How to retire early... or simply survive

[sptrawler]

Most working people are on an hourly rate and all the saving and scrimping and frugality in the world aint going to make all of them wealthy soon. Long time to a million on an hourly rate.

Don't think that way, I had a lot of arguement's with my other half in the early days.
She wanted children early, so we had four before I was 30, three before 25.lol
I decided, it was more important to get your money working for you, than spending it on something that doesn't matter in 30 minutes time.
She always complained we lived on the bones of our arse, while all our friends lived the life of Riley, I always said trust me it will get better you only earn so much money in your life.
You either spend it now and have a great time, or invest it and enjoy the time when you can't earn the money, because you are old and unemployable.
The other thing is, the kids don't care what carpet is on the floor, as long as they enjoyed their childhood at home, or the holidays.
What you have to remember is, interest rates aren't staying this low forever, the capitalist system doesn't work that way.
So if you have a loan, get it paid off while the rates are low.
Opportunity will present itself, make sure you're in a position to take advantage of it, and you recognise it.
BHP was $12 not that long ago, now they're closer to $30, not saying it was a given, but it was an opportunity.

 

[SuperGlue]

"Meet the Australians who are retiring early to embrace a fulfilling life of travel — while they still can"

In ABC News today.

http://www.abc.net.au/news/2018-03-27/can-you-afford-to-quit-working/9586530?WT.ac=statenews_qld

 

[tech/a]

Opportunity will present itself, make sure you're in a position to take advantage of it, and you recognise it.
BHP was $12 not that long ago, now they're closer to $30, not saying it was a given, but it was an opportunity.

Here is the secret.

Become an opportunity hunter.
1 opportunity can alter your entire financial life.

 

[sptrawler]

Here is the secret.

Become an opportunity hunter.
1 opportunity can alter your entire financial life.

It certainly can, however if they hammer negative gearing, capital gains and franking credit offsets, it will make it a fair bit harder for the young to climb out of the poverty trap.

 

[SirRumpole]

It certainly can, however if they hammer negative gearing, capital gains and franking credit offsets, it will make it a fair bit harder for the young to climb out of the poverty trap.

It's basically the middle aged well off who benefit from negative gearing.

 

[PZ99]

It certainly can, however if they hammer negative gearing, capital gains and franking credit offsets, it will make it a fair bit harder for the young to climb out of the poverty trap.

Well not really. People in poverty won't be enjoying the benefits of neg gearing, cap gains and divvies. What they need is better wages, lower taxes and lower living costs.

When you're earning $700 a week and paying $400 in rent you're going nowhere.

 

[sptrawler]

Yes but without any breaks, most will stay wage slaves. But hey who cares.

 

[sptrawler]

It's basically the middle aged well off who benefit from negative gearing.

That's not really true, it is any average wage earner, who has their head screwed on.
But you believe what you like, I know from working in a workshop most of my life, all the guys used negative gearing.
The ones who did well, also bought shares in their non working wife's name also.

 

[sptrawler]

Well not really. People in poverty won't be enjoying the benefits of neg gearing, cap gains and divvies. What they need is better wages, lower taxes and lower living costs.

When you're earning $700 a week and paying $400 in rent you're going nowhere.

People earning $700 per week aren't paying any tax, and are on benefit's, so it would be hard for them to negative gear.
But Im sure you know that already.
I'm talking about workers on $90,000 a year, like our council waste collection workers.
I cant talk for $35,000 a year full time employees, maybe you could tell me what job they are doing? Then it would give your post some credibility.

 

[PZ99]

People earning $700 per week aren't paying any tax, and are on benefit's, so it would be hard for them to negative gear.
But Im sure you know that already.
I'm talking about workers on $90,000 a year, like our council waste collection workers.
I cant talk for $35,000 a year full time employees, maybe you could tell me what job they are doing? Then it would give your post some credibility.

You might like to restudy that one. Anyone on $700 a week is paying around 10% in tax.

The minimum wage is $695 a week - retail employees are around this level, and that's the second biggest sector in the country. I'm using that as an example of the poverty trap you referred to in your earlier post.

I don't consider people on $90k a year as living in poverty. If they say they are then it's self inflicted and therefore they need to get real.

Neg gearing merely locks low income earners out of the housing market because it distorts the supply /demand ratio in favour of average wage earners reducing their incomes by increasing their debt. Not the sort of thing I want my taxes supporting.

 

[PZ99]

Ooooh lookie here: http://www.abc.net.au/news/2018-03-28/holiday-home-tax-deduction-rorts-targeted-by-ato/9593834

The ATO's assistant tax commissioner Kath Anderson said too many holiday home owners were claiming deductions for properties which were not genuinely available for rent or were only available to friends and family

 

[Bill M]

I retired early and my wife is also retired. Once you have your own home and it is paid for you don't really need millions of dollars to survive. We are self funded and live life a good life. $500 a week covers all of our living expenses and we could survive on that for ever if we had too. But we like travel and eating out occasionally so need around $1,000 p/w to live a comfortable retirement.

