# Superannuation – Test case to stop paying?



## stocksontheblock (8 September 2009)

Well, I have just received my statement for last financial yr and the wiz-kids over at my super fund managed to lose me a whopping $30k. All I can say is I contributed about the same, if not a little more, so all I did was burn $30k. I could have put it in the fireplace for all it was worth. So glad I didn’t contribute more than I have to.

So, I ask this question, why should I pay for something that obviously doesn’t work? Super returns irrespective of the amount paid into, or at balance about 4% a yr. The so-called compounded 9% and 13% amounts many bandit around are false and misleading, if not outright lies.

I know I can have my own managed super fund, and based on my own trades over the past 12 months I would have done a lot lot better – yet this could be a simple case of hindsight.

Could I – and while a little bit if an overreaction – could there be a basis, such as a test case to not pay superannuation?

I am lucky I can work for quite a few years to come, although that’s not the plan.

Superannuation has to be seen as an anti-progressive measure when it comes to looking after my own retirement. I am lucky I may possibly still continue to earn what I do and hence will make up this loss next financial yr providing the clowns at Super Company (made up name) don’t decide to lose more of my money. However, what about those people who are drawing their super now, or those who don’t make as much and are losing substantial amounts. They will never be able to recoup the losses – so they are forever going backward.

Maybe someone with some real financial or legal knowledge could help. Could I argue – providing I have the time and money – successfully, not to pay superannuation?


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## Prospector (8 September 2009)

Nope.  What kind of % is $30,000 though?  We "lost" more than that in our SMSF!  The going rate for the last financial year is around 20% loss.


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## stocksontheblock (8 September 2009)

Prospector said:


> Nope.




Why? Sorry - scrap the why, you obviously added more later.


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## prawn_86 (8 September 2009)

If you are that worried about it why not simply change the make up of your super account. Usually they have different 'growth' options and you should be able to choose low growth *that invests only in fixed interest products*.

By the sounds of it you are in a medium - high growth account (usually the defualt) at the moment, which means exposure to shares.


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## theasxgorilla (8 September 2009)

I got a better idea, convert to DIY and put your money where your mouth is.  Nothing wrong with Super IMO, nothing drastically wrong with it at least.  I suspect 9% will reveal itself to be a little low over a lifetime given when most want to retire and how long we expect to live.  But that is a long way from your arguement.


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## Prospector (8 September 2009)

stocksontheblock said:


> Why?




If you had nominated your Super Fund to direct the money into a cash interest account you would have earned money and not lost it.  On the other hand, if you had done that years ago you would not have earned much growth.


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## Timmy (8 September 2009)

stocksontheblock said:


> Well, I have just received my statement for last financial yr and the wiz-kids over at my super fund managed to lose me a whopping $30k.




What ever you do, don't investigate how much the whiz kids got paid ... its just likely to upset you some more.


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## stocksontheblock (8 September 2009)

Prospector said:


> If you had nominated your Super Fund to direct the money into a cash interest account you would have earned money and not lost it.  On the other hand, if you had done that years ago you would not have earned much growth.




Well yes, this is the problem. Years ago they were oay what? 1 or 2 % for cash, so it would have gone nowhere. Yet there is also the lag time with Super funds moving your money about, and it then requires me to take a more active interest in what they are doing with my money, and so I might as well have my own SMSF.



Timmy said:


> What ever you do, don't investigate how much the whiz kids got paid ... its just likely to upset you some more.




Ohhh yes Timmy, I'm saving that one for another thread! Dont get me started on that pack of pond-life.


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## prawn_86 (8 September 2009)

stocksontheblock said:


> Well yes, this is the problem. Years ago they were oay what? 1 or 2 % for cash, so it would have gone nowhere. Yet there is also the lag time with Super funds moving your money about, and it then requires me to take a more active interest in what they are doing with my money, and so I might as well have my own SMSF.




So your complaining about not wanting to lose money, yet you just let them put you in a default growth account and complain that the cash rate is too low?   If your that worried just start your SMSF.


It only takes about 2 weeks to move to across to different structures, so even if you did it in Jan last year you would have gone forwards while the other options went back.


