Super = black hole

[JIT]

Garry K, I agree, I think super must be seen primarily as a very tax-effective structure within which to invest. The only dowside being loss of leverage. Sure, if you're young you wouldn't be putting all your spare money into super, but later down the track I think it should be a central part of your investing strategy.

GSJ

 

[alexlee]

For me it really comes down to age: I intend to be retire (my own definition: I know not everyone uses this term the way I do) WAY before the government mandated age. I would think most people on this forum intend to do this as well? To have an investment that you can't touch until you're past 55 or 60 or whatever just doesn't make sense if you intend to be rich before then.

I think most accountants and financial advisers suggest super just because that's what they've been taught. Once you build up a property portfolio the super amounts (if you go for the standard contributions) become irrelevant.
Alex

 

[natmarie73]

I have to agree with you there Alex.

My employer puts the compulsory 9% of my wage into super and I don't put in any extra although I did before I bought property. Already after 3 years my property portfolio has made me waaaay more than 10 years of super contributions. I think unless you are a corrupt police commissioner or politician you'll never get rich through super!

And you're right in thinking that the govt will move the goalposts before we can get our hands on it. By the time I reach "retirement" age I probably won't be able to touch it until I'm 70.

cheers!

 

[young_gun]

Aren't self managed super funds also subject to the age rule? i.e. you have to be over the government-set retirement age before you can take any money out or suffer tax penalties. That's my main issue with super. Even though I have to pay higher taxes to start with (though with lower-taxed overseas income and depreciation deductions from IPs, I don't really have that problem) non-super assets are much more flexible.

Yes every super fund , be it a self managed trust or a super fund is subject to preservation rules (rules that state when you allowed acess to your money)

However as mentiond before on these forums , if you are no longer working full time and over 55 you can acess to your super and pull out all your moeny and their is nothing stoping you putting it back in another fund starting work full time and receive your SG contributions (9%) with your new employer.

Due to the fact most people are aiming at being financially indepdent many would be able to acess to their super at 55 due to not working full time and use this loop hole.I think super is a great idea , I mean it will lower the ammount of our taxation that is used to pay for social security. Without mandatory SGC (superauation guarantee charge , 9%) , all those who havent planned for their retirment would b a burden on us, those still paying income tax.

 

[Tim]

In my case, I only put in the minimum 7% (through salary sacrafice) of my gross salary & my employer 17.5%, which may not sound like alot, but does add up significantly as the years go by (after 13yrs the balance being around 4yrs worth of my current full-time gross salary) & does also provide great "income protection" & "death/disablement" insurance cover...


Manny.

Manny,

you must be in the public service or a Uni to get super like that. My $0.02

1) Super is a savings and investment structure
2) Why discount super? Why not have three tiers to retirement : a) Property b) Shares/Managed Funds c) Super
3) Super becomes more relevant as your age approaches your super entitlement age
4) I bet very few people understand the taxation, RBL's, access and pension/lump sum features of super - if they did the benefits may be more apparent
5) Preservation ages have and will increase
6) Australian super tax is the highest in the OECD countries
7) Super is great because your employer has to contribute the SGC

Tim

 

[Rixter]

When someone mentions super to me I ask them, do you mean SuperCONuation ?

 

[Garry K]

These are good discussions to have, as the more you know, the more pressure can be applied to the legislators to make super more appealing.

And they do listen, it just takes time. In the last couple of years, the following changes have been made to enhance super:

• choice of fund ie you don't have to use the one your employer says
• under age 65, you don't have to be working to contribute
• you can work and access your super using a complying pension
• you can split your employer contributions with your spouse
• surcharge tax abolished

I'd like to see super members (SMSF) able to "transfer" in (contribute)investment properties, like they can with listed shares.

Currently, this is unable to be done as is classed as acquiring an asset from a member, and requires the IP to be sold.

Either way, it still triggers CGT, but sometimes that can be managed.

GarryK

 

[young_gun]

I'd like to see super members (SMSF) able to "transfer" in (contribute)investment properties, like they can with listed shares.

