Superannuation Discussion + market volatility

[tgh]

I have been "stewing" over this all day…bloody pollies ….bring on the benevolent dictator.
Awash with cash we (along with one or two others) soaked up quite a few Hybrid issues.
The value of Hybrids relates entirely to their earnings and they are so priced in the market.
There is no productivity or growth, just earnings.
Folks have bought these products by the train load and they are about to be burned...

 

[lovetravellingoz]

I don't quite understand why people are factoring on spending the same amount at 85 years of age as you would at 60 years of age?

Surely you are going to slow down somewhat along the way and not be as active? Maybe I've got it all wrong.

Answer 1/ Because we can


Answer 2/ Well my Dad is 86, still has his CAMS Racing Licence and still races.

Both his and mums medicals bills are on the rise and are regularly occurring now....so I would not factor in on all expenses decreasing.


Answer 3/ In my case at 57 I still rough it on many of my trips (though not all ) as I enjoy the great outdoors. I suspect that in two decades that I will still be travelling, but that my body may need a little more pampering with the average costs of trips going up.

Answer 4/ And yes shock horror one has to have a safety net in case the FF Gravy Train dries up and that after several decades of cheap holiday FF flights I might actually start to have to buy some flights

Answer 5/ I have 3 daughters......

 

[Buzzard]

Now being financially independent, I have a lot (most?) of my assets in growth investments. I also have an IP that hopefully will continue to grow in value. When there is another stock market crash, and there will be one, I have a few years expenses in cash investments so that I don't need to sell shares in a slump.

 

[Flying mermaid]

,

I don't quite understand why people are factoring on spending the same amount at 85 years of age as you would at 60 years of age?

Surely you are going to slow down somewhat along the way and not be as active? Maybe I've got it all wrong.

the problem is no one actually knows how long they are going to live or what their quality of life will be. I have read of a lady who went on an Antarctica cruise at 90 and was climbing down into zodiacs. That might be me, or I might be hardly able to walk by then and not travelling,

As others have said there are potentially increasing medical costs the older you get and of course if your kids need a helping hand for some reason you want to be able to do that. Nursing home costs are also another thing. Haven’t really looked at them yet, but apparently very expensive to get into a high quality one, So the nature of the spending changes, but it is still there.

 

[Pushka]

,
the problem is no one actually knows how long they are going to live or what their quality of life will be. I have read of a lady who went on an Antarctica cruise at 90 and was climbing down into zodiacs. That might be me, or I might be hardly able to walk by then and not travelling,

As others have said there are potentially increasing medical costs the older you get and of course if your kids need a helping hand for some reason you want to be able to do that. Nursing home costs are also another thing. Haven’t really looked at them yet, but apparently very expensive to get into a high quality one, So the nature of the spending changes, but it is still there.

We had to venture into the Nursing Homes issue with Mum and several of my friends are at the same stage. It’s a nightmare. Families taking out loans to get their elderly into homes when they don’t get the pension but their assets may just be their house and one family member (spouse) needs to live somewhere.

 

[Flying mermaid]

We had to venture into the Nursing Homes issue with Mum and several of my friends are at the same stage. It’s a nightmare. Families taking out loans to get their elderly into homes when they don’t get the pension but their assets may just be their house and one family member (spouse) needs to live somewhere.

yes I have heard it is a nightmare - I guess I am burying my head in the sand and hoping I won’t need to come to grips with it.

 

[JohnK]

And JohnK you are not thinking of some of the extra costs associated with ageing. Medical care. Nursing home costs. Some items will fall like food, others will rise. Nothing to do with activity but living.

I'm factoring on what I'm doing today and what I'm likeky to be doing if still alive at 85.

Medical care should stay constant with Medicare and private health insurance in place. Food will definitely decrease. Activity will definitely decrease. Inflation needs to be factored into equation and I've done that already.

Nursing home costs do not figure in my calculation costs as they may not be necessary. Also how much do you budget? $20,000/year? $30,000/year? $40,000/year or more? Saving for nursing home now means working longer and that doesn't benefit anyone other than the beneficiaries of the will if you get it wrong.

Anything else I may have missed?

 

[lovetravellingoz]

Dementia, Divorce, Governments changing Super Rules, Embezzlement, Kids having unexpected accidents/illnesses.

But yes it is up to each of us how big a safety margin we want, how much comfort in retirement we want, whether we want to assist offspring etc.

With myself most of my Dad's male relatives live/ have lived to an active 90's. So I am planning for a longer term.

 

[cove]

Thanks JohnM and QF WP for the corrections in the matter of those over sized politician pensions getting taxed.
Bill Shorten couldn’t run a pay toilet but that is purely my personal opinion.
His ideas on taxes could have pretty nasty consequences.

 

[Pushka]

Dementia, Divorce, Governments changing Super Rules, Embezzlement, Kids having unexpected accidents/illnesses.