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## stocksontheblock (8 September 2009)

theasxgorilla said:


> I got a better idea, convert to DIY and put your money where your mouth is.  Nothing wrong with Super IMO, nothing drastically wrong with it at least.  I suspect 9% will reveal itself to be a little low over a lifetime given when most want to retire and how long we expect to live.  But that is a long way from your arguement.




I think you missed my point, 9% is a lie and is well over what the real return is, and it will only get lower in the long run.

My point is not that I should have a DIY fund etc., its why should I be made to contribute to something that obviously doesnt work? Why am I not responsible for my own money? Fine, there are all the arguements for "fools are easily parted ..." & "it removes preasure off the government pens... etc"

Yet, I wish to invest and manage my money as I see fit, and be able to use it for what I wish, and more to the point access it when I see fit.

Thats the worst part about all this. Say I was lucky enough to own my home at 50. Have no to very little debt, investments around the place - stocks, housing etc, and I have a super of say $1.5m. I cant touch it, even though it is mine, I cant "retire" and spend it, I cant access it and put it to better use (my term) apart from my own SMSF - however that doesnt solve the problem of not being able to access my money.

The key being, MY.


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## stocksontheblock (8 September 2009)

prawn_86 said:


> So your complaining about not wanting to lose money, yet you just let them put you in a default growth account and complain that the cash rate is too low?   If your that worried just start your SMSF.
> 
> 
> It only takes about 2 weeks to move to across to different structures, so even if you did it in Jan last year you would have gone forwards while the other options went back.




2 weeks? Yes, maybe to move the money from one to the other, yet not to set it up? Unless I have completely read the 'documentation' wrong, this takes a lot longer to establish.

Not to mention the imposed costs on running your own business. Sure, those costs are there to ensure I am running it how the law says, yet if I could run it how I wished, and used the money for how I wanted then there would be no fees, correct?


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## Timmy (8 September 2009)

stocksontheblock said:


> 9% is a lie




I think ASXGorilla is referring to the 9% compulsory contribution, not a projected return.


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## Prospector (8 September 2009)

stocksontheblock said:


> My point is not that I should have a DIY fund etc., its why should I be made to contribute to something that obviously doesnt work? Why am I not responsible for my own money? Fine, there are all the arguements for "fools are easily parted ..." & "it removes preasure off the government pens... etc"
> 
> Yet, I wish to invest and manage my money as I see fit, and be able to use it for what I wish, and more to the point access it when I see fit..




So how can you expect the Billions of dollars invested in commercial Super Funds to be invested according to everyone's individual wishes?  If you want that, then you need to start up a DIY.  

Besides, it is the employers who pay the 9% and not you.  If they raised the Super contribution to 12% it is the employers who would have to cough up the extra 3% and not you.  It is 9% of your salary and not 9% growth.  From that 9%, a contributions tax of 15% must be deducted.


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## prawn_86 (8 September 2009)

The 2 weeks i was reffering to was switching from a medium growth to an all cash account within your current super account.

If it helps, simply dont consider it as your money. Im only 22 but dont trust the gov enough to believe my super will be around by the time i retire. Hence whenever i go for a job, i look at what im getting in my hand, and couldn't care what they contribute to super.



> Something that obviously doesnt work:



 the arguement here is that the vast majority are not good enough with their money to save for the long term, so forcing them to do it is better than not at all.



> Why am i not responsible for my own money?



 You can be, either by a SMSF or by choosing what level of stock exposure you want through your current fund.

I agree there are downsides, but to me it seems you want the best of both worlds


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## stocksontheblock (8 September 2009)

Timmy said:


> I think ASXGorilla is referring to the 9% compulsory contribution, not a projected return.




Yes I think you are right,



Prospector said:


> So how can you expect the Billions of dollars invested in commercial Super Funds to be invested according to everyone's individual wishes?  If you want that, then you need to start up a DIY.
> 
> Besides, it is the employers who pay the 9% and not you.  If they raised the Super contribution to 12% it is the employers who would have to cough up the extra 3% and not you.  It is 9% of your salary and not 9% growth.  From that 9%, a contributions tax of 15% must be deducted.




Sure it is the employer, yet for self-employed contractors like me I am paying the 9% from my daily rate. Sure there is an element of this that I try to build into my rate, yet that rate can go up or down - usually Clients try to push it down, so I am the one stuck with "losing" the current 9%.

