live on average another 20+ years.
  Super has done OK for you up to retirement, why just stop then?
  Make sure you structure it so that you keep aside enough to generate regular income, but look at long terms investments as well with the main part of your fund.

  • 

    ccrap on 28/01/2022 - 12:33

    Thanks so much for that explanation blibster!

    They are currently with an industry super fund (Aware). With drawdown accounts can you just take out however much you need rather than an auto withdrawl of $x at timer interval y?

    I like your thinking re future planning and that's really what we are trying to get at here - maximising the benefit of using super as their 'investment' vehicle.

    The low cost pension accounts sound like a really good idea, especially being able to grow retirement funds whilst minimising tax implications. You mentioned buying ETFs, shares etc from those fund accounts - how does that work? I (probably incorrectly) thought that one you place money in industry supers like AusSuper, HostPlus etc your level of participation in the process is to pick a risk profile, say from maybe 5 options, and then they just put you in that managed fund category and that's the end of it, you can't pick specific ETFs, shares etc? Is it different for the types of pension accounts you mention vs their super accumulation account equivalents? Or is my original thought what you meant? I know you can customise the hell out of it with an SMSF but that's not something they would want to do given administrative overhead etc.

    • 

      cashless on 28/01/2022 - 20:37

      Hi ccrap! Please don’t take me as an expert, I’m very much an amateur who is still learning. But I have learned that in retirement you can continue to invest your super, let it grow, all the while ring-fenced by its tax free status. There may be some tax to pay on earnings and capital gains within the investment, but the whole idea is to try and let the fund growth match, or exceed the drawdowns being made.
      The minimum drawdowns are well known & are age dependent. They’re clearly spelt out on most advisory websites. Start here:
      https://moneysmart.gov.au/retirement-income/account-based-pe…
      Beware that those drawdown rates will probably double on 1st July as they were deliberately reduced for 2 years during Covid.
      There is no upper limit to what you can drawdown in any one year, you can take out the whole lot if you want, but that would be financial suicide if you have a big lump sum. The idea is to get growth, as much as you can, whilst withdrawing the bare minimum.
      The following link is for Australian Super, as it explains account based pensions well, so it’s a good place to start. But there are several other, similar providers.
      https://www.australiansuper.com/retirement

      Finally you’re right, there are many different investment options open. You can stick it all in a balanced fund as 95% of retirees do and watch it whither away. Or you can be more aggressive and buy ETFs, shares, managed funds, or even combine all above.
      And have some fun doing it

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  MrMarket on 29/01/2022 - 08:50

  Have a look at transition to retirement scheme and top up your super account before you actually retire
  and when you retire it becomes tax free

  https://www.afr.com/wealth/personal-finance/the-right-way-to…