Well I'm stuffed then.. 3 recessions, 1 divorce and a redundancy, I lost over $250,000 when my super fund in a 'reputable' mortgage\insurance investment went belly up ( only recovered $17,000 and that is still being paid out in annual installments ) and 'retirement' is only 18 months away. Yeah right !!
I suspect it will be work till I drop for me basically. Keep me busy I guess.
We have been using a financial planner for about 3 years, Troy McPhee (www.adviserfp.com.au). The key message he gives us is that the decisions we make when we are young have a huge consequence on the funds we will have in our old age.
If I squirrel away a little bit each year, when I am young, I can double or triple what I will have in retirement.
When we rely exclusively on the 9% super plan, in most instances this will provide insufficient funds for retirement.
Every year that we postpone retirement, we considerably increase the value of our retirement savings, as those savings have had an extra year to grow before we start chipping away at them. Retiring at 55 sounds attractive, but could be a very poor financial decision in the long run. Even pushing on to the age of 58 or 60 will make a huge difference later on.
Most financial planners will charge their fees from your super monies, so you do not have to part with your current cash flow to get that advice. It has been great for my wife and I, as for a modest fee from our financial planner, we have been set some achievable targets which will make a huge difference in retirement. Having someone to report to each year keeps us accountable, and takes some of the angst out of the discussion that might otherwise exist between spouses with competing ideas.
I cannot recommend more highly the value of getting some advice from a financial planner. They are like consulting a doctor, except for your financial health rather than physical health.
There are some shonksters in the financial advisory industry, so one has to be careful. As a litigation lawyer I have brought cases (and have one currently) for clients who have lost lots of money in dodgy investments. Be careful who you consult.
We should plan to retire in a place like Bali, ad it is a lot cheaper and our Aussie dollar worth a lot more.
Heck, follow the law of nature and moves overseas wherevthe cost of living is a lot lower.
Reading through this tread, I've noticed a few people missed out on a simple point with respect to what to have in the bank against what you can withdraw each year and "still make it"... Barry hit it on the head... Interest vs Inflation...
You should be aware of the following:
When calculating what you really want/need/desire in the way of an annuity, you need to account for not only uncertainties in the way of expenditures, but also for fluctuation in the interest rates and the consumer price index, CPI (rate of inflation).
Therefore, a 3.5% interest rate does nothing for you if the CPI sits at 3.5%, as your purchasing power decreases over time.
I've included a table I banged together in 30 seconds to illustrate my point... (took me longer to write the post, so hopefully my table is correct)
Assuming $800k, 3.5% interest, 3.5% CPI, living on $43.5k per year (fixed!), you are broke in 30 years (assuming no taxes... yea right!)
The right hand column in the actual purchasing power you have for the principal in today's dollars. What this means is that in year 10 (for example), $100 dollar will only buy the equivalent of $70 dollars worth of "stuff"... in other words, the $618k you have in the bank only can buy $433k of stuff in today's dollars. This results in you having to spend more each year if you want to maintain your "life style".
Interesting comment about the $5 coffee. In 10 years time (@ 3.5% CPI), a cup of coffee will cost $7.05
If I squirrel away a little bit each year, when I am young, I can double or triple what I will have in retirement.
Assuming someone doesnt come and pinch yr nuts along the way.
Its getting harder to find investments that will still be there later,
yet provide the growth / interest required to keep up with inflation,
and i suspect its going to get much worse in the near future.
Too many unemployed "financial types" will be out there trying to get their fingers into the super money pot, vs go on the dole.
Quote:
I cannot recommend more highly the value of getting some advice from a financial planner.
I always ask em why they still work for a living
Ie if they are so good at it, why dont they take out a loan and invest it wisely, then live off the proceeds.
Investing only for themselves, paying no fees, knowing how to dodge tax etc, means they should be able to do this much better if they are their only customer.
Getting investors to pay their wages seems a better deal.
Its a bit like the old story of who gets rich in a gold rush
( and its not the miners )
Andrew
Last edited by AndrewJ; 09-10-2012 at 07:31 AM.
Reason: spellink
I have never had any faith in super funds or financial planners, other than my own super (CSS). These funds and planners are businesses and they aim first to make a nice living for themselves and if there is anything left over it goes to the fund.
I remember the first 3% compulsory levee 20 years ago. I was in one but never relied on it and when I cashed it in at retirement there was 20% less than my employer had put in.
I calculate the value of my super by knowing what it returns then backtrack from what I can receive from a secure investment eg fixed deposits, less the inflation rate and any other charges. Thus for a $30000 indexed pension you can't rely on anything better than about nett 2.5% return. This of course equates to about $1.2m.
If you have this amount invested at retirement and you own your own home you are pretty much assured of a comfortable retirement. You won't get this from any of the super funds so you need to make your own provisions.
Yeah, divorce punches a big whole in your retirement plans. In my case it meant the property had to be sold at a terrible time, so it lost money, I ended up back at about the same place as I was at 20 years old, but with 23 years less time to prepare for retirement! It also means owning a home before I retire is far less likely, (I'm stuck renting in a very pricey rental market) which in turn puts a greater financial drag on any retirement income. Lost a year or two of income for medical stuff too.
