Superannuation Discussion + market volatility

[SYD]

If you missed it, this article was surprising! https://www.news.com.au/finance/sup...d/news-story/b9361a93f29fc569dd2d32117a97e1e1

Assuming you own you own home, and will - at some stage - go onto the pension, the article estimates singles need to retire with about $310k and couples $420k in their super.

That’s gonna give you $43k to $62k a year to spend.

Not bad, and makes super a bit more realistic and achievable. ‘experts’ continually saying you need more, more, more is disheartening.

Those numbers don’t add up (re super balance) but annual pension / income in that range is about right for a lot of peeps.

Question will be how many will be homeowners in the future? That aspiration seems to be slipping through the fingers for a generation.

 

[Brissy1]

If you missed it, this article was surprising! https://www.news.com.au/finance/sup...d/news-story/b9361a93f29fc569dd2d32117a97e1e1

Assuming you own you own home, and will - at some stage - go onto the pension, the article estimates singles need to retire with about $310k and couples $420k in their super.

That’s gonna give you $43k to $62k a year to spend.

Not bad, and makes super a bit more realistic and achievable. ‘experts’ continually saying you need more, more, more is disheartening.

Excludes RAD...an extra $1M. I think that's why a lot of retirees aren't spending their super

Edit: I've never heard of the organisation that produced this (news journalist is just reporting a report), and quote "medium retirement" spend $43,000 a year". I think that's below the poverty line.

 

[MEL_Traveller]

Excludes RAD...an extra $1M. I think that's why a lot of retirees aren't spending their super

I guess you would sell your home? Depending on where you wanted to go?,

 

[Brissy1]

I guess you would sell your home? Depending on where you wanted to go?,

Fine for a single person

 

[CaptJCool]

At the current rate of uptake for the age pension, only 1/3 are going on it as the others are denied by asset and income thresholds

This has seen the figures flatline for some time. Superannuation has changed that game plan

 

[Quickstatus]

Excludes RAD...an extra $1M

Agree.
While RAD does not need to be upfront 100% - can be less. However the balance needs to made up by regular payments including effective 8% interest.

 

[JohnK]

Assuming you own you own home, and will - at some stage - go onto the pension, the article estimates singles need to retire with about $310k and couples $420k in their super.

That’s gonna give you $43k to $62k a year to spend.

Not bad, and makes super a bit more realistic and achievable. ‘experts’ continually saying you need more, more, more is disheartening.

True. I've been trying to ignore these types of articles. $75,000/year for couples is more than "comfortable" and I think is overkill.

Also you are not going spend the same money at 70 years old, 80 years old or even 90 years old.

Aged care is unknown. For me I'm trying to save enough now in Thailand if we need aged care later. (I refuse to consider the ridiculous cost of aged care in Australia. The government should have stepped up to create not for profit aged care a long time ago.)

P.S. I think I'm already there but no point retiring while daughter is at school.

 

[Quickstatus]

$75,000/year for couples is more than "comfortable" and I think is overkill.

The problem with that is it assumes regular and stable income from the investments. Unfortunately it is rare for any investments to provide stable returns over the decades it is needed. There should be enough buffer to cover downturns in the investment such that it does not run out before you want it to run out, otherwise you will be constantly worried when the ASX has a cold. We have not had a real recession for decades and there is a generation of Australian who have never experienced one.

 

[clifford]

$75,000/year for couples is more than "comfortable" and I think is overkill.

Also you are not going spend the same money at 70 years old, 80 years old or even 90 years old.

Well, in our case (my wife and I are both in our mid 70's), we seem be spending that sort of money every year, and I don't think we live particularly extravagantly.

Such mundane things as health care expenses can rise significantly as you get older. For example, my wife has just had knee replacement surgery (successful) and may need a hip replacement too. Doing it privately (in the ACT), with hospital rehabilitation, had out of pocket costs of around $7,000, and that's with full health insurance (which in itself isn't cheap). The alternative was to wait for a long time for public hospital treatment.

Of course one can forego these discretionary things and rely solely on the public health system and other Government agencies, and live more frugally, albeit at a cost to your health, which as you get older seems be assume more importance in one's mind.

 

[Flashback]

Well, in our case (my wife and I are both in our mid 70's), we seem be spending that sort of money every year, and I don't think we live particularly extravagantly.

Such mundane things as health care expenses can rise significantly as you get older. For example, my wife has just had knee replacement surgery (successful) and may need a hip replacement too. Doing it privately (in the ACT), with hospital rehabilitation, had out of pocket costs of around $7,000, and that's with full health insurance (which in itself isn't cheap). The alternative was to wait for a long time for public hospital treatment.

Of course one can forego these discretionary things and rely solely on the public health system and other Government agencies, and live more frugally, albeit at a cost to your health, which as you get older seems be assume more importance in one's mind.

Likewise, my father has full PHI and after a recent prostate cancer surgery still had out of pocket costs of nearly 10k. I wouldn't be waiting for a public slot to open up to treat that. That could be life ending.

 

[CaptJCool]

From memory

Only 8% of older Australians get to live in aged care and so MAY Need the RAD

Unless they are on full age pension or don’t own a freehold house

 

[Quickstatus]

Only 8% of older Australians get to live in aged care

Thanks. The problem is that there is no way for anyone to know pre retirement if they will need a RAD.

8% = 1 in 12.5 retirees.

 

[Pushka]

From memory

Only 8% of older Australians get to live in aged care and so MAY Need the RAD

Unless they are on full age pension or don’t own a freehold house

I’m counting on that.

 

[Quickstatus]

My discretionary spend does not included alcohol because I'm not into it so super balance can be a little lower or slightly more resilient if the market catches a cold. I suppose for some, alcohol does not fall into the discretionary columns

 

[SYD]

The problem with that is it assumes regular and stable income from the investments. Unfortunately it is rare for any investments to provide stable returns over the decades it is needed. There should be enough buffer to cover downturns in the investment such that it does not run out before you want it to run out, otherwise you will be constantly worried when the ASX has a cold. We have not had a real recession for decades and there is a generation of Australian who have never experienced one.

The system is semi self correcting to some extent, in that if you take the min 4% to start and hope to average 6% return, your fund will have a net growth of 2%. But if there is a downturn, the actual dollar figure of 4% will reset to a lower amount the next year - so not gobble up your capital.

Yes, there’s potential feast and famine scenarios if super is your only source of income. But there are leavers increase/decrease your draw in the early years.

Not financial advice but the risk could be greater for those in very conservative options and interest rates reset to low levels. A 4% or 5% draw on 2% return is a path to the OAP.

 

[Quickstatus]

The system is semi self correcting to some extent,

Sure, the problem occurs with expectations around lower super balances that can't afford the downturns.

 

[SYD]

Sure, the problem occurs with expectations around lower super balances that can't afford the downturns.

The principle is the same for $200k or $2mil.

A good financial advisor can help someone with a lower super balance go thru the “What ifs”.

Currently a tax free income stream of $40k at 4% draw requires $1,000,000, assuming not eligible for the OAP*.

A 20% market fall would result in a $32k pension the following year. If my math is correct!

*it irks me when reporters still talk about taking the OAP and Super. Those days are numbered for the vast majority of us - as alluded to be the stats mentioned earlier. After all, that was the point of compulsory super.

 

[Quickstatus]

A good financial advisor can help someone with a lower super balance go thru the “What ifs”.

Thats important as many just assume the good times will continue.