I dont think some how this is going to happen for a long time , because if the govt allowed changes like this to occur super would be primarily used as a vehicle to escape taxation from the government and then the govt itself would have to change some of the benefits asociated with super funds because it would be used for the wrong reasons .

By allowing all assets to be transfered into super it is taking the ownis away from super being a vehicle for retirment savings and it being just a general platform for investing . Technically if you are before your preservation age (age of acess to your super fund) you would not be able to take your money out of the fund that you had put your money into , if you decided to sell a property inside your SMSF, so the benefits would be marignal anyways.

 

[alexlee]

I dont think some how this is going to happen for a long time , because if the govt allowed changes like this to occur super would be primarily used as a vehicle to escape taxation from the government and then the govt itself would have to change some of the benefits asociated with super funds because it would be used for the wrong reasons .

By allowing all assets to be transfered into super it is taking the ownis away from super being a vehicle for retirment savings and it being just a general platform for investing . Technically if you are before your preservation age (age of acess to your super fund) you would not be able to take your money out of the fund that you had put your money into , if you decided to sell a property inside your SMSF, so the benefits would be marignal anyways.

That I don't agree with. The purpose of super (from the govt's point of view) is so that people will save for their old age and not have to rely on govt pensions.

I doubt the govt would worry if the people saved 'too much' in super. The biggest control the government has over super funds (compared to other structures like companies, trusts, etc) is the 'age limit' rule. Even if people use super to 'escape' taxation, it still serves the govt's objective of self-funded retirement. All the govt has to do (and I believe they will) is to increase the age limit on super. There's a reason why the rich uses trusts instead of super funds to build wealth.
Alex

 

[Bantam Roosta]

Although I don't think my super will make me rich, I think it is serving a very useful purpose. The contributions made are built into my expected earnings so I don't even notice it gone.

Yes I could use that money elsewhere (property), but I can do that anyway, as I only put in 5% of my income into super. What it does allow, is when I do hit 55...65...70, I will have that money as a very handy bonus. If I am already rich and have been retired since 40, well who cares, I made it anyway so that small amount of money diverted probably wouldn't have sped up retirement any quicker, BUT, if something has gone wrong, or is taking longer then expected then I will be able to use the super to bring my debts to a suitable/manageable level.

BR

 

[alexlee]

So use super as a failsafe. That's reasonable. So Bantam Rooster would you contribute any more money into super above the mandatory %age?

Personally, I think having an active investment plan for the long term (20+ years, say) is almost guaranteed. The chances of that plan failing is no higher than, say, your super fund imploding from a sharemarket crash just before you retire!

I take to heart Jan Somers' comment in (I think the Story by Story book): (paraphrasing) Do you know anyone who lost money buying median priced properties for the long term?

Maybe I'm inexperienced and haven't gone through a bad crash (though I'm looking forward to it: bargains!) but I honestly don't see any risks with my portfolio as long as I'm still employed and hold for the long term, making super irrelevant.
Alex

 

[Bantam Roosta]

I just see it as a 'compulsory' form of diversification. Although I may have a very sound investment strategy that should in theory make me very wealthy, there is no guarantee with anything and super is just a small counter to help prevent tragedy.

Would I increase my % from the minimum contribution?

At this stage (30+ yrs until 'retirement') no, I wouldn't because I have absolutely no idea what rules and regulations will be in place when it comes time. When I get much closer (<10 yrs) I will consider it as a very possible strategy.

BR

 

[djones]

BR has raised a valid point regarding the diversification and this is what i use the Super for...

I only hold investment in sharemarket thru Super and rest all my investments are in property. So for me its essientially about choosing between Shares and Property...

So for me the choice depends on how much i think both Property and shares will appreciate in say next 20-30 years...I think the property will not appreciate beyond more then 3-4% as its hugely over priced at the moment...It just cant double in next 10 years as has been the case till now...it may take 20 years...

I am bullish on shares then IPs...



Just my 2 cents.

 

[alexlee]

Djones, are you concerned that you can't take money out of super before you're 60? If, say, the sharemarket goes nuts and you have enough in your super fund to retire by the time you're 45, there are restrictions on what you can take out of the super fund. On the other hand, if you invest in your own name or a trust or whatever, you can do what you like with the money whenever you want.
Alex