Australia's Population

[noirua]

If the Japanese market is now roughly a quarter of what it was in early 90's (ie, 40,000 then and now Nikkei is 10,000) does that mean the average value of shares that make up their index is a quarter of the value now some 20 years later?

And if so how can they afford to retire and i believe they have an aging population?

The Nikkei 225 peaked at 38,957 on 29/12/1989. The index has only one mining stock 'Impex Group' and seems to contain all old world shares. Probably doesn't represent Japan as well as it did once. Many stocks were on PE ratios of 40 to 60 and when growth collapsed so did the average PE.
One day Australia's mining industry will not represent us as it does today and it may be time to exit the ASX200 around 2035 - 2045 - I'll be dead by then so I don't care really.

 

[gooner]

Why isn't it hypocritical, gooner?
The two aims are directly opposed.

I always believed hypocrisy was pretending you are something you are not, rather than an inconsistency in political policies.....

 

[tradingtiger]

The Nikkei 225 peaked at 38,957 on 29/12/1989. The index has only one mining stock 'Impex Group' and seems to contain all old world shares. Probably doesn't represent Japan as well as it did once. Many stocks were on PE ratios of 40 to 60 and when growth collapsed so did the average PE.
One day Australia's mining industry will not represent us as it does today and it may be time to exit the ASX200 around 2035 - 2045 - I'll be dead by then so I don't care really.


But is'nt an index always made up of the leading (top) companies???
Just like the XJO- some will drop off and be replaced by the new leading companies.

Don't they have the equivalent of (Australian) Managed Funds in Japan-and if so- then if the same thing was happenning here (lousy performance)- how would we cope(with retiring).????

 

[tradingtiger]

But is'nt an index always made up of the leading (top) companies???
Just like the XJO- some will drop off and be replaced by the new leading companies.

Don't they have the equivalent of (Australian) Managed Funds in Japan-and if so- then if the same thing was happenning here (lousy performance)- how would we cope(with retiring).????

 

[GumbyLearner]

But is'nt an index always made up of the leading (top) companies???
Just like the XJO- some will drop off and be replaced by the new leading companies.

Don't they have the equivalent of (Australian) Managed Funds in Japan-and if so- then if the same thing was happenning here (lousy performance)- how would we cope(with retiring).????

Population growth is a big factor to consider in North Asian democratic economies like Japan, Korea and Taiwan before you invest. IMHO.

But again investment advice on ASF is prohibited.

Do your own research

But will include this Jim Rogers vid. A great person to listen to IMO.

 

[Julia]

Don't they have the equivalent of (Australian) Managed Funds in Japan-and if so- then if the same thing was happenning here (lousy performance)- how would we cope(with retiring).????

Can you explain why you seem to correlate retiring with the performance of managed funds? Why wouldn't you manage your own investments in retirement?

 

[Julia]

When I started the thread, one of the factors I hoped would be discussed was the raising of the Super contribution. I don't think anyone has passed an opinion on this.

The government is suggesting that much of the need for increased population is to provide an increased tax base for funding the living and healthcare of an expanding aged population.

If our natural resources, e.g. water, and poor infrastructure render considerably increased population a problem, shouldn't we be focusing more on making our existing population more self sufficient in retirement, and increasing the Super contribution to a total of 15% as soon as possible?

 

[GumbyLearner]

When I started the thread, one of the factors I hoped would be discussed was the raising of the Super contribution. I don't think anyone has passed an opinion on this.

The government is suggesting that much of the need for increased population is to provide an increased tax base for funding the living and healthcare of an expanding aged population.

If our natural resources, e.g. water, and poor infrastructure render considerably increased population a problem, shouldn't we be focusing more on making our existing population more self sufficient in retirement, and increasing the Super contribution to a total of 15% as soon as possible?

water is a massive issue Julia. Also, it's great to hear that you earlier mentioned self-managed super.

 

[tradingtiger]

Can you explain why you seem to correlate retiring with the performance of managed funds? Why wouldn't you manage your own investments in retirement?

I am just interested in how mr/mrs average copes with falling asset values.

All I am doing is trying to compare what a typical managed fund in Japan would be returning to retirees ( in a typical allocated pension) assuming the financial planning world is similiar to here.

 

[GumbyLearner]

All I am doing is trying to compare what a typical managed fund in Japan would be returning to retirees ( in a typical allocated pension) assuming the financial planning world is similiar to here.

Well it's not, watch the Jim Rogers vid one more time. It's important to not have an insular view of the world when it comes to investing. I'm still waiting on the press release from the head of Japan Toyota on the brake faults.

 

[gooner]

When I started the thread, one of the factors I hoped would be discussed was the raising of the Super contribution. I don't think anyone has passed an opinion on this.

The government is suggesting that much of the need for increased population is to provide an increased tax base for funding the living and healthcare of an expanding aged population.

If our natural resources, e.g. water, and poor infrastructure render considerably increased population a problem, shouldn't we be focusing more on making our existing population more self sufficient in retirement, and increasing the Super contribution to a total of 15% as soon as possible?

Julia

A very simple excel spreadsheet shows that someone on $50k on the 9% SGC and assuming real investment returns of 5% and real wage growth of 1% pa will have $626,000 after 40 years.

This should be more than enough to provide a comfortable requirement for a single person. People earning minimum wage will probably need some pension assistance but this is probably better than taking the money off them right now when they need it.

