Unretired

[redwing]

Just reading through some miscellaneous posts and news and chanced upon this story in Businesweek:
Unretired

Food for thought with regards to our retirement planning strategy

They saved. They planned. Then housing tanked and the financial markets melted. Now they need jobs, and there aren't any

An increasing number of people who retired in recent years, confident they had set aside enough to live on comfortably, are finding themselves strapped.

The stock market plunge and the housing downturn have affected many Americans, of course. But retirees have been particularly pinched because their homes and investments are the primary assets they depend on for income. As a result, many of the country's elderly are finding themselves in Nelson's situation, low on money and looking for work.

"Suddenly the rug has been pulled out from under them," says Alicia H. Munnell, director of the Center for Retirement Research at Boston College

These are The Unretired. Seniors who thought they were set for life just a year ago now face the prospect of going back to work for two, five, even 10 years. They're sprucing up their résumés, calling old work contacts, and flocking to employment sites. There are no reliable stats yet on how many retirees are looking for work, but there are clear signs the number is growing. RetirementJobs.com, the largest career site for people over 50, saw traffic more than double, from 250,000 visitors in July to 600,000 in November. In April, before the worst of the market downturn, a survey conducted by the seniors group AARP found that 17% of responding retirees over 50 were considering or already going back to work.

These aren't just the spendthrifts or sloppy planners you would expect to run into trouble in retirement. Interviews with 35 of The Unretired show that many are people who did everything they were supposed to do—working for decades and regularly socking money away

I was speaking to a couple of older part-time workers at our workplace some time ago, one found the rug pulled out from him as he retired from the Police Force as the markets took a nosedive years ago and now works part-time to supllement income. Another saw some of his LPT's Listed Property Trusts (REIT's now) and income funds take a huge nosedive of up to 90%. The property trust index fell by a greater percentage than the ASX 300 as a whole

Having a look at Centro Properties Group, Valad Property Group, Mirvac, Commonwealth Office Property Fund, CFS Retail Property Trust and Westfield Group it's still a sorry picture, others such as GPT Group and Australand Property Group have staged a comeback of sorts

Saving to finance an old-age retirement doesn't work and the Australian Age Pension doesn't look to promising with rates from the 20th September 2010 currently at (per fortnight)

• Single $658.40
• Couple $496.30 each

As a single that's $17,118.40 per annum or $25,807.60 per annum for a couple

We are currently looking at our investments and forward planning with regards to:

1. When will our assets (shares, managed funds, property) be able to support us?
2. What size does our asset base need to get to and be able to meet our future financial needs?
3. What is the best way to use our portfolio once this is achieved?
4. Will we be able to live off dividends and rental income received?
5. Will we have to sell any of our portfolio once we retire, or will the asset base be self-sufficient?

The end-goal is to retire early, the end-goal of the government however is the opposite, with the Australian Government planning to push the age of retirement, before one qualifies for a pension, out to 67

Many threads on the forum are assisting with that goal

Financial Freedom is something we all want, our efforts are focused on the exciting things we can do with our lives by attaining this financial freedom; Not just in our 60's and 70's or beyond, but what can be achieved in the 40's and 50's also.

Why should all the 67 year olds be having all the fun

 

[redwing]

There's an interesting post from KeithJ here on Is 10 years of your life worth $2M?

If someone told you that you could retire today, but it would cost you $2M.... would you do it?
What about if they told you don’t have to pay the $2M today, you’ve got the rest of your life to pay it off bit by bit?
And what if it was even better than that – it’s not real money that you have to pay it off with – it’s money you would have made if you hadn’t retired.

 

[redwing]

From a recent VANGUARD Article

So if someone was to ask you this question: How has your super gone since the global financial crisis hit? How would you answer?

New data from the Australian Bureau of Statistics Survey of Income and Housing conducted through 2009-10 has allowed ASFA to update and extend its analysis on the distribution of super assets across age groups for everyone above 15 years of age.

Besides giving us a measured perspective on how real world super accounts have fared the ASFA analysis also updated the picture on how the super system is travelling generally.

Average super balances in 2009-10 were up to $71,645 for men and $40,475 for women. Now those average balances are clearly not adequate in terms of providing a significant retirement income stream and points to the fact that despite our super system being 20 years old it is still relatively immature in terms of coverage and adequacy for the general working population.

But there is a more positive story when you look at the super balances at the time of retirement - $198,000 for men and $112,600 for women. The most significant increase in those numbers is for women – in particular older women.

Returning to the question of how your super has fared in the two years leading up to the global financial crisis, the average super account earning rate was around 15 percent. That was followed by a negative 8 percent return in 2007-08 and a further negative return of 12.9 percent in 2008-09. In 2009-10 returns bounced back into positive territory with an average return of 10.5 percent.

According to the ASFA work that means that a super account without any additional contributions or withdrawals would have grown 6 percent by 30 June 2009 compared to where it started four years earlier.