I know what your saying about starting a DIY fund if I dont like it, yet my question is why should I have to? I know there are all the maternal/motherhood statements for why I 'must' have one, yet could I test this and win? I know the answer, yet I want to understand why I cant win.


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## stocksontheblock (8 September 2009)

prawn_86 said:


> ... I agree there are downsides, but to me it seems you want the best of both worlds




I'm not sure what the best of both worlds are. I just want to have my money in my pocket to do as I wish and not have it forced on me to have it in any sort of 'super' fund, whether SMSF or institutional.

I can make all sorts of silly statements that I will sign in blood I will not ask for government handouts if I lose it all, yet thats just silly.

The way I see it is that my super fund will never act in my best interest's. I think thats generally obvious by the amounts they are losing - esp. in times such as this.

The time to look after my own super fund, if I dont have the time, makes it difficult to react to certain events, esp. if I am investing in stocks, and more so less stable ones, or ones that have a tendency to move based on specific events.

Should I try to make more stable - in a sense - investments, say buy a house with my super then I cant if I dont have the money in the first place, and if I did I wouldnt want that tied up in a super imposed type arrangement.


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## trading_rookie (8 September 2009)

> Well, I have just received my statement for last financial yr and the wiz-kids over at my super fund managed to lose me a whopping $30k.




I suggest you contact your 'Super Company' and get yourself a login acct (if you haven't already got one) to their website and see what your balance is today...considering the rally we've been having this last couple of months, I wouldn't be suprised if your loss as of now, is a lot less than $30K. Should at least make you feel a little better... 



> It only takes about 2 weeks to move to across to different structures, so even if you did it in Jan last year you would have gone forwards while the other options went back.




@prawn; to clarify, if my superfund PDS states they will process my switching request next business day, are you saying regardless of this promise, it still takes 2 weeks for the switch to be effective?


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## prawn_86 (8 September 2009)

As with any mass imposed regulations there are bound to be problems for some.

My old man is a self employed farmer, he would be better off paying off his properties than contributing to super, but he has to so just do the lowest amount possible, put it in a low growth option, and hope its there when you retire.


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## stocksontheblock (8 September 2009)

prawn_86 said:


> As with any mass imposed regulations there are bound to be problems for some.
> 
> My old man is a self employed farmer, he would be better off paying off his properties than contributing to super, but he has to so just do the lowest amount possible, put it in a low growth option, and hope its there when you retire.




Whether or not I would do this, this is exactly the sort of thing I should be able to do. It makes more sense to me, maybe its just me, yet this is common sense. I want to retire my debt, rather than extend it for the term of a home loan, and pay money into an account that will either lose or make me some money.

House prices do fall yes, yet if I had no debt on it then I will be further ahead than I would be by continuing to hold a mortgage as well as pay into a super fund - based on the averages.


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## theasxgorilla (8 September 2009)

stocksontheblock said:


> I think you missed my point, 9% is a lie and is well over what the real return is, and it will only get lower in the long run.
> 
> My point is not that I should have a DIY fund etc., its why should I be made to contribute to something that obviously doesnt work? Why am I not responsible for my own money? Fine, there are all the arguements for "fools are easily parted ..." & "it removes preasure off the government pens... etc"




Who said it doesn't work?  I say it just doesn't work for you.  I think your misgivings about Super are misplaced.  IMO it has to be one of the best systems in the world.  I will go as far as to say that it is better than having your money in an off-shore tax-haven, because it's sanctioned by the government (for now).



> Yet, I wish to invest and manage my money as I see fit, and be able to use it for what I wish, and more to the point access it when I see fit.




You can still do these things.  Just not with the 9% contribution allocated to Super every pay cycle.



> Thats the worst part about all this. Say I was lucky enough to own my home at 50. Have no to very little debt, investments around the place - stocks, housing etc, and I have a super of say $1.5m. I cant touch it, even though it is mine, I cant "retire" and spend it, I cant access it and put it to better use (my term) apart from my own SMSF - however that doesnt solve the problem of not being able to access my money.
> 
> The key being, MY.