 

[DocK]

I'm certainly no expert in economics, so the following is probably guff, but here goes:

As an employer, I shudder at the thought of having to pay 15% super for employees. In order for our business to remain at current levels of profitability or better, either total wages would have to remain the same - meaning a lower take-home pay for employees, or total payroll would have to remain the same - meaning less employees. Small businesses in Australia are doing it tough atm, and any increase in compulsory super paid by employers would need to come out of existing gross wages I feel, which would no doubt lead to a lot of very unhappy employees. It is difficult enough for young people to save for the first home deposit/ pay the rent/ allow one parent time off for having babies etc - without them having to endure an effective paycut in order to have more of their wage put into super. Personally, I think it more important for the home loan to be paid down as quickly as possible whilst young, then plow money into super once the non-deductible debt is under control.

I can certainly see that an aging population is a problem, and it would be very irresponsible to assume that pensions will remain available in the future on the same basis as at present. Tax revenue to pay for infrastructure needs to increase - not be siphoned off into more and more pensions. However, I would prefer that the onus to look after your own retirement becomes more your own responsibility, in that if you've provided well enough for yourself you retire when you wish, but if not, you may need to continue working longer than at present. Raising the pensionable retirement age makes sense to me, as we are generally healthier at 65 than prior generations, and are living longer. It once was that the average man would retire at 60 and die at 70 - happily this is no longer the norm. Lowering tax rates for those over say 55/60 would encourage people to stay in the workforce a few years longer and allow for that extra net income to be put into super. Leaving the compulsory super contribution at 9% should allow most people a comfortable retirement if they plan and manage reasonably well, whilst also allowing younger people greater choice as to where they wish to direct their funds- if I were 25 again I'd be quite concerned about the legislative risks of super and would prefer to keep a good portion of investments away from governmental interference. If I'd worked and saved all my life only to be told "sorry, but we don't trust you with a lump sum, so here's what you can spend per month of your own money, try not to die before you get to enjoy some of it", I'd be very, very ###### off!

Sorry for the ramble, just my

 

[Happy]

Julia

A very simple excel spreadsheet shows that someone on $50k on the 9% SGC and assuming real investment returns of 5% and real wage growth of 1% pa will have $626,000 after 40 years.

This should be more than enough to provide a comfortable requirement for a single person. People earning minimum wage will probably need some pension assistance but this is probably better than taking the money off them right now when they need it.

Every 7 to 10 years value of our money halves.


So in 40 years $626,000 taking 10 years as halving factor, will have buying power of under $40,000
(Try to live the rest of your life comfortably on it, … lifestyle might need some adjustments to do that)

 

[Mr J]

Julia did state a real return, and that takes inflation into account.

Every 7 to 10 years value of our money halves.

Do you have figures to support this? That suggests inflation at 8%+.

 

[Happy]

Put it different way:

1% real return falls within error that comes with every estimation, so chances are it might be negative.

(Little hint: if pensioners had their pensions adjusted for inflation, why all of the sudden they found themselves on border of poverty?
Little explanation to hint: Government reported inflation does not represent real life inflation, otherwise nobody would feel the pinch.)

Anyway, enjoy your assumptions while they last.

 

[Mr J]

I know what you're talking about, but criticising the example in this way is unreasonable. It's an example, not a statement of actual returns. We are asked to assume that these figures are facts in the example, so denying that assumption completely misses the point of the example.

Government reported inflation does not represent real life inflation

I think most here know that, but you still haven't bothered to give any explanation of your inflation rate of 8%+.

 

[Happy]

...
I think most here know that, but you still haven't bothered to give any explanation of your inflation rate of 8%+.

If most know, why bother?

 

[Julia]

If most know, why bother?

Well, I don't, Happy, so would be grateful for your further explanation.

DocK, good points, as usual.

I don't think the 15% suggestion is intended to all come from employers. What I heard was 12% from employers and 3% from employees.

Your comments about paying off mortgages and not allowing the government to control too much of savings are realistic, but somehow people have to be encouraged to take more responsibility for providing for their own old age.
Governments are still going to have to pick up most of the tab for healthcare which will become more and more expensive as medical technology continues to advance.

I don't know what the best solutions are, but I'm just interested to have the discussion.

 

[Sidamo]

Do you have figures to support this? That suggests inflation at 8%+.

Based on RBA's historical CPI data, goods costing $1000 in 1969 woudl have cost $9783.19 in 2009, for an average inflation of 5.9%pa over 40 years.

http://www.rba.gov.au/calculator/annualDecimal.html

Not sure how accurate that is given changes in composition of the basket of goods used to determine CPI???

 

[Wysiwyg]

Your comments about paying off mortgages and not allowing the government to control too much of savings are realistic, but somehow people have to be encouraged to take more responsibility for providing for their own old age.

I don't know what the best solutions are, but I'm just interested to have the discussion.

This transition from the working age people supporting the non-working age people to a self sufficient older age life is not going to be an easy one.
Since "living" became mainly dependent on the coloured paper, it is indeed possible for people to provide for their own living via the compulsory superannuation scheme. It is indeed possible but the grey area is 'what lifestyle'.

This subject does in some way come back to "sleeping in the bed one makes". I strongly suggest that stuffing the pillows with feathers in addition to the compulsory scheme is a prudent act to ensure the bed is not a strip of five ply with foam mattress.