Australian (ASX) Stock Market Forum

Superannuation direct investing outside of SMSF

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Trembling Hand said:
Thats the biggest mistake with super. Why grow something and make it your second or even first biggest investment with something so friggin restricted?

A cent hasn't gone into my super for 5 years now, from anywhere. And I cannot see that changing.
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Agree. For anyone under 50, there's also the possibility that by the time you are able to tap your super the taxes may have significantly changed to the point that the reason you originally put so much in super is no longer relevant. I can definitely see means testing SMSF coming in over the next decade.
 
An additional risk is the requirement that much of the Super will be required to be taken as an annuity.
Makes considerable sense but would irritate many of those retiring who may want to pay off loans, travel etc.

It's probably reasonable to remember, TH and McLovin, that compulsory Super wasn't designed for people like you who will have the capacity and sense to provide for their own retirement.
It's for those who don't.
 
Julia said:
An additional risk is the requirement that much of the Super will be required to be taken as an annuity.
Makes considerable sense but would irritate many of those retiring who may want to pay off loans, travel etc.
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Good point, Julia. And I agree with both your sentences.
 
Julia said:
It's probably reasonable to remember, TH and McLovin, that compulsory Super wasn't designed for people like you who will have the capacity and sense to provide for their own retirement.
It's for those who don't.
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Funny thing is a few months ago a good friend who has just turned 40 told me that he was putting $250 a week into his super because it was their only way to save for retirement!! I slapped him in the head.

Can you imagine giving up $250 a week to not be able to control it for 20 years!!! :banghead:

I told them they could actually put that into a broking account and buy a managed fund or ETF and then use it for whatever, whenever and however they wanted. They had never thought of it!!! :banghead:
 
Trembling Hand said:
Funny thing is a few months ago a good friend who has just turned 40 told me that he was putting $250 a week into his super because it was their only way to save for retirement!! I slapped him in the head.

Can you imagine giving up $250 a week to not be able to control it for 20 years!!! :banghead:

I told them they could actually put that into a broking account and buy a managed fund or ETF and then use it for whatever, whenever and however they wanted. They had never thought of it!!! :banghead:
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Some people have no financial discipline. I have a mate who just had a kid and wants to set up some sort of education savings thing for him. He wants it to be in an account that he (my friend) can't touch because he's worried if he sees that money there he'll be tempted to spend it. He's not exactly poor and would probably be pulling in $150k/year but he rarely has money left over at the end of the month..
 
McLovin said:
Agree. For anyone under 50, there's also the possibility that by the time you are able to tap your super the taxes may have significantly changed to the point that the reason you originally put so much in super is no longer relevant. I can definitely see means testing SMSF coming in over the next decade.
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With super taxed at 15% while highest marginal tax rate at 49.5%... it's a pretty big incentive even for those under 50. Over 20 years, the same performance say 10% p.a. will yield 511% after tax within super but only 268% under personal name (assuming highest tax rate). Over 30 years, the numbers become 1156% vs 438%.

I often consider this difference to be the "control premium" one must pay. They have to tax super a fair bit more than they currently do to make this equation unattractive.

So I find myself putting a small amount in super as a hedge.
 
skc said:
With super taxed at 15% while highest marginal tax rate at 49.5%... it's a pretty big incentive even for those under 50. Over 20 years, the same performance say 10% p.a. will yield 511% after tax within super but only 268% under personal name (assuming highest tax rate). Over 30 years, the numbers become 1156% vs 438%.

I often consider this difference to be the "control premium" one must pay. They have to tax super a fair bit more than they currently do to make this equation unattractive.

So I find myself putting a small amount in super as a hedge.
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I have a small amount in super too. The problem is that tax policy is not set in stone it adjust to maintain the revenue base. Go back thirty years and there was no FBT, GST, CGT and lots of companies getting lost at the bottom of the Harbour. With super I am making a deal with the government that I agree to put my money into a regulated account and in return receive a concessionary tax rate. This scenario works well while the majority are in accumulation phase and still paying income tax, but what happens when all those baby boomers hit retirement and go into pension phase super or the government pension? Someone still needs to pay the bills and it would not surprise me in the least when/if the government announced that SMSF's with assets over $x will have their income taxed at ordinary rates. It also wouldn't surprise me if they put drawdown restrictions in place.

That's what I don't like about it, there are too many variables. And aside from that, I'm not that interested in living like a pauper until I'm 60 and then a King.:D
 
McLovin said:
And aside from that, I'm not that interested in living like a pauper until I'm 60 and then a King.:D
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That is so true and it is the reason I don't put a lot in Super. I have every intention to be well off enough without ever worrying about what's in my super account.

