Financial Independence (Home Ownership, Super, Long Retirement) not possible for wage earners: What do we need and how do we get it?

[qldfrog]

Yes odds may be stacked against retail shareholders but they are even more stacked against small business owners (government regulation favours larger companies). The guy who invests his life's savings in buying or opening a local fish and chips shop is far more likely to lose his life savings then the guy who invests his life savings in BHP or Telstra shares.

Personally I think the happy middle ground between wage slave and small business owner is being a self employed/freelance professional/tradesman with a practical skill. You aren't really investing capital into your business but at the same time you have a lot more freedom than a wage slave. For example if you do an apprenticeship as a barber and then work for somebody for a few years after that you can either rent a chair at a salon or visit clients at their homes and therefore you don't have the risk associated with paying a long-term lease and paying for an expensive shop fit out etc. Or for example if you do freelancing work as a graphic designer.

I know, I left wage to contracting to own one man company
When I tried expanding, my very first customer with a subcontractor I placed to do the job took 7 months to pay his invoice, I obviously paid my contractor on the spot..and decided not to want to grow further..and when the red tape with super GST etc got too much to either do myself or pay an accountant to do based on the fees I was charging, I headed and worked overseas in our startup
It is not easy indeed, but while I agree on what you say, I guess it means that Australia has just closed the entrepreneurial path with decent odds for the latest generation.

 

[JohnDe]

There is a flip side to Small business.

We do 8 figures a year so consider us small in comparison to
some of the Civil Companies we work for.

We are big enough for me to be able to have middle management so
Admin and Production are delegated.
The company returns well in excess returns on my capital v if I sold it and had a return on the funds received.
(16-25%) over the last 11 years.

I am fortunate enough to be the venture capitalist in My own and a few other smaller businesses.

The Labor government and Unions don't like small business, unless they have a unionised workforce.

Albanese government’s family business changes bringing fury to the farm

It’s unlikely that Australia’s anti-family business warriors – Anthony Albanese and senators David Pocock and Jacquie Lambie – have ever come face-to-face with a furious ‘farmer’s wife’.

Certainly, until the second day of 2024, I had never had such an experience.

I describe my encounter below to underline that I don’t believe the government has any idea of the family business community fury that they are about to unleash.

My encounter came at a surf coast coffee shop, where I was recognised by a husband and wife who own a small dairy farm in southwestern Victoria near the South Australian border.

They have around eight employees, including some who have been with the family for many years.

On the dairy farm, the wife – like many spouses in smaller businesses – knows everything about the families of their workers.

The spouses or partners to the base entrepreneur are often the family business equivalent of a large enterprise human resources manager, except they operate in a close-knit community and there are no unions involved.

I explained to the couple that very likely one of their eight employees would join a union and become a union representative and as business owners, the farmers would have to pay the cost of training.

The husband was shocked, but the wife was goggle-eyed with anger and frustration and couldn’t believe what I was telling her. Their dairy farm culture would change.

“It won’t happen,” she said with determination.

“But it’s the law,” I replied. And I warned that it gets worse.

If there was a sharp fall in the milk price, and they had to cut staff, they would now have to make retrenchment payments, which, of course, would lower the equity in their property at a time when the business would be struggling.

Previously, businesses employing less than 15 people did not pay retrenchment benefits.

Her eyes were enlarging, and the obvious anger caused me not to mention the other four blows, which she would have read about on Monday. And the family will also learn the new small vehicle emission rules will make it difficult for farms and other industries to buy the flexible vehicles required to carry heavy loads.

Once family enterprises understand the impact of the Albanese, Lambie and Pocock blows, there will be sheer horror. For example, the retrenchment provision means that hiring friends to help expand small enterprises means those friends can wipe out the family taking the risk.

Families in successful businesses in all industries see their employees as part of their community, with a relationship that doesn’t exist in larger enterprises. Of course, many family businesses may find that none of their staff are prepared to be a union representative, but there only needs to be one.

In the statutory retrenchment provisions the number of weeks retrenchment pay rises with the length of service and so for example for two or three years’ service it is around six weeks but for nine to ten years’ service it is 16 weeks. And that means that every year a person works for a small family business, they become a greater threat to the capital base of the business. And that is now in legislation thanks to the ALP, Lambie and Pocock.