But yes it is up to each of us how big a safety margin we want, how much comfort in retirement we want, whether we want to assist offspring etc.

With myself most of my Dad's male relatives live/ have lived to an active 90's. So I am planning for a longer term.

Yes, all of the above. I also don’t want my kids having to support me too much with their time or become my carers. I think that’s an awful waste for the younger person, jmo.

Family history is interesting. Life expectancy is all over the place in my family. Grandpa died at 52 from WWI complications and was ill from that for most of his adult life. His wife life until 92 but was in Nursing Home for several years before that. Their daughter Mum was in robust health until 85 until stroke and then death in Nursing Home 18 months later. On Dads side, Granny died at 87 after a lifetime of rheumatoid arthritis but as a country girl that didn’t stop her being on the roof when we visited her on our honeymoon at the age of 80. Her husband died at 78 from heart issues. Dad died at 74 from cancer. My thoughts - 85 seems the best I can hope for and I will not proceed to a Nursing Home.

Husbands history - all grandparents lived to their 90’s plus a couple of hundreds. His parents - His dad died at 57 from cancer, his mother at 66 from Cancer and he himself had cancer at 22 but obviously recovered.

So for us family history seems completely irrelevant. I’d expect to leave my family something. I intend to take action when the time is right. ‘Still Alice’ movie scared me. I have no family issues to work through unlike the character in that story so figure it’s my choosing. It actually helps with planning.

 

[QF WP]

I'm factoring on what I'm doing today and what I'm likely to be doing if still alive at 85.

Medical care should stay constant with Medicare and private health insurance in place. Food will definitely decrease. Activity will definitely decrease. Inflation needs to be factored into equation and I've done that already.

Nursing home costs do not figure in my calculation costs as they may not be necessary. Also how much do you budget? $20,000/year? $30,000/year? $40,000/year or more? Saving for nursing home now means working longer and that doesn't benefit anyone other than the beneficiaries of the will if you get it wrong.

Anything else I may have missed?

Before considering nursing homes, one has the option of needing to consider retirement homes/villages (which have both independent living places as well as high care need places).

To gather an idea on potential cost for nursing homes (as they will go up), read this and use the figures: Nursing Home Costs

Everything that you save in reduced costs are likely to be spent in aged care fees. The lucky few are physically and mentally capable into their late 80's. Depending on the level and type of assets and the position (one person of couple needing facilities, or both); means much research should be considered before making any decision.

I had one couple where the husband needed nursing home facilities (as assessed by ACAT) after a stroke and the wife needed to withdraw from her Allocated Pension to partially fund his Refundable Accommodation Deposit (RAD, previously and more easily known as the "bond"). She then sold their home and that funded her into her independent living unit (at the neighbouring retirement village) and allowed her to put the equivalent funds that she'd spent on his RAD, back into her super.

The average time spent in a nursing home (previously known as high care) is 1 years and 3 months (as most are in serious decline health wise, it makes sense). My client died after 6 months and the RAD was refunded to his Estate and then available to his surviving spouse (who was the major beneficiary of his Estate but by this time couldn't put it back into super as she was then over age 65). So we had to use other retirement income steam strategies for those funds.

Understanding RAD's and Daily Accommodation Payments (DAP's): Making sense of RAD and DAP | Aged Care Online

 

[Pushka]

Before considering nursing homes, one has the option of needing to consider retirement homes/villages (which have both independent living places as well as high care need places).

To gather an idea on potential cost for nursing homes (as they will go up), read this and use the figures: Nursing Home Costs

Everything that you save in reduced costs are likely to be spent in aged care fees. The lucky few are physically and mentally capable into their late 80's. Depending on the level and type of assets and the position (one person of couple needing facilities, or both); means much research should be considered before making any decision.

I had one couple where the husband needed nursing home facilities (as assessed by ACAT) after a stroke and the wife needed to withdraw from her Allocated Pension to partially fund his Refundable Accommodation Deposit (RAD, previously and more easily known as the "bond"). She then sold their home and that funded her into her independent living unit (at the neighbouring retirement village) and allowed her to put the equivalent funds that she'd spent on his RAD, back into her super.

The average time spent in a nursing home (previously known as high care) is 1 years and 3 months (as most are in serious decline health wise, it makes sense). My client died after 6 months and the RAD was refunded to his Estate and then available to his surviving spouse (who was the major beneficiary of his Estate but by this time couldn't put it back into super as she was then over age 65). So we had to use other retirement income steam strategies for those funds.

Understanding RAD's and Daily Accommodation Payments (DAP's): Making sense of RAD and DAP | Aged Care Online

Can you put funds into your Super once you reach older age (I’m assuming she was in her ‘80’s). I thought that door would be bolted by then. And there is a limit, isn’t there.