50K pa would be great, I'd be getting a $20,000 pay rise
So, yeah, if you are young, get that house paid off, and stash money away, retirement age comes around faster than you can imagine, and if you live a long life, you will need a fair lump o cash when you retire.
My 2cents again: Many people worry too much about wealth in retirement and forget that life is about the journey not the end.
When I was in the AFP I saw many many friends work shift work all their lives, refuse to consider early retirement so they could build up their nest egg and then they retired at 65 and I attended their funeral within 3 yrs. Food for thought?
Why, what did he suggest Larry? If it's not a rude question.
Hi Paul
He suggested rolling most of my super and proceeds from the sale of my business into an allocated pension, keeping back about $10,000 in a cash management account for high interest/ready availability.
The money was, of course, invested with the bank's investment/superannuation arm using a safe strategy of only having 30% in Aust/International shares.
Since I am still working part time, the adviser suggested I draw the minimum annual amount allowed by the government, and consequently the value of the investment is increasing even after I draw a set fortnightly amount, and this is not taxable or considered as income when applying for the aged pension.
To sum up, I get a part aged pension, an allocated pension, income from work, and I have a Centrelink concession card-pretty good!
There is no fee for the advice-only a relatively small fee for setting everything up if you decide to go ahead, and a small ongoing annual management fee.
Don't know if I can say WHICH BANK here.
Yeah, divorce punches a big whole in your retirement plans. In my case it meant the property had to be sold at a terrible time, so it lost money, I ended up back at about the same place as I was at 20 years old, but with 23 years less time to prepare for retirement! It also means owning a home before I retire is far less likely, which in turn puts a greater financial drag on any retirement income. Lost a year or two of income for medical stuff too.
50K pa would be great, I'd be getting a $20,000 pay rise
So, yeah, if you are young, get that house paid off, and stash money away, retirement age comes around faster than you can imagine, and if you live a long life, you will need a fair lump o cash when you retire.
Yeah, for sure. My Ex never considered having her own super setup so when we split she hooked half of mine. <insert appropriate swear word here >. We did ok on the house sale as we had reasonable equity although we lost capital value (bad time to sell as well) but that just became the deposit on my next place when I got settled and married again. Fortunately the kids were young adults so didn't have the support problem but with the recessions, redundancy etc had to start all over again.
My lovely wife in this marriage has been brilliant. We were both earning real good for while and hit the mortgage hard and when redundancy happened the payout almost finished the mortgage so we are basically debt free there but my chances of getting anywhere near a sustainable investment for later is zero.
And what investment is safe these days ? My $250k was in a very reputable (supposedly) big insurance company that just belly flopped. The advisor I had at the time is still embarrassed to see me after the advice she gave. She sends me a calendar each year ...
Makes me laugh, the finance people all complain that the little investors are all sticking their money in bricks and mortar, not companies and they wonder why !! At least it yours and you have some control.
Hi Paul
He suggested rolling most of my super and proceeds from the sale of my business into an allocated pension, keeping back about $10,000 in a cash management account for high interest/ready availability.
The money was, of course, invested with the bank's investment/superannuation arm using a safe strategy of only having 30% in Aust/International shares.
Since I am still working part time, the adviser suggested I draw the minimum annual amount allowed by the government, and consequently the value of the investment is increasing even after I draw a set fortnightly amount, and this is not taxable or considered as income when applying for the aged pension.
To sum up, I get a part aged pension, an allocated pension, income from work, and I have a Centrelink concession card-pretty good!
There is no fee for the advice-only a relatively small fee for setting everything up if you decide to go ahead, and a small ongoing annual management fee.
Don't know if I can say WHICH BANK here.
Hey Larry,
thanks so much for that detailed reply. I appreciate the details cos that's where the real information is. Can you tell me how much you're allowed to take as an 'allocated pension' from your fund such that it isn't considered income as you've described. That wouldn't be considered 'prying' would it? It must be a figure that applies to all of us I'd think
Thanks again Larry - all the best in your executive semi-retirement
My 2cents again: Many people worry too much about wealth in retirement and forget that life is about the journey not the end.
When I was in the AFP I saw many many friends work shift work all their lives, refuse to consider early retirement so they could build up their nest egg and then they retired at 65 and I attended their funeral within 3 yrs. Food for thought?
You're right mate - it is most definitely about the journey - well said. Even so, we do have to make some sort of assumption that we're still gonna be around after working age, and will therefore need to pay our way - and enjoy ourselves. We probably shouldn't assume we'll have snuffed it at an early age. Try to cater for some of each maybe
A few years ago, I arranged some insurance through a guy I knew from a business club. This was in the height of the boom - around 2007, and this guy also was a financial advisor, although I had nothing to do with this part of his services - but it IS a part of this story.... read on !
A year later, I got my statement showing the $3k I paid for my insurance premiums. Also included was a surprise first page from someone else's Super Fund Statement - whoops!
I didn't know this other guy, but his statement made for interesting reading.
He'd started his fund at about the same time as I took out my insurance, so about a year ago. He'd paid in $200,000 .... and after just one year in the boom we were all enjoying back then..... his fund had lost the staggering amount of $80,000 !!
They had managed to whittle his $200k down to a bit over $120k at a time when a monkey could have made money on stocks.
Be very careful of Managed Funds that invest the larger part of your money on stocks, and if at all poss, set up your own SMSF. You won;t regret it!