It is also going to be harder for smaller family businesses to get loan capital because the banks will look at the retrenchment liability in assessing the security on top of the new accounting standards incorporating emissions and environmental rules.

Accordingly, the attack on the family business sector not only changes people management practices but will reduce the amount of capital that is available and no doubt over time will reduce the significance of the sector – exactly what is planned by the government.

Yet it is smaller enterprises that provide much of our innovation, and consequently our productivity will be harmed. Unions have been reduced to a token force in the private sector, particularly in the family business area. The Albanese government is funded by unions, and the agenda to unionise the family business sector is in part payment for the cash they received to gain power.

By confusing contracting with labour employment and taking on the High Court of Australia, the government will trigger long court cases and incredible uncertainty in the contracting sector for years to come.

Large companies usually have the resources to manage, but family enterprises, including sole traders do not and many will be damaged and shut down. What we are looking at is probably the biggest social change that any elected government has undertaken, leaving aside the measures that were required during the first and second world wars.

Where it will be most prevalent is in small towns, which operate via networks of small businesses which embrace the farming communities. The head of the National Party, David Littleproud, grew up on a large family farm in North Queensland, and his family still operates it. That may give him an understanding of the damage that is set to be created in all rural electorates.

But he may not have personal experiences to enable him to relate to the wider family enterprise community and be the equivalent of a Jacinta Price in the referendum.

It is also possible that Lambie and Pocock having plunged the knife into the family business sector may see the reaction that will be headed their way if they approve the anti-family business measures that are yet to be passed by the Senate – the casual labour elimination, gig economy destruction and the bankrupting of independent truckles via a union-big company cartel and the slashing of ACCC protection powers. But that is a very long shot.

Meanwhile, banning of casual labour will not only greatly impact the flexibility of many family businesses, but it is also designed to hit people with large mortgages. This will longer term lower homeownership in Australia, as well as lifting current mortgage stress.

One of the problems of the Australian parliamentary system is that very few of the politicians experienced mortgage stress, and almost none have understood the pressures in the family businesses.

During my working lifetime, I have invested capital (successfully) and embraced management operational duties in two media businesses. Every day starts with looking at the bank balance to make sure that the funds are available to pay everyone. Politicians and those that work for government and large enterprises simply I have no concept of the culture required to start the day checking the money in the bank.

ROBERT GOTTLIEBSEN BUSINESS COLUMNIST

 

[tech/a]

If you look at what the whole of market indexes have returned in both dividends and capital gains over the long term, I don’t think the odds are against retail investors, the tide is definitely in their favour. It’s only really people that try and jump in and out of the market that get hurt.

anyone that just dollar cost averages into the market does well over time. and the reason for that is that over time the companies do well.

We can all see as plain as day that over time Woolies, Coles, BHP, CBA, and the rest of the companies that own things like transmission towers, toll roads, hospitals, warehouses, offices buildings etc etc are all generating pretty consistent profits over the years. Just owning part of all those businesses is a good idea.

trading the businesses can cause losses, but just buying and holding them long enough is pretty much guaranteed to provide you with a decent return, because the underlying businesses provide decent returns.

I feel the odds are definitely in favour of the long term retail investor.

I'm not at odds with this. In the long term, my system returns better than buy-and-hold.
Plus I feel warm and fuzzy inside because it keeps me out of long-term drawdowns.
It also limits my initial loss to 1-2% if I'm making an initial investment. (I am sure no one wants to enter a trade long term only to see it come off 30% or worse---Not as hard to take a drawdown, with some equity in place Although I have in the system safeguards against excessive drawdowns.)

Trading can result in loss and in rare cases, long-term holds can be less than spectacular TLS anyone and some be delisted, and all the while you could have been averaging down into a position. Happens quite a lot.

Delisted entities

List of companies that have been removed from ASX's official list during the last 6 months.

www.asx.com.au

Personally I think the happy middle ground between wage slave and small business owner is being a self employed/freelance professional/tradesman with a practical skill. You aren't really investing capital into your business but at the same time you have a lot more freedom than a wage slave. For example if you do an apprenticeship as a barber and then work for somebody for a few years after that you can either rent a chair at a salon or visit clients at their homes and therefore you don't have the risk associated with paying a long-term lease and paying for an expensive shop fit out etc. Or for example if you do freelancing work as a graphic designer.