We still watch our pennies like we always have. We don't waste money. Like they say, never spend more than you earn and all will be fine. Although as one gets older it is ok to start consuming some of your capital. We won't live forever, we earn't it so we will spend it, no use being the richest tight arse in the grave. Enjoy life, be good to people and you will be ok. Just keep an eye on the draw downs and inflation as it's got to last you until 90 or so, cheers.

 

[sptrawler]

You might like to restudy that one. Anyone on $700 a week is paying around 10% in tax.

The minimum wage is $695 a week - retail employees are around this level, and that's the second biggest sector in the country. I'm using that as an example of the poverty trap you referred to in your earlier post.

I don't consider people on $90k a year as living in poverty. If they say they are then it's self inflicted and therefore they need to get real.

Neg gearing merely locks low income earners out of the housing market because it distorts the supply /demand ratio in favour of average wage earners reducing their incomes by increasing their debt. Not the sort of thing I want my taxes supporting.

I'm not at home ATM, but a mate works for Bunnings, I'll find out what the annual income is, when I get back.
I do agree with you regarding negative gearing, but the point im making is , it isn't only the rich that use the tax breaks.
Somewhat like the backflip Labor is doing, regarding franking credits for small parcels of shares held by low income earners.
The underlying inuendo that only rich people own shares or property, is a deception to aid change, how many Woolies and Westfarmers retail workers own shares? Most of them as part of their work package.
Of course rich people will own more, they have more money. I just get anoyed with the constant demonisation of anyone who owns anything, despite the endeavour and sacrifice they may have gone through to accumulate it.
Anyway I'm obviously out of step with mainstream, spend, spend, spend is the mantra of today, Rudd didn't sell it well at the time, but Billy has certainly got the message through. IMO
I definitely thought Labor's idea of using an income level as a cut off, has much more merit and credibility, than just saying anyone who owns something, ala shares, is rich.

 

[Junior]

Agree with the sentiment in this article....by punishing and targeting those with say $1m-$3m in super, they will just encourage more and more to fall into part pension eligibility.

If you've saved enough to avoid being on Government benefits you should be applauded, not insulted!

Malcolm Turnbull should defend self-funded retirees
Labor backflips on dividend imputations

• by Jennifer Hewett

Labor's latest plan to scrap cash rebates for excess franking credits has united the Coalition and the opposition on one aspect of the policy – the need to do more to protect pensioners. But there's one group of retirees where there's been far less outrage expressed by both sides during the past two weeks – self-funded retirees in self-managed super funds who don't qualify for a pension.

In Labor's case, of course, such people are dismissed as the very wealthy who should look after themselves. In the government's case, the rhetoric has been far more sympathetic but the primary focus has been on pensioners hurt by Labor's "pensioners' cash grab".

According to the Coalition, Labor's new deadline of this Wednesday for exempting existing self-managed super funds with at least one part-pensioner means Labor still can't claim to be protecting all pensioners.

The government has also condemned the chaos of Labor's supposed "pensioner guarantee" put together two weeks after the initial policy was announced.
"It's another example of a shambolic policy on the run," the Prime Minister declared in Parliament, describing it as a combination of "avarice, malevolence and incompetence".
Malcolm Turnbull did cite Labor's attacks on all retirees on "low incomes" and the counterproductive impact of forcing SMSFs out of investing in Australian fully franked shares in favour of foreign shares or property. But so far at least, there's been an apparent reluctance to go into much detail over the numbers and incomes of self-funded retirees in SMSFs badly affected by Labor's policy.

Presumably, it was considered to play less well politically than the plight of pensioners – even if this calculation wasn't borne out by the last Newspoll.

That approach looks as if it will (and should) change, particularly given Labor has belatedly excised the most potent lines of attack. But even on Tuesday, by far Turnbull's most frequent references were still to pensioners.

Super-rich myth
Yet the SMSF Association points out that the number of retirees who receive income from SMSFs already adds up to more than 350,000 people, with many hundreds of thousands more expecting to do so in future years. And rather than being the super rich depicted by Chris Bowen and Bill Shorten, the great majority withdraw relatively modest annual incomes from their SMSFs, in many cases only marginally above the full pension.

For all Chris Bowen's complaints about all of those super-rich retirees getting millions of dollars in cash rebates, for example, the latest Australian Taxation Office figures show that only 0.5 per cent of the 600,000 self-managed super funds have assets over $10 million. Another 2.5 per cent have assets between $5 million and $10 million and 11.5 per cent between $2million and $5 million. Good luck to them.

But the Association says, for example, that the average balance in the funds is $1.1 million. Remember that SMSFs typically are composed of two members – husband and wife. That leads to an average income of $50,000 – or $25,000 per retiree – with the changes reducing that amount by about $5000.

For those SMSFs heavily weighted to Australian shares, which is also typical, the reduction in income would be even more severe – leading to annual incomes for two people in this era of reduced returns of under $40,000 for many.

This compares with a full pension for a couple of just over $35,000 – and with few of the concessions and benefits available to those who qualify for the pension. The obvious question for middle-income and even relatively high-income earners is – why bother to save as much as possible for retirement?

This is in part due to Morrison's own measures, introduced when he was social security minister, to cut the thresholds for eligibility for even a part-pension. For a couple, that threshold has gone from having no more than $1.175 million in assets apart from the family home to $830,000 today.