I find it unbelieable that some professionals with 40yr working live would find themselves with no assets aside from the family home and super upon retirement... yet that seems to be the base case for many scenarios proffered by financial planners...
 
McLovin said:
. He's not exactly poor and would probably be pulling in $150k/year but he rarely has money left over at the end of the month..
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This happens so often. Why??? Ex-husband of a relative has been earning around $200K for many years.
He doesn't even own his own place, and is struggling to fund his basic living expenses while he takes a couple of years off to do his PhD.
Meanwhile, his ex-wife has almost paid off the mortgage on $1.5M home in Sydney, along with completing a couple of degrees, working, and raising two profoundly deaf boys.

Just beats me how some people can be so intelligent about some things, yet be financially hopeless.
 
Trembling Hand said:
You only pay 9% if you are a wage earner. Simple don't work for someone.
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If I didn't work for anyone at all, I would still have to pay myself super to avoid tax thresholds above 32.5%.

I thought you did work for "someone"? I would love to be able to avoid super. I can look after my own affairs thanks!
 
Also last time I checked if you are a "Sole-trader" your income is not covered by Superannuation guarantee.
 
Julia said:
An additional risk is the requirement that much of the Super will be required to be taken as an annuity.
Makes considerable sense but would irritate many of those retiring who may want to pay off loans, travel etc.

It's probably reasonable to remember, TH and McLovin, that compulsory Super wasn't designed for people like you who will have the capacity and sense to provide for their own retirement.
It's for those who don't.
Click to expand...

The problem is leaving access to super with few restrictions tends to mean those with the least ability to reduce their burden on the tax payer can fritter it away faster than they should.

I would argue that until your not entitle to any for of Govt pension you shouldn't really be able to tap int your super in a way that increases the pension you get. How we achieve that goal I'm not sure. I just don't think it's fair to allow someone to take a lump sum from their super to pay off private debt, which then allows them access to a pension, or increase the pension they're entitled to.

Maybe a simple way is to only allow a 10% lump sum, and the rest needs to be taken as some form of annuity??
 
sydboy007 said:
The problem is leaving access to super with few restrictions tends to mean those with the least ability to reduce their burden on the tax payer can fritter it away faster than they should.

I would argue that until your not entitle to any for of Govt pension you shouldn't really be able to tap int your super in a way that increases the pension you get. How we achieve that goal I'm not sure. I just don't think it's fair to allow someone to take a lump sum from their super to pay off private debt, which then allows them access to a pension, or increase the pension they're entitled to.

Maybe a simple way is to only allow a 10% lump sum, and the rest needs to be taken as some form of annuity??
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Maybe it would be fairer to restrict access to the % of capital contributed by employers, but not get in the way of retirees accessing lump sums from additional contributions they've made voluntarily. If person X has only a small super balance due to only the compulsory contributions having been made, and person Y has a large super balance as they've put in extra themselves over many years - why should person Y be unable to take a lump sum to repay any remaining private debt, buy a caravan, take a holiday etc if it's essentially their own money they want to get their grubby little hands on!
 
DocK said:
Maybe it would be fairer to restrict access to the % of capital contributed by employers, but not get in the way of retirees accessing lump sums from additional contributions they've made voluntarily. If person X has only a small super balance due to only the compulsory contributions having been made, and person Y has a large super balance as they've put in extra themselves over many years - why should person Y be unable to take a lump sum to repay any remaining private debt, buy a caravan, take a holiday etc if it's essentially their own money they want to get their grubby little hands on!
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Could be one way of doing it.

I often wish I could put a bit extra into my super and keep it in cash or fixed interest and then take back the $ value I had deposited at a later time. The earnings on the money would be kept till retirement.

The way things stand, it's really best to leave super as a minimum till your 50s and then start hitting the 25K limit each year with some undeducted contributions to top things up.
 
Mr J said:
Brainfart, I had forgotten about dividends.

I hope that is typical for those in your line of work :)
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It is if you own a business and decide not to draw a wage or Director fees. Or if you are a sole trader. You just pay yourself and thats it. No Super.
 
I just posted this chart of my superfund trades in the SAI thread, i figured it worthy of some discussion in this thread, as a demonstration of what's possible with an AustSuper or ING account that allows you to trade within your (non SMSF) super account.
~
attachment.php

~
By trading in and out of the same stock, taking partial profits, its possible to build a position while recycling capital and locking in trade profits...my super fund (trading part) has more closed trade profits than open trade profits.

--------------------

Trembling Hand said:
Can you imagine giving up $250 a week to not be able to control it for 20 years!!! :banghead:
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As above...its not like i have no control at all, i can trade with restrictions to at least build my balance, what the Govt does in the future is of course another matter...but i/we do have some control.
 

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