Quote:
Originally Posted by glend
It's about how you manage it. Forget Annuities, they are stacked against the buyer to make money for the seller. There are plenty of managed funds that provide investment streams returning around 10%. Avoid the high fees funds, and pick a good performer. My Super fund has been growing just the Balanced choice by more than 10% for many years now. It's about the level of risk you personally will accept. To get the equivalent of a full pension(for a couple) you need only about $340k in investments. The Health Card is not part of the changes, it has already been stated that all retirees will still get access to the Health Card, even the millionaires.
Don't believe the propaganda that sites the cash rate as the return on investment in pension impact comparisons. The lesson is that everyone has to pick a risk profile that gets them what they need. Low interest rates across the whole are a fact of live and no where are you going to get the old term deposit rates of +10% (that we enjoyed back when mortgage rates were 17% (thank you Paul Keating for that nigthmare).
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While existing Health card holders with $1.1million in assets get to keep it, future people who are ruled out from the pension under these changes, will not get it.
How well did your balanced fund perform from 2008 to 2011? For a relatively safe investment, one can only really count on something paying 2 to 4 percentage points above the risk-free rate of return (government bonds) in the long term, given the guaranteed eventual ups and downs.
I have seen plenty of people in the past caught out badly by planning their retirement on 10% rates of return in perpetuity. It doesn't work out that way.
Can I take it that the Managed Fund income streams that you mention are taxable? Whereas the income streams from managed funds within Allocated Pensions are effectively tax free. I wouldn't be in a hurry to get out of Allocated Pensions just yet.
$340,000 does not deliver the same as an old Age pensioner couple gets.
Firstly, it does not deliver the effective up to $5000 from the Health Card.
Secondly, the money will be taxable.
Thirdly, there is no guarantee that it can maintain the investment return at 10%.
Fourthly, it is constantly losing value to inflation, whereas the pensioners don't have that problem as their income stream is constantly being indexed upward.
Regards,
Renato