Superannuation, the ultimate government cash cow?

[HelloU]

Maybe a better/fairer system would be that earnings on super balances once preservation/access age is reached reverts to individual marginal tax rates.

Earnings during accumulation phase left to be taxed as they are.

Withdrawal of capital untaxed as it is your money.

when you have forced someone to lock away their money for 40 odd years then it becomes tricky as to how to 'fairly' treat it ....... and part of me wonders if it is all worth it for the country. I have no answers here ...... this is all way above my pay grade.

I suppose an easy answer to all your questions is.
Why save and not have holiday's, or flip new cars to save $800k and get no pension and earn about $35k of income.
When you could have a great time and spend and all your money, then have $300k in super and get $35k in pension.
It really doesn't make sense.
I'm probably missing something, maybe the great feeling of doing without for the greater good. Then being told your just a selfish fat cat. What a hoot, what a flicked up system.
Is there any wonder we are going down the tube. Lol

(not meaning to devalue anybodys life efforts) If I was approaching retirement age right now I would be seriously considering that situation if it was a near thing. That is the bit I do not like ... that the option presented of going on the taxpayers tit should be 'more' attractive than paying for my own retirement ..... that was an earlier point I made.
However, I also struggle with the concept that if I am paying for my own retirement then at 65 I can earn up to about about $120K pa (as a single and way more for couple - super and sapto) and basically pay no tax .... but if I was 35 years of age on the same earnings I would be paying up to 37 cents in every dollar (and I would prolly have kids to feed and a mortgage to pay at the same time). I find the whole thing to be weird, convoluted and disjointed.

BTW, I already know the 'Shorten' position for my projected earnings this fiscal (as a comparison/get ready tool).

 

[willy1111]

So in 40 years the funds need IMO, have gone from $600k to say $2.4m that is about 4 times, which is about right if you use the general rule that everything doubles about every 10 years

Do you mean doubles every every 20 yrs. $600k doubles to $1.2M and then $1.2M doubles to $2.4M.

Using the rule of 72 for how long things take to double...72 divided by 20 yrs would mean about 3.6%. So that means inflation/cost of living running at about 3.6% for last 40 yrs.

The RBA try to keep inflation between 2-3% so that would mean the cost of living would take between 24 and 36 yrs to double.

 

[willy1111]

But generally, if you are in your 40's you will probably need about 3.5-4m to retire comfortably at 60-65 and never require State assistance.

Maybe if you adopt the live off dividends and not spend capital approach.

But there are many on here who have been able to generate total returns in excess of 20% per year and for those that can do that...they wouldn't require any where near that amount of capital to generate a good living.

 

[HelloU]

Maybe if you adopt the live off dividends and not spend capital approach ......

Hey, numbers confuse me so I will not comment on that .... I do like that you have some skin in the complexity of this.
Shorten is attacking that thought with the shake-up. Quite possible atm to be around cap level and sapto and not burn capital on the yearly churn ....... some spend to maintain cards and broader eligibility such is current thinking ...... it is/was a very attractive target to hit ........ maybe that is sucking eggs to you though.
(not sure if that means they are funding their own retirement or not - if no burn and no tax - semantics I spose - this is also a previous point on who is actually funding peoples retirement)

 

[Smurf1976]

It really doesn't make sense.

There's some rational logic in investing outside super in order to be able to retire early should you choose or be forced to by whatever circumstances.

The system certainly isn't encouraging people to fund their own retirement as such though, that's for sure.

 

[Toyota Lexcen]

living off pension good for couples who own home, completed renovations and had holidays through out life

and with Labour announcing franking credit policy

bit tougher on single pension though as a friend has discovered. (74yr old, asset rich, income poor)

does income from 300k in assets reduce pension?

 

[HelloU]

right now there are 2 tests to do with money:
1. Income (actual income)
2. Deeming on assets (deemed to produce income even if they do not)

You must pass both to get the goods. As to what they are suggest u start here
https://www.humanservices.gov.au/individuals/enablers/income-test-pensions/30406

 

[HelloU]

There's some rational logic in investing outside super in order to be able to retire early should you choose or be forced to by whatever circumstances.

The system certainly isn't encouraging people to fund their own retirement as such though, that's for sure.

first bit yeah
second bit ..... (let me say that high income peeps will normally max out concessional super every year) ...... I must say that it is currently financially beneficial for nearly every worker to max their concessional contributions from a taxation view (and with recent law changes that $25K is available now to everyone). But if franking rebates are removed (Labor proposal) then there will be a gross income figure below which additional concessional contributions will be a waste of time if some of the gross income has franking attached. They will pay hardly any more tax if they just pocket the money and not put it into concessional super to be locked away .... and these are the very borderline tax-payers, that have lowish incomes and some investment income (maybe up to $60K gross DYOR), for whom additional money in super may have kept them OFF the govt pension for longer.

So back to the problem of not encouraging (lower) middle australia to pay for their own retirement..... whilst the rich will always make full use of the tax discounts attached to concessional super.