I think The Australian government is one of the more progressive on the planet in this area.  They give you, among other things, the freedom to choose.  You can choose to contribute more, in tax effective ways, and you can choose how it is invested.  It's up to you, if you want to be a better investor, the opportunity is right there.

And seriously, can it (Super) be any better?  Low tax on the way in, low tax on gains and income within the fund, no tax on the way out.  The only way it could be better would be via investing in a low tax jurisdiction eg. Isle of Mann.  And even then most people would be contributing with post-tax earned income, payed at the top marginal rate.

My only concern with super is that it won't remain this favourable until I retire.  That it's been made this good _by baby boomers, for baby boomers_ and that it's not sustainable.  I'm not meaning to kick off another inter-gernational exchange, but I can't help but wonder: if it looks too good to be true, is it?

Whether other people lose 30% in a year where I made 15% is not my concern.  It is MY money.

In Sweden I paid 18.5% p.a. into a government pension fund, with very limited transparency.  If the "wizkids" running that fund lose 30%, we all lose 30%.  No thanks.  Super is fine with me.


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## mattlaw (8 September 2009)

I am not sure how you are structured as a self employed person e.g. partnership or sole trader. Self employed people dont have to put money into super. Only if you are entered into a contract with and employer and you bill them for labour do they have to pay super for you. I am not sure why you are contributing to super.


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## Krusty the Klown (8 September 2009)

mattlaw said:


> I am not sure how you are structured as a self employed person e.g. partnership or sole trader. Self employed people dont have to put money into super. Only if you are entered into a contract with and employer and you bill them for labour do they have to pay super for you. I am not sure why you are contributing to super.




This is right Stocks, being self employed, you are not obligated to contribute to super if you don't want to.

You will lose a tax deduction though.

Even if you contribute to cash in super and you only get 2% return, the tax deduction alone would make it worth while to continue.

There is a product called a Retirement Savings Account, a savings account which is compliant with Super laws. It pays an interest rate and has no costs. This could be an alternative for you.


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## Prospector (8 September 2009)

stocksontheblock said:


> Yes I think you are right,
> 
> 
> 
> ...




But self employed people dont have to pay the 9% unless you are paying yourself as a PAYE.  Ahh, Krusty and Mattlaw beat me to it.  Guess it shows we know our stuff!


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## mattlaw (8 September 2009)

You are obviously on the top tax bracket as well so you are saving 30% tax on each dollar you put into super.


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## Julia (8 September 2009)

stocksontheblock said:


> Well, I have just received my statement for last financial yr and the wiz-kids over at my super fund managed to lose me a whopping $30k. All I can say is I contributed about the same, if not a little more, so all I did was burn $30k. I could have put it in the fireplace for all it was worth. So glad I didn’t contribute more than I have to.
> 
> So, I ask this question, why should I pay for something that obviously doesn’t work? Super returns irrespective of the amount paid into, or at balance about 4% a yr. The so-called compounded 9% and 13% amounts many bandit around are false and misleading, if not outright lies.



Your comments here show a misunderstanding of the whole concept of Superannuation.

*Super is simply a tax effective vehicle in which to hold investments.*
It's entirely up to you how the investment is structured, i.e. you can have it all in cash as Prospector has explained, all in growth shares, all in property, or any combination of these.  

And if you don't like the options offered on the above by your Super Fund, then you can - as you have already noted - start your own.

Organisations like ESuper do a set up and first year's return and audit for around $500 I think.  Then you can absolutely take charge of your own returns.

To say it's a con because your fund has gone backwards this year is pretty silly.  If you are invested in a balanced or growth option, then of course it has gone backwards if you didn't request a move to cash when the rot set in.

So don't blame your Super Fund or the whole general concept of compulsory super because you have failed to actively and appropriately manage it.


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## So_Cynical (9 September 2009)

Julia said:


> To say it's a con because your fund has gone backwards this year is pretty silly.  If you are invested in a balanced or growth option, then of course it has gone backwards if you didn't request a move to cash when the rot set in.
> 
> So don't blame your Super Fund or the whole general concept of compulsory super because you have failed to actively and appropriately manage it.




I moved half my super into the "Australian shares" option in late March...bet there's no way that...that half of my super grew by 25+% no way known. 

And ill tell ya what, im gona be asking why the hell not....will report back when i know for sure.


