Superannuation Discussion + market volatility

[Quickstatus]

Probably shouldn't have brought housing into it

It is all related

$2M funds a $100k per year pension

With a lot of assumptions going into that calculation

I think its highly unlikely that super with some allocation to equities will underperform inflation over decades

NZ currently in a recession. We are not far behind.
There is no reason why values should keep going up and up. Down is also realistic.

 

[tgh]

However, many of the people with balances >$3M and most of those with balances >$10M are using super not for their retirement needs but as a low-tax environment for wealth creation.

I can understand you thinking this, but opine that is mostly incorrect.
The end result is a function of the journey ; we started with a quite modest super fund balance and no certainty that it would fund our retirement.
We invested it carefully, minimised fees, and drew the absolute minimum pension.
It is now a substantial sum .. but that is also a function of inflation and government policies.. not us being greedy as is sometimes implied.
In hindsight we perhaps should have flown f everywhere , lived a high life, eventually qualified for a part pension and avoided the social odium for our apparently ill gotten gains...

 

[andye]

E

However, many of the people with balances >$3M and most of those with balances >$10M are using super not for their retirement needs but as a low-tax environment for wealth creation.

I can understand you thinking this, but opine that is mostly incorrect.
The end result is a function of the journey ; we started with a quite modest super fund balance and no certainty that it would fund our retirement.
We invested it carefully, minimised fees, and drew the absolute minimum pension.
It is now a substantial sum .. but that is also a function of inflation and government policies.. not us being greedy as is sometimes implied.
In hindsight we perhaps should have flown f everywhere , lived a high life, eventually qualified for a part pension and avoided the social odium for our apparently ill gotten gains...

No social odium, (in fact good on you) just asking to contribute a bit of tax from your good fortune

 

[33kft]

Running up debt now is asking our children and grandchildren to pay for us. That's why I think the affluent over 60s need to be paying more now. You can be 3 decades in retirement and contribute little except GST.

Greater tax revenue will not stop the issue of governments borrowing. It's fanciful. Just like with inflation, governments know that SOME borrowing is a good thing, regardless of how much they tout budget surpluses. Think about it from their perspective - they'll get thinktanks to benchmark their borrowings against pretty much every other country on earth and they'll have lobbyists in their ears saying you're not borrowing enough, you have access to cheap capital, spend some future generations' money on popular policy and assure yourself of re-election.

We have enviable levels of government debt in Australia (don't ask about personal debt though - sheesh). If anyone thinks additional tax rev would go into repaying previous governments' debt obligations without anything to show for it vs buying your next term - I have a toll road to the airport to sell you.

 

[Happy Dude]

However, many of the people with balances >$3M and most of those with balances >$10M are using super not for their retirement needs but as a low-tax environment for wealth creation.

Yes I recall discussion around super being used to hold farms and other property. Taxing unrealised capital gains makes sense in those cases. They could release some of the housing pressure by excluding residential property from super.

 

[andye]

Greater tax revenue will not stop the issue of governments borrowing. It's fanciful. Just like with inflation, governments know that SOME borrowing is a good thing, regardless of how much they tout budget surpluses. Think about it from their perspective - they'll get thinktanks to benchmark their borrowings against pretty much every other country on earth and they'll have lobbyists in their ears saying you're not borrowing enough, you have access to cheap capital, spend some future generations' money on popular policy and assure yourself of re-election.

We have enviable levels of government debt in Australia (don't ask about personal debt though - sheesh). If anyone thinks additional tax rev would go into repaying previous governments' debt obligations without anything to show for it vs buying your next term - I have a toll road to the airport to sell you.

I'm sure you are right but at least some the future generations will benefit from infrastructure spend.

 

[Quickstatus]

I'm sure you are right but at least some the future generations will benefit from infrastructure spend.

Assuming that the govt borrowing goes into infrastructure.