Fiendish complexity
This policy led to a big backlash against the Coalition from many older Liberal voters and party members at the last election – as yet another example of a (Coalition!) government changing the rules on superannuation while targeting those attempting to look after themselves.

Morrison also announced a new limit of $1.6 million for a tax-free pension super account, with any more transferred to an accumulation account taxed at 15 per cent. That naturally also reduces – though does not eliminate – the value of cash rebates for excess franking credits in those accumulation accounts.

Now it is possible to argue against or alter the system of dividend imputation in general – but that is not what Labor is proposing. It is also possible to argue for a cap on the amount of cash rebate that can be claimed on excess franking credits.

Even if this system would make an already fiendishly complicated system more complex, it would eliminate the prospect of the small percentage of wealthy retirees getting huge cash refunds. But that is also not what Labor is proposing.

It's also possible to argue that Australia's tax-free superannuation in pension mode is not sustainable. But this ignores the fact that Australia (unusually) taxes contributions and earnings in super rather than the more typical approach of taxing superannuation income only in the pension phase. No change proposed there.

Instead, Chris Bowen is arguing Labor's latest changes mean 94 per cent of the projected revenue of $59 billion over a decade is maintained even though Labor is now exempting 25 per cent of the people affected.

Leaving aside the rubbery predictions of revenue projections over a decade, this happily ignores the inevitable behavioural changes in response to yet more changes to super rules. Here we go again …

 

[SirRumpole]

If you've saved enough to avoid being on Government benefits you should be applauded, not insulted!

Getting tax free super after 60 is a pretty big concession, and yet people still whinge about $1000 here and there.

 

[PZ99]

@sptrawler I can pretty much agree with your comments there. I don't begrudge anyone for being rich - just for as long as they don't expect me to paddle their boat for them, it's all good.

I'll be a self funded retiree in 2020 and I won't be rich but I won't be holding my hand out either.

I just fight my own battles because that's how I was brought up.

Yes, most Woolies and Westfarmers workers are shareholders but I doubt they would qualify for the tax free status required to cash in franking credits. If anything, they were given the shares as a tax reduction strategy in the first place

In fact most people don't even know what it all means.
Check this out >http://www.news.com.au/national/bre...l/news-story/f04f4064f945dfc21dc1d9e0d92fc514

 

[Junior]

Getting tax free super after 60 is a pretty big concession, and yet people still whinge about $1000 here and there.

I agree with you on this.

I don't agree with the language the ALP uses and the insinuation that anyone who owns shares or has a SMSF is rich and therefore should pay more tax.

The ability to receive a refund of franking credits has been around for 2 decades now and pensioners have planned based on these rules. Yes, I recognise that it is excessive and needs to be unwound, however for many this is a big hit, so it should be approached cautiously and with consideration for the impact on self-funded retirees.

 

[Country Lad]

Well it seems the pensioners are now safe. However, as a self funded retiree I am mightily pi$$ed off.

Most self funded retirees have worked to an economic strategy, taking into account all the tax and superannuation rules to have sufficient funds for a comfortable lifestyle without needing the public purse for support - no pensions, none of the health benefits pensioners get, no rent assistance etc etc and still pay tax on income. Now that we are not dependent on government, Shorten wants to change the rules and put his hand deeper in my pocket.

I have always seen the franking credits as a type of withholding tax. If entitled, we get that tax as a refund, if not entitled they keep it. That was fair enough in my books.

 

[sptrawler]

Agree with the sentiment in this article....by punishing and targeting those with say $1m-$3m in super, they will just encourage more and more to fall into part pension eligibility.

If you've saved enough to avoid being on Government benefits you should be applauded, not insulted!

The thing that really galls me is the smugness of people on a full taxpayer funded pension, criticising self funded pensioners getting a tax break, talk about the kettle calling the pot grimy ar$e.

 

[Value Collector]

I have always seen the franking credits as a type of withholding tax. If entitled, we get that tax as a refund, if not entitled they keep it. That was fair enough in my books.

Franking credits and 50% capital gains tax discounts are important measures designed to prevent double taxation, Without them the shareholders will be unfairly taxed twice on their earnings.

eg, If a company earns $100, it will pay $30 in tax leaving $70 that can be paid as a dividend to the company owner/share holder, When that shareholder gets the $70 if you tax him on it, he may pay another $31.50 in tax.

Meaning that $100 company profit ends up being taxed at 61.5% by the time the share holder/owner get the profit in their pocket, that is simply not a fair tax rate.

By allowing the share holder to have the franking credit for the tax already paid at the company level it means the company profits just get taxed at the tax bracket of the individual share holder, which is a much fairer system.

-------------
Same with capital gains discount, the "capital gain" is often the result of the company retaining after tax profits and reinvesting them,

eg. IF company earns $100M, pays $30M in tax and retains $70Million, its market cap will probably increase by $70Million, when a long term shareholder sells and gets a "capital gain", its partly due to the after tax profit the company retained which has already been taxed at the company level, charging the investor tax on the full capital gain will result in double taxation.