In agreeance to a point. Chippies, Plumbers, Tilers, Baristas, and Deli's need to be able to scale to move away from a wage slaves in their own business. They need to multiply their earning capability. If I have 10 people all of whom I generate $20/Hr profit from then I'm making $300 an hour not just 100/ hr as a self-employed Xman. ---just a principal example. Scalability.

 

[qldfrog]

I'm not at odds with this. In the long term, my system returns better than buy-and-hold.
Plus I feel warm and fuzzy inside because it keeps me out of long-term drawdowns.
It also limits my initial loss to 1-2% if I'm making an initial investment. (I am sure no one wants to enter a trade long term only to see it come off 30% or worse---Not as hard to take a drawdown, with some equity in place Although I have in the system safeguards against excessive drawdowns.)

Trading can result in loss and in rare cases, long-term holds can be less than spectacular TLS anyone and some be delisted, and all the while you could have been averaging down into a position. Happens quite a lot.

Delisted entities

List of companies that have been removed from ASX's official list during the last 6 months.

www.asx.com.au

In agreeance to a point. Chippies, Plumbers, Tilers, Baristas, and Deli's need to be able to scale to move away from a wage slaves in their own business. They need to multiply their earning capability. If I have 10 people all of whom I generate $20/Hr profit from then I'm making $300 an hour not just 100/ hr as a self-employed Xman. ---just a principal example. Scalability.

But there is a point in that the left/globalists do not like SME and try their upmost to destroy them thru regulations and taxation.
SME can not offer bribes, and are hard to control so they are the enemy .
I saw that played in France to a great success for government, and lately being attempted in Germany where SME were the spine of the economy.

 

[Value Collector]

I'm not at odds with this. In the long term, my system returns better than buy-and-hold.
Plus I feel warm and fuzzy inside because it keeps me out of long-term drawdowns.
It also limits my initial loss to 1-2% if I'm making an initial investment. (I am sure no one wants to enter a trade long term only to see it come off 30% or worse---Not as hard to take a drawdown, with some equity in place Although I have in the system safeguards against excessive drawdowns.)

Trading can result in loss and in rare cases, long-term holds can be less than spectacular TLS anyone and some be delisted, and all the while you could have been averaging down into a position. Happens quite a lot.

Delisted entities

List of companies that have been removed from ASX's official list during the last 6 months.

www.asx.com.au

In agreeance to a point. Chippies, Plumbers, Tilers, Baristas, and Deli's need to be able to scale to move away from a wage slaves in their own business. They need to multiply their earning capability. If I have 10 people all of whom I generate $20/Hr profit from then I'm making $300 an hour not just 100/ hr as a self-employed Xman. ---just a principal example. Scalability.

I guess we are just different beasts, volatility of share prices doesn’t phase me.

 

[Dona Ferentes]

not a fan ... but ...
.
New data shows that the Home Equity Scheme – where the government offers reverse mortgages at less than half commercial rates – has changed from an obscure scheme to a mainstream product with participation figures reported in the year to March at more than 12,000 people, up from 700 in 2019.

And why not? Any older person looking to tap into the value of their family home can get the government mortgage at a set rate of 3.95 per cent (unchanged in the last budget).

Meanwhile, commercial rates are more than twice this level, with rates climbing towards 10 per cent. Commercial mortgages have fewer restrictions, but the effectively discounted rate the government offers is clearly a powerful trade-off.
The boom in reverse mortgages (where the applicant generally sells part of their home to an institution in return for regular income) was always going to happen with the escalation of house prices occurring while owner-occupiers on fixed incomes were facing inflation.

But the take-up has been accelerated by a change of regulations, which allowed financial advisers to recommend the government scheme alongside commercial products.
Commercial reverse mortgages have also been growing quickly, but nothing like the pace of the government scheme.

Moreover, if it suits the applicant (and assuming the applicant is fully aware that the real price of these loans is the reduction in the inheritance for the next generation), they are a welcome arrival in the market.

The news comes just as Andrew Boal the chair of the Actuaries Institute Retirement Strategy group has issued a paper on the wider issue of retirement income sources, suggesting it’s time to consider the role of the home as the “fourth pillar” in the retirement income system – alongside the pension, super and voluntary private savings.

Boal now wants to push the notion of the family home as an active financial asset that can be used as an income stream. He also wants the government to review the areas and to “relax the age pension means test exemptions on money accessed through home equity release schemes such as reverse mortgages”.