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## BradK (9 September 2009)

Lots of people lost money this year. The fact that you lost the same amount as you contributed suggests must be frustrating. 

Agree with ASXG that the rules will be changed by the time of my retirement, so I am basically investing in other areas. 

Brad


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## gooner (9 September 2009)

theasxgorilla said:


> Who said it doesn't work?  I say it just doesn't work for you.  I think your misgivings about Super are misplaced.  IMO it has to be one of the best systems in the world.
> 
> I think The Australian government is one of the more progressive on the planet in this area.  They give you, among other things, the freedom to choose.  You can choose to contribute more, in tax effective ways, and you can choose how it is invested.  It's up to you, if you want to be a better investor, the opportunity is right there.
> 
> And seriously, can it (Super) be any better?  Low tax on the way in, low tax on gains and income within the fund, no tax on the way out.  The only way it could be better would be via investing in a low tax jurisdiction eg. Isle of Mann.  And even then most people would be contributing with post-tax earned income, payed at the top marginal rate.






mattlaw said:


> You are obviously on the top tax bracket as well so you are saving 30% tax on each dollar you put into super.






Julia said:


> Your comments here show a misunderstanding of the whole concept of Superannuation.
> 
> *Super is simply a tax effective vehicle in which to hold investments.*
> It's entirely up to you how the investment is structured, i.e. you can have it all in cash as Prospector has explained, all in growth shares, all in property, or any combination of these.
> ...




Lots of very good, factual, informative posts there. Super is YOUR money and apart from spending it pre 60 (or 55 for the oldies), you can pretty much do what you want. Low tax, blah, blah, blah. I salary sacrificed into mine saving loads of tax. Super also ensured that Australian as a nation had a decent savings rates as before all the money used to be blown on crap or used to pump up the property bubble.

I love you, super.



So_Cynical said:


> I moved half my super into the "Australian shares" option in late March...bet there's no way that...that half of my super grew by 25+% no way known.
> 
> And ill tell ya what, im gona be asking why the hell not....will report back when i know for sure.




So_cynical

Suspect you deserve your nic. You will probably be surprised how well it is has done in the last few months. I was in a defined benefit scheme when I   retrenched last year - put it in an Australian shares fund at December lows. Went down a bit early in the year, but now well up.. Should be enough for my retirement without putting any more in. Am 46 now.


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## stocksontheblock (9 September 2009)

Julia said:


> If you are invested in a balanced or growth option, then of course it has gone backwards if you didn't request a move to cash when the rot set in.
> 
> So don't blame your Super Fund or the whole general concept of compulsory super because you have failed to actively and appropriately manage it.




Sorry for another big post 

I understand completely what you are saying, and agree in principle. However, to "appropriately" manage my super which I have paid quite a lot to a Super Fund to manage for me seems to fly in the face of what they are being paid to do.

Sure, personal responsibility etc would dictate that I should take an active interest in what is being done with my super; however, this is not unlike building a house. I pay - whatever the cost is - to have a professional builder (I hope) build my home, and for that money I expect it to be built according to standards. I am not a builder, and hence rely on them to do the best for what I have asked. Not completely unrealistic I think?

Sure the Super Fund is not a mind reader and of course I allocate my super fund accordingly, yet it brings me back to what are they doing with my money to lose so much of it? Sure, many have lost more, and some not as much, yet there has to be an element that if they are not 'putting' my money to its best use, or acting responsibly on my behalf then I should have recourse to invest my money as I see fit - that is not be forced to have it under any super type scheme.

Tax advantages etc should not be the driving force as to why super is a good thing. The rules of it change almost every 2 yrs, and the playing field when you enter will not be - as shown historically - be the same when I exit. I would also contend as has been suggested that the employer is paying “my” super. I can’t see how this is correct. The super is part of my salary, so I am paying for it. A job offered says $50k plus super ($4500), or $55k (including super). Either way, it’s built in to what is being offered, is it not?

