Future planning relating to super

Hi all,

Just has a question about how people factor super in to their long term plans. I just had a look at some basic (very rough) numbers and assuming 7% return per year and salary increasing by 2% a year (with a few years of 0 income and super for my partner while on mat leave but is still conservative to assume only 2% increase for myself each year) by the time we hit 60 I would have around 1.6M in super and my partner around 800K so nearly 2.5M between us. Also this is based ob 9.5% contribution not the 12%

Based on the 4% rule that gives us plenty to live off the returns of that once we turn 60. With that being the case, is it worth looking in to selling off some capital in future to help us reach 60 then just live off that or do most of you aim to hit targets outside of super then super is just a bonus?

Any input would be greatly appreciated.

Thanks,
Nick

 

One strategy is to eat into your capital now to assets with earlier retirement/freedom, before accessing super, because once you are able to access it you will get a sudden boost in income.

 

How old are you?

 

27 and partner is 24

 

How much will that 4% drawdown on 2.5m be worth in 35, 40 years?

what if you dont want to, or can’t, work until then?

 

That is a valid point and I have been intentionally conservative to somewhat take inflation in to account.

I don't plan to "have to" to work until then, but I am trying to work out if people aim to have enough invested to live solely of dividends/returns outside of super then super is a bonus or if they sell off capital in the last few years until they can access super

 

Super should always factor into long term plans. Not exclusively but as a part.

1. It is concessionally taxed and can assist growth objectives to compound
2. It is concessionally taxed and will grow through contributions which are mandated
3. There can be merits of tax planning to assist both 1 and 2 above through efforts beyond the minimum super obligations
4. Super has a low tax rate of 10-15% in accumulation phase and then
5. Super has a tax rate of a potential 0% when members are aged 60+
6. Super is a protected shelter. It has superior asset protection from creditors and may even sometimes be insured from loss by the Govt
7. In pre-retirement there will be startegies to consider for non-super wealth so it has concessional tax benefits if divested to super
8. In retirement tax planning may substantially alter outcomes eg a couple of retiree swith $120K of rents would pay $22K tax each year. With switch to franked investment income in super they may avoid the $22K tax AND obtain tax credit refunds of $51K. Capital gains could be taxed at 0%

In retirement capital may erode but if the assets are sufficient the capital should be quite enduring. Most people with super of the maginitures of $2.5m will be required to draw out more than they want/ Having too much money is not a retirement problem.

 

I always read stuff like this and I know purely financially speaking that investing in super makes a lot of sense for so so many reasons.
The one part i struggle with when making the decision about where to invest and how to view super is that I would rather invest outside of super so that if I am in a position to retire early or cut back days or whatever I can. Whereas I feel like investing in super means I will be in a far better position long term but you are kinda limited to enjoying the fruits of your labour to their full extend until you hits your 60s if that makes sense

 

Do both if possible. Whether income is from super or from investments external to super it's retirement income and may allow a person or couple to retire before meeting the superannuation preservation requirements.

 

This of it this way.

If you know you have enough to live on till 60, and then from 60 will have enough to live on till the end what is stopping you from retirement now?