# Calling all Brainiac opinions - Superannuation: propaganda or not?



## aldebaran3003 (13 March 2009)

My parents are in their 60's.  Dad works in mining.  Getting close to retirement or so they thought.

The biggest superannuation fund is with MLC diversified and he salary sacrifices almost his entire pay and draw back from the super for living expenses (not sure what that facility is called).  They have lost $485K from MLC super in the last 12 months. Mum thinks that's about 33%.  

Here's what *Choice* reported in February:

The Association of Superannuation Funds of Australia stated in December that “it’s important members of funds stay in their current investment portfolio, so they can obtain the benefit when the value recovers”.

Frank Gayton, Head of IFFP, takes a different view. “I have no difficulty with clients switching to cash. Some people are saying the superannuation declines are only paper losses. No – they’re real losses – this is real money. If you’ve suffered a loss and are close to retirement, you should get advice about your situation pretty urgently.”

My opinion is that both perspectives have merit.  However my folks are close to retirement.

Interested in opinions (not financial advice).  What would you do if you were close to retirement in this financial climate?

Looking forward to your comments


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## doctorj (13 March 2009)

*Re: Calling all Brainiac opinions - Superannuation - propaganda or not*

I think the old cliche about seeking financial advice is particularly apt here.  Superannuation, particularly so close to retirement and in the current environment is a very serious and complex matter.

My best advice would be investing the time in finding a GOOD financial planner - friends, family or even people here at ASF may be able to recommend someone in your local area.  Financial advice may be costly, but the cost of not getting the right advice is potentially much higher.

I'd normally close this thread as ASF can't be used to seek financial advice, but I'll leave this open provided people stick to discussing (a) the merits of super, (b) similar situations they find themselves in or (c) recommended financial advisors.

Sorry for sounding draconian, but unfortunately, ASIC doesn't leave us a lot of room to move in these matters.


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## So_Cynical (13 March 2009)

*Re: Calling all Brainiac opinions - Superannuation - propaganda or not*

Ok so dad has 970K in his super fund...and the problem is what?

Please don't tell me hes complaining about not getting Rudds 900 
dollar hand out. 

The time for timly financal advise is gone...i thought u were suppost 
to switch to cash in the last 3 or 4 years before retirement?


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## Julia (13 March 2009)

*Re: Calling all Brainiac opinions - Superannuation - propaganda or not*

Aldebaran, from the time markets began to slip, (at that stage not recognised as anything like a GFC), financial planners and economists hit the media saying stuff like "just hang in there, the market always recovers, don't turn a paper loss into a real loss" etc etc.  This brilliant advice was never qualified with the suggestion for those retired or nearing retirement to *protect their capital* in order to maintain sufficient capital base to generate retirement income.

Having failed to issue such a warning to older investors, it seems few of them are now prepared to lose face by saying they were wrong.  So I don't think the advice currently offered can be considered to necessarily be in an investor's best interests.

If the loss to date is about 30% of total capital (plus presumably your parents have their home freehold?) and your father is planning to continue working for a few years, perhaps he could consider a TRAP (transition to retirement pension).  If their asset base was under $873,500 they would be eligible for part age pension which offers all the concessions on rates, registration, healthcare, prescriptions etc.   

How do they feel about having watched their balance diminish to the level it has?   Are they feeling anxious about being able to provide for their retirement years?   I think making a decision about whether to move to cash at this stage is about more than just the money.  Anxiety levels and being able to sleep at night matter hugely imo.

We don't know what will happen with the market.  I'll be surprised if there are not further losses before any recovery.

If you can find a genuine fee for service financial planner then maybe seek advice.  But beware of the majority out there whose 'advice' is based on whatever will make the FP the most money, viz Storm and others of a less flamboyant type.

I'd be interested to know what they decide to do.


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## Bill M (13 March 2009)

*Re: Calling all Brainiac opinions - Superannuation - propaganda or not*



doctorj said:


> I'd normally close this thread as ASF can't be used to seek financial advice, but I'll leave this open provided people stick to discussing (a) the merits of super, (b) similar situations they find themselves in or (c) recommended financial advisors.




A. Super is is a terrific way of saving money and minimising the tax within it. After age 60 all proceeds are tax free from it. In my opinion having a portfolio in super is better than having one out of super.

B. I have just moved my super mostly into Australian shares, right now (in my opinion) it is the best value I have ever seen in my lifetime.