The one biggest problem I see about super is that there is – generally – a belief that the investor (super payments made by an employee) is a sophisticated investor and has an acute understanding of what takes place. I think on the whole this is a false assumption, as many believe they pay in and when they retire it will all be there plus the % earnings. Sure, this is a little naive; however it would appear that this is generally the case. So if I was in my late – lets assume – 40’s had made payments for 25 odd yrs, contributed a little extra a long the way and had a balance of lets assume $180k, and base that on broad super losses for 07/08 and 08/09 financial yrs, then I could have lost some $50k. This would mean for a worker on $75k who pays only 9% over the next few yrs – assuming no real substantive wage increase or increase in super % contributions it will take them about 4 yrs to get to where they were (assume an avg. 6% return per/yr), and a further 3yrs to extend that investment by roughly $50k.

Now, from what I remember the cyclical nature of the economy is somewhere between 5 and 7 yrs, so in this period the avg. super payer would have lost all they had contributed and be back to where they were 7 yrs previous $180k. I will agree that this market down turn has been worse than any for many many yrs, yet if the next one was just as bad – and it could be, no reason why it cant – then the avg. super payer is in $ terms (and just, I might add) going forward, yet in real terms they are stagnating.

Now this example is very real, and has happened to a lot of people. I guess it would be further exaggerated if the amounts were larger???

I am not one for disbanding super or the like, yet I am trying to understand why people see super as the great benefit it’s claimed to be. Maybe I am missing something, I don’t know.

I would also add while I’m going at it, that the ‘playing’ field between public sector and private sector supers are not level, and hence the general tax payer in the private sector is propping up the super funds of public servants. Sure they pay taxes and are in effect propping up their own fund with their taxes, yet doesn’t this go against the grain of how the ‘rest of us’ have to deal with our failing or rising super?

Just trying to open the debate on Super, that’s all. I’m not calling for the abolition of society


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## Gillie (9 September 2009)

I was surprised to see that mine had actually grown 3% for the year to 30th June 2009. I know that most people made losses but am i the only one who made a gain?


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## stocksontheblock (9 September 2009)

BradK said:


> Agree with ASXG that the rules will be changed by the time of my retirement, so I am basically investing in other areas. Brad




I think this is the issue I am seeing with Super. You are investing in other areas - maybe because you can afford to, or you believe you will benefit in the long run of doing so by creating a level of debt to fund future growth, or you are investing money you do have in small parcels to grow, and invest back to grow more and on and on...

Yet if you don’t have the disposable income or the means to acquire debt to create growth then you are generally reliant on super as being your one big ticket in retirement, maybe?

So if super is so great for the masses, then why do so many try to invest elsewhere - and yes, apart from accumulating wealth and providing a comfortable life, you are substituting one program which you believe wont provide for your retirement, or may change substantially enough to worry you to ensure you have other means????


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## pointr (9 September 2009)

For me and mine super is a great vehicle in which to hold assets. I worked for a State Gov't authority and was medicalled out, my employer based super was reasonable and is now in our SMSF. For a while it was with an 'advisor' and from him invested in several 'big' names via a master trust.  We got sick of losing money while watching him and his staff go on soft commission holidays to Prague at our expense. Every level of management had a cost. Do it your self and you will have no one to blame or commend other than yourself.


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## Judd (9 September 2009)

I believe that, if possible, one should invest through super and outside of super.  It is nice to be a few (it does not seem "a few"!) years from retirement and have the income outside of super cover all the overhead costs (rates, insurances, car registration and insurance, telephone, etc) of your household.  Means less of a drawdown from your super to cover those costs and allows for an _in specie_ transfer or recontribution strategy (I need to examine those aspects a bit more thoroughly but not today.)


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## gooner (9 September 2009)

stocksontheblock said:


> I am not one for disbanding super or the like, yet I am trying to understand why people see super as the great benefit it’s claimed to be. Maybe I am missing something, I don’t know.




Tax is the reason its great - you put $100 in and you lose $15 in tax, instead of $46.5 in tax via the tax system. You are $31.50 better off for each $100 of income.



Judd said:


> I believe that, if possible, one should invest through super and outside of super.  It is nice to be a few (it does not seem "a few"!) years from retirement and have the income outside of super cover all the overhead costs (rates, insurances, car registration and insurance, telephone, etc) of your household.  Means less of a drawdown from your super to cover those costs and allows for an _in specie_ transfer or recontribution strategy (I need to examine those aspects a bit more thoroughly but not today.)




Agree, also means you can retire a few years before you can access your super.


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