That would make tapping home equity even more attractive for older people.

As financial adviser James Gerrard has pointed out in The Australian: “There is scepticism over reverse mortgages – and they are not risk-free. Home prices may still fall in the future.”

What’s more, nobody likes a reduction in assets, but reverse mortgages at low prices are going to be very attractive to the asset-rich and cash-poor.
Gerrard says: “Under a reverse mortgage, you do not make regular loan repayments, meaning that interest accumulates on interest, and this compounding effect can lead to a large liability which is often paid by your children, after you die, via a large chunk of their inheritance taken out of your estate.”

Nonetheless, once more people understand the concept of reverse mortgages, the take-up of the Home Equity Scheme will accelerate further. The only question is at what point might Social Services Minister Amanda Rishworth begin to question whether the rates offered are too low.
.

https://www.theaustralian.com.au/business/wealth/older-australians-have-rushed-the-governments-cutprice-reverse-mortgage-scheme/news-story/078bbc965063057ca05c8a71a2af07ff

 

[divs4ever]

not a fan ... but .

absolutely not a fan

as an emergency ( cash ) life-line , hmmm better than some other options

but plenty can go astray for the older home-owner tapping into that equity too early ( and limited ability to repay quickly ) can leave the retiree in some uncomfortable situations .

i can see some tales of woe on the horizon

 

[Miner]

not a fan ... but ...
.
New data shows that the Home Equity Scheme – where the government offers reverse mortgages at less than half commercial rates – has changed from an obscure scheme to a mainstream product with participation figures reported in the year to March at more than 12,000 people, up from 700 in 2019.

And why not? Any older person looking to tap into the value of their family home can get the government mortgage at a set rate of 3.95 per cent (unchanged in the last budget).

Meanwhile, commercial rates are more than twice this level, with rates climbing towards 10 per cent. Commercial mortgages have fewer restrictions, but the effectively discounted rate the government offers is clearly a powerful trade-off.
The boom in reverse mortgages (where the applicant generally sells part of their home to an institution in return for regular income) was always going to happen with the escalation of house prices occurring while owner-occupiers on fixed incomes were facing inflation.

But the take-up has been accelerated by a change of regulations, which allowed financial advisers to recommend the government scheme alongside commercial products.
Commercial reverse mortgages have also been growing quickly, but nothing like the pace of the government scheme.

Moreover, if it suits the applicant (and assuming the applicant is fully aware that the real price of these loans is the reduction in the inheritance for the next generation), they are a welcome arrival in the market.

The news comes just as Andrew Boal the chair of the Actuaries Institute Retirement Strategy group has issued a paper on the wider issue of retirement income sources, suggesting it’s time to consider the role of the home as the “fourth pillar” in the retirement income system – alongside the pension, super and voluntary private savings.

Boal now wants to push the notion of the family home as an active financial asset that can be used as an income stream. He also wants the government to review the areas and to “relax the age pension means test exemptions on money accessed through home equity release schemes such as reverse mortgages”.

That would make tapping home equity even more attractive for older people.

As financial adviser James Gerrard has pointed out in The Australian: “There is scepticism over reverse mortgages – and they are not risk-free. Home prices may still fall in the future.”

What’s more, nobody likes a reduction in assets, but reverse mortgages at low prices are going to be very attractive to the asset-rich and cash-poor.
Gerrard says: “Under a reverse mortgage, you do not make regular loan repayments, meaning that interest accumulates on interest, and this compounding effect can lead to a large liability which is often paid by your children, after you die, via a large chunk of their inheritance taken out of your estate.”

Nonetheless, once more people understand the concept of reverse mortgages, the take-up of the Home Equity Scheme will accelerate further. The only question is at what point might Social Services Minister Amanda Rishworth begin to question whether the rates offered are too low.
.

https://www.theaustralian.com.au/business/wealth/older-australians-have-rushed-the-governments-cutprice-reverse-mortgage-scheme/news-story/078bbc965063057ca05c8a71a2af07ff

@Dona Ferentes - thanks for the posting. I need to read more to understand it.
If you could create a pdf of the link and attach it, will be great and save financial freedom from money to be spent on Australian Newspaper subscription in conjunction with existing subscription with West Australian newspaper

 

[qldfrog]

not a fan ... but ...
.
New data shows that the Home Equity Scheme – where the government offers reverse mortgages at less than half commercial rates – has changed from an obscure scheme to a mainstream product with participation figures reported in the year to March at more than 12,000 people, up from 700 in 2019.