 

[Aaron_C]

And yet they want to increase the super contribution from 9% to 12%....just shows how ridiculous this rort has become.

 

[BV]

So if someone was to ask you this question: How has your super gone since the global financial crisis hit? How would you answer?

redwing

Mine has done very well but I took measures to protect it.
When I saw the GFC coming I moved it all to cash and later invested the majority of it in property.

I think the problem with super companies is that they don't have a proactive approach and they won't advice us to move our money away from shares and protect it because they say we'll miss out on the upswing.

I just had a quick look and for the past 5 years the balanced fund has returned 3% and the high yield fund has returned 1.5%. To their defence we are experiencing events of a lifetime.

cheers

 

[random]

I don't get the retirement fuss , well not here anyway because people have property , it's easy to retire , I did at 32ish and if I can
But then because we traveled for 10 yrs , I went into the arts for a hobby and that sucked up all cash, at 42 I was absolutely FLAT broke again and owned nothing , not even a car , well an unregistered car because we couldn't afford reg.
But we did wanna live while we were young though, and we did it all and much more , all though not in a smart way because I should have kept properties I had earlier but we're glad we went for it none the less .

But to find myself broke again at 42 was a biggie and a very depressing period believe me , very low but had faith in myself and knew that all I just needed in the door with one reno and I'd easily make serious cash and be back on my feet and I did.From there we bought another, another and another, 6 -7 yrs later I'm pretty well retired again from flat broke and I'm no rocket scientist .

Buy properties you can add to set up extra rentals on, that pays it down very quickly and then that rents all yours , forever You live off that that's what I do . You don't need much when everything's paid off. Simple sacrifices along the way like drive older cars for example , properties that need work , our own place even needs a reno but hey-who's laughing in the end , new stuff just burns your accounts and income to the ground. It's ok if you've got it but there's plenty of time for flash later cause your gonna need something to amuse yourself with when your doen nothin.

I do work for myself though and only go for very high margins even when I trade, it's the only way. Work less , buy less but smarter. Potential properties, trade decent returns , it's much easier than slaving your guts out or buying rubbish.

But I don't get why people want so much for retirements. Remember , EVERYTHING'S probably paid off anyway .
It's not like your 20's/30's, owing fortunes on your income plus, so you need bugger all with no debt. You can live like a king on 17k p/yr , what's that the pension and don't forget your adding rental incomes to that and no repayments. I never see what the problem is except media and gove't bs warping everybodie's minds.I can't get the pension for another 18yrs , don't think , but my rentals provide plenty anyway and growing as they pay down.
So by the time you get the pension those rentals will be twice as much again and all yours.Hell when I can get the pension , add my rents , god knows what I'll do with all the money .

Cheers

PS , Of course mine aren't fully paid down yet but that's on auto and with growing left over so. I also still do wanna build one or two more on spare blocks that came with one . One's for my daughter so by the time she's grown up it'll pay itself off and she'll have auto income plus also own a house.
But I'll mess around with all that in my spare time from here.

 

[battler]

I was of the understanding that you couldn't get the pension if you owned a second property.

Could anyone confirm/correct this please?

 

[marg4000]

The pension is subject to an asset test and an income test. You must pass both to obtain a pension or part pension.

The asset test tapers out at around $900K (roughly) for a couple. This can include any asset including a second, third and fourth property depending on their value and any outstanding loans.

Not sure of income limits, but they are fairly generous.

As always, get good advice from the experts.
Marg

 

[random]

Yeah I've heard snippets of around what Margs mentioned and I mean that's a fair bit of worth I reckon and very generous.
Beats me why people with those kind of assets or income even want it. When my time comes if they want to give it to me great but if not I don't really care.

One thing that does urk me when people talk pensions too is that what Governments give you as a pension is not meant to be your life's wage equivalent it's only meant to help you out and in most cases you'd imagine too , everything is also owned and paid out by then too don't forget .
So at 17k or whatever it is , roughly 1/3 of the average wage but 3/4 of the average wage when your younger goes on life and debt and bs of which you shouldn't have any of left at retirement . So it'd buy a lot of tea bags

But then even if you get there but have nothing , it'd still cover rent and food atleast , and you'd get a shipload of discounts and rebates too so , a few goodies and that's all it's meant to do . not provide a royal lifestyle- gotta pay for that yaself ! At least that's the way I see it.

Cheers

 

[Aaron_C]

random I think that's why the pension is set at that level - it's only for basic sustenance so we don't see pensioners roaming the streets without a home.

 

[Ed Barton]

The pension is subject to an asset test and an income test. You must pass both to obtain a pension or part pension.

The asset test tapers out at around $900K (roughly) for a couple. This can include any asset including a second, third and fourth property depending on their value and any outstanding loans.

Not sure of income limits, but they are fairly generous.