 

[Quickstatus]

Rather than give extra to the govt it would be easy to keep it at $3M by retirement by restricting further contributions so that it reaches $3M at retirement or taking out lump sums at retirement and give it to the kids/grandchildren tax free while I'm still alive, even as non concessional contribution to their own super account

Lots of ways and reminds me of Kerry Packer

 

[andye]

Rather than give extra to the govt it would be easy to keep it at $3M by retirement by restricting further contributions so that it reaches $3M at retirement or taking out lump sums at retirement and give it to the kids/grandchildren tax free while I'm still alive, even as non concessional contribution to their own super account

Lots of ways and reminds me of Kerry Packer

SImilar to my thoughts though I'd probably put it towards their future home loans (and let them make tax-deductible contributions if they can then do so)

Although I've been a bit of a dog with a bone on this, I may well end up affected at some point and hopefully have more years in retirement than working

I'm not planning to give more to the government unless the rules change and say I need to

I do have 4 sons so the intergenerational thing hits home

 

[Brissy1]

Packer's last 5 sec is the best..."because you're not spending it that well that we should be donating extra"

https://www.facebook.com/video.php?v=10153318259351264

Edit, can't insert link to video of his appearance before the senate

 

[tgh]

Alternatives to institutionalisation are expensive , 24 hour live in care at commercial rates is at least 800k pa.
It will be no easy feat to live a quality life without incarceration.
A property with a granny flat may be the go, although employing a suitable carer is likely challenging

 

[33kft]

I'm sure you are right but at least some the future generations will benefit from infrastructure spend.

Not to disagree but in my rather cynical view of things I think this will end up covered by all the public private partnerships that govt love so much for the low outlays, ensuring the user pays for the next century. If our kids are all working from home and we are off towing the caravan around they just need to stick toll gantries every 10km along the national highways and we will have it paid off for them in no time

Or until transurban build the next new tunnel and negotiate another 100 years on the old roads to cover it

 

[Quickstatus]

do have 4 sons so the intergenerational thing hits home

Are you still paying school fees

.....

Im going to sit down again to do super projections to see when my super hits $3M.

 

[NM]

Im going to sit down again to do super projections to see when my super hits $3M.

Around age 82 for me ... if I keep working.

 

[andye]

Are you still paying school fees

.....

Im going to sit down again to do super projections to see when my super hits $3M.

No, lucky with local state options

 

[Quickstatus]

The other tool is to transfer up to 85% of annual super contributions into the spouse account especially if their account has room

 

[Jacques Vert]

Assuming that the govt borrowing goes into infrastructure.

Yes indeed. When it comes to government borrowing I support it for infrastructure, but not for recurrent expenditures.

Let's take the example of the Sydney Harbour bridge. Who should have paid for its construction: those paying tax in 1936 or those who will/continue to get the benefit of its construction.

Borrowing to build significant infrastructure has the effect of spreading the cost of construction over future generations who will benefit from that infrastructure rather than allocating all the cost to those taxpayers who happen to be alive (and paying tax) at the time of construction.

 

[cove]

Well the health levy of 2% is way short of the actual cost that is borne by State and Federal governments. Probably about 8% is closer to the actual cost.
This year we will have 7 new small home units in our social housing partnership. Construction has been surprisingly smooth. We are lucky to have a builder partner.
Have never understood how disastrous projects like Snowy and NBN got to YES. NDIS was a financial disaster run by idiots at the start.
We still pay lots of tax and don’t whinge about it. Our tax audit was painful and raised about $800 in GST based on some obscure rule after more than 6 months..
I worry about the manufacturing sector in Australia crashing.and no one seems to care.
I don’t know why our WA government do budgets as their projects have cost over runs are generally out by 100%.
We need our children to have good work attitudes as they are facing issues we boomers did not have.

 

[SYD]

Since the comm seniors health care card is based on taxable income Which EXCLUDES superannuation income, vast majority of Australians are eligible at 67

That’s not what the Gov says - unless I’m misreading it?

https://www.servicesaustralia.gov.au/income-test-for-commonwealth-seniors-health-card?context=21966

Unless I sell all income producing non-super assets and buy gold or upsize (and contribute to the housing shortage), I’d never get under the income test for a Health card.

Which reminds of the other negative change for older higher income earners. We effectively pay a shed load more tax after losing the private health insurance rebate…

The OAP is based on all income (less 10%) regardless of if it is taxable hence why only 35% of newly turned 67yo folk are going onto it.

Also an assets test? (But the healthcare card doesn’t - not that it matters to me).

By design, we should be seeing less and less going on the OAP - which is unfunded and unsustainable if that number started heading back up!

It’s alarming that after 35 yrs of Super and the power of compound interest at work, peeps are seeing the opportunity to eat the Goose that laid the golden egg. It’s akin to removing the CGT exception on the family home.

Yeah, there’s the Dick Smiths and 7999 others with mega balances over $10m but those accounts will decrease in quantity with death.

 

[CaptJCool]

The OAP Numbers are flat lining
Around 35% of people who turn 67 go on it
Surviving spouses go off it as thresholds for singles are lower than couples
Others having spent the assets go on it later in life
And then of course people pass away