And why not? Any older person looking to tap into the value of their family home can get the government mortgage at a set rate of 3.95 per cent (unchanged in the last budget).

Meanwhile, commercial rates are more than twice this level, with rates climbing towards 10 per cent. Commercial mortgages have fewer restrictions, but the effectively discounted rate the government offers is clearly a powerful trade-off.
The boom in reverse mortgages (where the applicant generally sells part of their home to an institution in return for regular income) was always going to happen with the escalation of house prices occurring while owner-occupiers on fixed incomes were facing inflation.

But the take-up has been accelerated by a change of regulations, which allowed financial advisers to recommend the government scheme alongside commercial products.
Commercial reverse mortgages have also been growing quickly, but nothing like the pace of the government scheme.

Moreover, if it suits the applicant (and assuming the applicant is fully aware that the real price of these loans is the reduction in the inheritance for the next generation), they are a welcome arrival in the market.

The news comes just as Andrew Boal the chair of the Actuaries Institute Retirement Strategy group has issued a paper on the wider issue of retirement income sources, suggesting it’s time to consider the role of the home as the “fourth pillar” in the retirement income system – alongside the pension, super and voluntary private savings.

Boal now wants to push the notion of the family home as an active financial asset that can be used as an income stream. He also wants the government to review the areas and to “relax the age pension means test exemptions on money accessed through home equity release schemes such as reverse mortgages”.

That would make tapping home equity even more attractive for older people.

As financial adviser James Gerrard has pointed out in The Australian: “There is scepticism over reverse mortgages – and they are not risk-free. Home prices may still fall in the future.”

What’s more, nobody likes a reduction in assets, but reverse mortgages at low prices are going to be very attractive to the asset-rich and cash-poor.
Gerrard says: “Under a reverse mortgage, you do not make regular loan repayments, meaning that interest accumulates on interest, and this compounding effect can lead to a large liability which is often paid by your children, after you die, via a large chunk of their inheritance taken out of your estate.”

Nonetheless, once more people understand the concept of reverse mortgages, the take-up of the Home Equity Scheme will accelerate further. The only question is at what point might Social Services Minister Amanda Rishworth begin to question whether the rates offered are too low.
.

https://www.theaustralian.com.au/business/wealth/older-australians-have-rushed-the-governments-cutprice-reverse-mortgage-scheme/news-story/078bbc965063057ca05c8a71a2af07ff

So the government lease you money at 3.95% that you can invest at 5.3%
I do not know details, how easy it is to close and repay, but that is an easy $53k minus $39.5k so $13.5k a year gifted income on a million dollar without touching the principal..or affecting the inheritance
Would be worth checking details

 

[divs4ever]

So the government lease you money at 3.95% that you can invest at 5.3%
I do not know details, how easy it is to close and repay, but that is an easy $53k minus $39.5k so $13.5k a year gifted income on a million dollar without touching the principal..or affecting the inheritance
Would be worth checking details

including tax and deeming implications

sounds like a savvy accountant should be consulted before you signed up

also how does the mortgage go if property prices fall , not to mention complications if selling the property is necessary

 

[qldfrog]

including tax and deeming implications

sounds like a savvy accountant should be consulted before you signed up

also how does the mortgage go if property prices fall , not to mention complications if selling the property is necessary

As long as you just cash the difference, taxes and actual value would be irrelevant, you would still get a ...taxable.. profit based on rate difference.
The only issues are costs to setup, fee on closing the reverse mortgage and obligations attached to closure
There is a sizeable rate difference between a lending rate and an investment rate, it would be crazy not to investigate it for people who qualify..

 

[divs4ever]

As long as you just cash the difference, taxes and actual value would be irrelevant, you would still get a ...taxable.. profit based on rate difference.
The only issues are costs to setup, fee on closing the reverse mortgage and obligations attached to closure
There is a sizeable rate difference between a lending rate and an investment rate, it would be crazy not to investigate it for people who qualify..

crazy maybe , but i have spent most of my life in Labor electorates , in including at least two Federal Treasurers

when one of these guys shakes your hand you had better count the fingernails as well

the key is getting very good advice , first