As always, get good advice from the experts.
Marg

i maybe misunderstanding your use of 'tapers'. but i take it you mean the pension starts to reduce at 900k. if so, you're very wrong.

the asset test for full pension is 186/275k(single/couple) for home owners. it then tapers out and no pension is payable at 686k/1m.

http://www.centrelink.gov.au/internet/internet.nsf/payments/chartab.htm#a

the income test for full pension is 150/264 pf and again it tapers out and no pension is payable when you earn 1600/2500 pf.

http://www.centrelink.gov.au/internet/internet.nsf/payments/chartc.htm

 

[Sunfish]

The asset test tapers out at around $900K (roughly) for a couple.

i maybe misunderstanding your use of 'tapers'. but i take it you mean the pension starts to reduce at 900k. if so, you're very wrong.

Where is the ambiguity? It's all over by 900k.

 

[Ed Barton]

Where is the ambiguity? It's all over by 900k.

semantics. i read it that way and i'm sure others might too, just clarifying for people who may have read it the same. personally i would have said it cuts out.

 

[Dazz]

Nice links Ed, well done.

The income test criteria are far stricter than the assets test.

$ 265 per fortnight per couple before the pension starts to taper off is very low indeed.

Anyone trying to modify / adjust their income from investments - like so many retired folk do - so that they qualify for a part pension at least so they can obtain all of these cards (medical and travel especially) is just madness when you consider the hoops they need to jump thru for the tiny monetary gain.

Far better to concentrate on, and apply your mind power to improving your passive income in retirement to the point you don't qualify for anything. That way you don't have to continually submit your private affairs to every known Govt dept for scrutiny, and you suddenly become unrestricted and able to earn whatever you like.

It took over 6 years to convince my parents to change their mindset over this point. All of their peers, who were extremely knowledgable in the "ways of the system" were encouraging them restrict their income and their assets so they qualified for all of these cards etc. When we sat down and actually calculated the benefit of these cards was minimal.

Their assets and income now blitz all of the tables, and they are one of the few retired folks in their circle who don't have to scrimp and save, and more importantly don't receive letters from Social Security saying things like "we've noticed your income has risen lately, which will adversely affect your pension" and then the poor folk duck and weave and do all sorts of crazy things to reduce their income so that they stay under the prescribed limits.

It's nuts.

 

[Sunfish]

semantics. i read it that way and i'm sure others might too, just clarifying for people who may have read it the same. personally i would have said it cuts out.

To be pedantic, "cuts out" infers that it is constant and then stops abruptly which, we know, is not how it works.

But enough of this.

 

[Sunfish]

The income test criteria are far stricter than the assets test.

Ain't that the truth.

Mrs Fish does a few hours a week on the books for a friend. She MUST notify Centerlink the actual income every fortnight on Thursday. Can't do so a day earlier, even if going for a holiday.

 

[Ed Barton]

Nice links Ed, well done.

The income test criteria are far stricter than the assets test.

$ 265 per fortnight per couple before the pension starts to taper off is very low indeed.

Anyone trying to modify / adjust their income from investments - like so many retired folk do - so that they qualify for a part pension at least so they can obtain all of these cards (medical and travel especially) is just madness when you consider the hoops they need to jump thru for the tiny monetary gain.

Far better to concentrate on, and apply your mind power to improving your passive income in retirement to the point you don't qualify for anything. That way you don't have to continually submit your private affairs to every known Govt dept for scrutiny, and you suddenly become unrestricted and able to earn whatever you like.

It took over 6 years to convince my parents to change their mindset over this point. All of their peers, who were extremely knowledgable in the "ways of the system" were encouraging them restrict their income and their assets so they qualified for all of these cards etc. When we sat down and actually calculated the benefit of these cards was minimal.

Their assets and income now blitz all of the tables, and they are one of the few retired folks in their circle who don't have to scrimp and save, and more importantly don't receive letters from Social Security saying things like "we've noticed your income has risen lately, which will adversely affect your pension" and then the poor folk duck and weave and do all sorts of crazy things to reduce their income so that they stay under the prescribed limits.

It's nuts.

you're welcome, but really it only took 3 seconds on google.

ha ha. my parents are the same. i think the thinking comes from a time when you retired, sat in a chair for two years and then died. and god damn it you deserved the pension and benefits come hell or high water.

 

[Ed Barton]

Ain't that the truth.

Mrs Fish does a few hours a week on the books for a friend. She MUST notify Centerlink the actual income every fortnight on Thursday. Can't do so a day earlier, even if going for a holiday.

that sucks.

the amount of income where you start to lose pension seems very low.

 

[Sunfish]

Sounds as if you guys might know.

If I get 25% return on a 100g spec portfolio, does the 100g get added to my assets or the 25g added to my income. I assume not both.

I guess the same question could be asked of rental property but I have sold my IP.

 

[jonesy427]

just regarding the asset test for centerlink mentioned above, could one not have most if not all assets in a trust to get around this? just thinking...