 

[Flying mermaid]

Can you put funds into your Super once you reach older age (I’m assuming she was in her ‘80’s). I thought that door would be bolted by then. And there is a limit, isn’t there.

currently as I understand it, the age limit is 75 and from 65 you need to meet a work test,

However from 1 July this year you can put 300,000 pp into super with no age restrictions if downsizing the family home.

Disclaimer - it changes so often I could easily be wrong

 

[QF WP]

Can you put funds into your Super once you reach older age (I’m assuming she was in her ‘80’s). I thought that door would be bolted by then. And there is a limit, isn’t there.

Access to super is limited beyond age 65, where one must meet a work test and that only applies until age 75 (with the contribution limit being $100K personally and/or $25K employer).

There are other retirement products that give income streams that aren't under the superannuation umbrella.

New legislation now gives the availability for a "downsizing" contribution to those aged over 65 and the maximum is $300K per person (but only after1 July 2018 having met certain conditions): Downsizing contributions into superannuation. Of course, this will limit any ability to access the Age Pension if they still have less than the asset threshold. Then there is also the issue for those with already a lot in super - the transfer balance cap ($1.6M)

 

[Pushka]

currently as I understand it, the age limit is 75 and from 65 you need to meet a work test,

However from 1 July this year you can put 300,000 pp into super with no age restrictions if downsizing the family home.

Disclaimer - it changes so often I could easily be wrong

Access to super is limited beyond age 65, where one must meet a work test and that only applies until age 75 (with the contribution limit being $100K personally and/or $25K employer).

There are other retirement products that give income streams that aren't under the superannuation umbrella.

New legislation now gives the availability for a "downsizing" contribution to those aged over 65 and the maximum is $300K per person (but only after1 July 2018 having met certain conditions): Downsizing contributions into superannuation. Of course, this will limit any ability to access the Age Pension if they still have less than the asset threshold.

Ah yes. Rings a bell now. I have a few years to go. I can retire now, raid the super, pay off the mortgages, then sell the house when I’m sixty five and pop some back in. What is the aged pension?

 

[Flying mermaid]

Ah yes. Rings a bell now. I have a few years to go. I can retire now, raid the super, pay off the mortgages, then sell the house when I’m sixty five and pop some back in. What is the aged pension?

And use up all the super to go on cruises and then go on the pension

 

[Pushka]

And use up all the super to go on cruises and then go on the pension

Oh yes. Best advice ever. I’m surprised that loophole hasn’t been slammed shut.

 

[QF WP]

Yesterday, the International Organization of Securities Commissions (IOSCO) released a report that examines the growing vulnerability of ageing investors to financial fraud and other risks. It also identifies sound practices for enhancing protection of seniors and highlights the valuable role of financial planners in client education and protection.

The report brings together feedback gathered from a recent global survey on senior investor vulnerability, conducted by the Financial Planning Standards Board (FPSB).

IOSCO's media release: http://www.iosco.org/news/pdf/IOSCONEWS490.pdf
Report: http://www.iosco.org/library/pubdocs/pdf/IOSCOPD595.pdf

Light bedtime reading for advisers, the public, retirement places and the government.

 

[QF WP]

Oh yes. Best advice ever. I’m surprised that loophole hasn’t been slammed shut.

Not a loophole - the public expressing their democratic right to spend $ in their early retirement whilst they can still afford and have physical and mental health. Remember the percentage of people who have excess investment assets above the assets test threshold and are independent (self-funded) retirees, is very small. Feel fortunate if you are amongst them, generally due to good planning.

Assets Test thresholds: Age Pension: Assets test thresholds applicable since March 2018

 

[JohnK]

,
the problem is no one actually knows how long they are going to live or what their quality of life will be. I have read of a lady who went on an Antarctica cruise at 90 and was climbing down into zodiacs. That might be me, or I might be hardly able to walk by then and not travelling,

As others have said there are potentially increasing medical costs the older you get and of course if your kids need a helping hand for some reason you want to be able to do that. Nursing home costs are also another thing. Haven’t really looked at them yet, but apparently very expensive to get into a high quality one, So the nature of the spending changes, but it is still there.

I can understand all of that but what is the equation for how much you factor on nursing home care? How many years? How much per year taking into consideration that costs increase more than CPI?

Personally I don't have a lot of money. If I work until 60 I should have an income of around $55,000-$60,000/year. That should be enough for a comfortable life for our family, including trip(s) back to Thailand.

I'd expect a relatively active life until 75 years of age at which point costs should start to decrease each year even with increase in medical costs.

So that's the plan. But what about nursing home costs? If I start saving these over and above the income mentioned above then I may need to work another 5-10 years. I don't even want to consider that option.

Also with a family income of $60,000 are you eligible for health care card as if you were on pension? That could save some of the medical costs.

I guess we are all different and we all plan differently.