 

[Toyota Lexcen]

Thanks, that’s a clear layout from government

So you want enough to give you 176/fortnight

 

[Smurf1976]

I must say that it is currently financially beneficial for nearly every worker to max their concessional contributions from a taxation view

My concern is that if you factor in losing the pension plus the risk that government changes the rules and has you working until you drop then it doesn't look too good and encourages a "spend today and don't worry about retirement" approach.

That's the exact opposite of what I've been hearing from government for decades but it seems to be where it has ended up.

 

[sptrawler]

My concern is that if you factor in losing the pension plus the risk that government changes the rules and has you working until you drop then it doesn't look too good and encourages a "spend today and don't worry about retirement" approach.

That's the exact opposite of what I've been hearing from government for decades but it seems to be where it has ended up.

It is certainly a strange situation, from what I've read after tax contributions have dropped markedly, and I would say they will be nearly nill this year.
Why would someone sacrifice their spending power and lifestyle now, when they know it won't enhance their retirement at all, unless they get to the $1.6m limit.
If they are only able to get to the $800k point, and lose all their pension and entitlements, why wouldn't they just aim for the $300k and $35,500 pension?
That would mean, they don't have to forego any of life's luxuries now and still have a comfortable retirement by supplementing the pension.
These two Governments have certainly stripped the excitement out of super, rather than a pot of gold at the end of the rainbow, it has become a lead goblet. The way they both move the goalposts, makes everyone feel the politicians are the only ones who know what the end game is, there is no trust anymore. IMO

 

[PZ99]

Part Quote...

The government-funded pension remains important for older Aussies, with about 66 per cent receiving at least a partial age pension in June 2017.

That proportion is down from 75 per cent in 1997, when 1.7 million older Australians were receiving pensions.

Superannuation has become more vital, with the number of retired Australians aged 45 or older using superannuation as their main source of income up from 12 per cent in 1997 to 25 per cent in 2016/17.

Like the general population, the number of seniors who own their homes without a mortgage has dropped, from 79 per cent in 2003/04 to 76 per cent in 2015/16.

https://www.news.com.au/national/br...g/news-story/02be61411ed9188fd593f121ef9b99ed

 

[sptrawler]

The Government funded pension, will have to absorb much more feed in the next 5 years IMO, there is no sense in saving anything other than the super guarantee rate, any extra should be put into the PPR.
To save $1.6m for a blue collar worker, is a lifetime of sacrifice, to get a return of 3-5% is just ludicrous return for the effort. Just my opinion, but if i had my time over, I would not be investing in shares for retirement income.
I would upgrading the house enjoying the ambience, and the free capital gains, then working on pension upgrade facility. lol
Unfortunately I've missed the boat, but others should really take heed. IMO

 

[PZ99]

Whatever it is you're planning - it has to be flexible to cater for rule changes.

Sadly, one fears that free capital gains on the family home has a use-by date.

 

[willy1111]

The Government funded pension, will have to absorb much more feed in the next 5 years IMO, there is no sense in saving anything other than the super guarantee rate, any extra should be put into the PPR.
To save $1.6m for a blue collar worker, is a lifetime of sacrifice, to get a return of 3-5% is just ludicrous return for the effort. Just my opinion, but if i had my time over, I would not be investing in shares for retirement income.
I would upgrading the house enjoying the ambience, and the free capital gains, then working on pension upgrade facility. lol
Unfortunately I've missed the boat, but others should really take heed. IMO

Haven't you read the future of property prices thread or watch the 60 minutes episode the week before last.

Property prices are doomed too

 

[willy1111]

I would upgrading the house enjoying the ambience, and the free capital gains, then working on pension upgrade facility. lol
Unfortunately I've missed the boat, but others should really take heed. IMO

You still can as far as I understand. Sell your current home and invest your capital in a more expensive PPOR so you can qualify for a pension

 

[willy1111]

.
To save $1.6m for a blue collar worker, is a lifetime of sacrifice, to get a return of 3-5% is just ludicrous return for the effort. Just my opinion, but if i had my time over, I would not be investing in shares for retirement income.

3-5% return....comeon surely you can do better...@McLovin posted a return north of 30% last year, @Trendnomics would have been north of 30% too, @craft compounded at over 30% p.a for over 10 years, @minwa well north of 30% p.a, I'm sure there are many others as well on here with very decent returns.

30% on 1.6m tax free in retirement is a nice little earn, much bigger than a pension

 

[sptrawler]

30% on 1.6m tax free in retirement is a nice little earn, much bigger than a pension

It's getting the $1.6m together, in the first place, that is difficult.

 

[willy1111]

It's getting the $1.6m together, in the first place, that is difficult.

$40k (no extra contributions) compounded at 20%p.a over 20 yrs will get there. Most 30 year old would have well above $40k especially by the time they reach 40.

Its the rate of return that is the issue for most, but with a bit of interest, passion, dedication one can learn how to outperform the market.

 

[sptrawler]

$40k (no extra contributions) compounded at 20%p.a over 20 yrs will get there. Most 30 year old would have well above $40k especially by the time they reach 40.

Its the rate of return that is the issue for most, but with a bit of interest, passion, dedication one can learn how to outperform the market.

Tell me in five years time, how you are going with that plan.