C. I would not trust any financial advisors and I would not recommend any.


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## daisy (14 March 2009)

*Re: Calling all Brainiac opinions - Superannuation - propaganda or not*



Bill M said:


> B. I have just moved my super mostly into Australian shares, right now (in my opinion) it is the best value I have ever seen in my lifetime.
> 
> C. I would not trust any financial advisors and I would not recommend any.



My husband was also in the mining business and continued as a consultant post retirement age but was among the first to be hit when the boom went sour towards the end of last year.
Sounds as if your parents have (had) roughly the same amount as us. Enough to make a comfortable retirement but only just.  
And so from a completely different perspective to Bill, I moved all our super out of shares and into cash in late 2007 and won't start buying shares again until the technicals ...
Interest rates are a joke if you are on the deposit side of this equation though and am thinking about maybe using some cash to buy a rental house for the moment. But don't want to overpay. I'm just keeping tabs at the moment. I know what I want so I'll know when it's looking good. But who knows when the market will recover so maybe I won't....

My point is that there is no right or wrong answer to how to manage your money and on top of that because most financial advisers work on commission from the funds they sell you into, you can't always trust that their advice has *your* best interests at heart. 

 It's not easy managing your money. The grass always looks greener on the other side. (e.g. If only I'd bought gold..)
The best I can offer is that your parents need to formulate an overall plan of how they are going to do this (including asking what if?)  and then following through.
Not much of an answer for the moment though. There are many people in your parent's situation regarding losses right now and all asking the same questions. Trying to think of an answer, makes me feel like a rabbit caught in the headlights.


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## daisy (14 March 2009)

*Re: Calling all Brainiac opinions - Superannuation - propaganda or not*



Julia said:


> I think making a decision about whether to move to cash at this stage is about more than just the money.  Anxiety levels and being able to sleep at night matter hugely imo.




Julia, I couldn't agree more.


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## aldebaran3003 (14 March 2009)

*Re: Calling all Brainiac opinions - Superannuation - propaganda or not*



doctorj said:


> My best advice would be investing the time in finding a GOOD financial planner - friends, family or even people here at ASF may be able to recommend someone in your local area.  Financial advice may be costly, but the cost of not getting the right advice is potentially much higher.
> 
> Sorry for sounding draconian, but unfortunately, ASIC doesn't leave us a lot of room to move in these matters.




Thanks Doc.  He has a financial planner.  First visit was about $3K then the ongoings which I'm not sure of.  Lovely bloke, but it's not for free.

Mainly interested in what others are doing and general feeling out there.  Definately not advice 



So_Cynical said:


> Ok so dad has 970K in his super fund...and the problem is what?
> 
> Please don't tell me hes complaining about not getting Rudds 900
> dollar hand out.




He salary sacrifices virtually everything to super so his taxable income should certainly make him eligible for the Rudd $900 refund.



Julia said:


> How do they feel about having watched their balance diminish to the level it has?   Are they feeling anxious about being able to provide for their retirement years?   I think making a decision about whether to move to cash at this stage is about more than just the money.  Anxiety levels and being able to sleep at night matter hugely imo.
> 
> I'd be interested to know what they decide to do.




Yes Julia there is a lot of anxiety.  If their contributions were minimal and the super was mainly employer funded then they wouldn't give much of a damn (much like me at the moment) but Dad's been salary sacrificing almost everything.  So to see all your gains plus all the capital investment sliced off as well as commission, it's devastating.  He's been working for nothing.



Bill M said:


> A. Super is is a terrific way of saving money and minimising the tax within it. After age 60 all proceeds are tax free from it. In my opinion having a portfolio in super is better than having one out of super.
> 
> C. I would not trust any financial advisors and I would not recommend any.




I hear you Bill.  I think the adage of "stay put or you won't realise any gains when the market corrects" while mostly true, is a double edged sword, largely propelled by vested interest.



daisy said:


> I moved all our super out of shares and into cash in late 2007




Daisy, you were smart.  My folks are hard working but don't make the best investment decisions.  They tend to let "the experts" look after it and seem to be behind the 8 ball alot of the time...like many of us.

So I'm not after advice, just personal opinions and what others are doing with their super.  Thanks Doc for letting this one stay and thanks for your replies.


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## daisy (14 March 2009)

*Re: Calling all Brainiac opinions - Superannuation - propaganda or not*



aldebaran3003 said:


> Daisy, you were smart.  My folks are hard working but don't make the best investment decisions.  They tend to let "the experts" look after it and seem to be behind the 8 ball alot of the time...like many of us.
> 
> o




Thanks aldebaran but I wasn't trying to show off. During the last bear market we saw our managed funds deteriorate as your parents are doing now and became worried our super just wouldn't be enough so I had to become more pro-active. And learn how to do it myself. It really isn't rocket science...just some 'experts' make it sound that way.
One of the first things that I learnt as an investor facing retirement in the not-so-distant future is that *"rule number one is preservation of capital"*
The next thing was to make and write down a long term plan to acheive that and which matched my personality and don't worry about what the bloke next door is saying or doing or what the 'experts' are telling me I should do. As you have pointed out, one says one thing and the other says almost the opposite ...just stick to my plan.

On a slightly different note, after having worked so hard to save and build super for retirement, it is actually quite difficult to have to change our way of thinking about this "untouchable" lump of money and actually start spending it.


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## aldebaran3003 (14 March 2009)

*Re: Calling all Brainiac opinions - Superannuation - propaganda or not*



daisy said:


> It really isn't rocket science...just some 'experts' make it sound that way.
> One of the first things that I learnt as an investor facing retirement in the not-so-distant future is that *"rule number one is preservation of capital"*
> The next thing was to make and write down a long term plan to acheive that and which matched my personality and don't worry about what the bloke next door is saying or doing or what the 'experts' are telling me I should do.




Well I think that's the best method Daisy.  It's just such a pity that "the experts" don't come out and say the same thing.  Sometimes I think it's because they want to preserve their funds rather than look after individuals.  Therein lies the problem.  Then so many people are faced with making a decision on which way to go when it's getting too late.  Don't get me wrong, they're not dumb dumb's but they trust a little too much at times and end up like the kid in the middle of the football field trying to catch up with the pack when the team is going the other way....much like me


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## Julia (14 March 2009)

*Re: Calling all Brainiac opinions - Superannuation - propaganda or not*



Bill M said:


> A. Super is is a terrific way of saving money and minimising the tax within it. After age 60 all proceeds are tax free from it.



Bill, super proceeds are not all tax free if the fund is still in the accumulation phase.  Only becomes tax free when moving to pension phase.

Aldebaran:  it's probably not all that relevant what others of us have done, given that we all have different circumstances.   But for what it's worth, I moved to cash at the beginning of 2008, and even then gave back some profits.

It sounds as though your parents are like much of the population (and I don't mean this unkindly):  prepared to entrust their financial survival to so called experts who in reality are far more concerned with their own income streams than the retirement welfare of their clients.

No reason they can't do as Daisy has done and educate themselves.
If they were to move to cash now then that's not an irrevocable situation.
They can still move back into shares once a recovery begins.
Maybe you/they need to recognise that no decision will be perfect.
They need to decide what means most to them, i.e. reduction of anxiety or missing the beginning of the uptrend.  I'd suggest asking them:

"how are you going to feel if you do nothing and see further capital losses ?"

"if you do some calculations about what income you will need in retirement, is the present amount sufficient?"  (there are calculators available on the web)

"Is the potential for greater gain when the recovery occurs worth the risk of further loss?"
etc.


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## daisy (15 March 2009)

Me, I was so naive that when we went through what your parents are going through now, I didn’t even now that managed funds were used to buy shares. And I didn’t even now to relate this to a bear market. (I had no idea what that meant) At first, I just thought our particular adviser wasn’t very good. I only started to get the picture when I started shopping around for a better financial planner. We went to just about every financial planner in town. We almost got “stormified” except that we were not prepared to borrow the amount Cassimatis said. It was after our (non) experience with Storm that I realised we were going to have to get more savvy.  

So I did educate myself. I had already bought a very general type book for beginners about the different ways you could invest your money and found out about Listed Investment Companies. I liked the way they cut out the financial planner, as I now understood what they were all about.  So I got an on-line broker. Then I learnt about bull and bear markets and the idea of putting your money in and taking it out again rather than leaving it there all the time. I figured that during bad times we would be living off our capital and in good times, we would be replenishing it again. (Even if we didn’t bring it back to the previous level, it would still last longer) 

But while I very reluctantly started this whole task, I actually got right into it and ended up buying shares directly. But you wouldn’t have to move into directly buying shares. You could still do the same kind of thing with managed funds.  

On a completely different note, doing this with hubby has added a new interest into our lives, something else to talk about.


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## daisy (15 March 2009)

P.S.
Probably the most important thing I learnt was how to set *a stop loss and protect profit point. *
Which I obey religiously.


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