Investing in superannuation in 30's?

preservation changed has always been grand father, and never retrospective so if your preservation age is 60, it will stays at 60 and if there are changes it will be for the new generations that just enter the workforce, it wont be you reach 50 and preservation at 60 then all the sudden it goes to 70

Lot of baby boomers retiring soon or already retired still retire at 55 and that has not change despite a dozen of changes gone through the super system.

I am fairly confident my preservation at 60 wont change and if they do it be for my kids and grand kids generations

so it mostly myth

 

I don’t believe one should be choosing whether to buy investments in Super OR to buy investments outside Super. I believe one should do both.

We are retired, been so for over 8 years.

Our Net Worth is:

• 40% in Super, consisting of shares, managed funds and cash reserves. Its purpose is to provide 100% of retirement income (tax free) plus some capital growth.

• 60% outside Super, consisting of property and cash reserves. Its purpose is to mainly provide capital growth. It is currently NG and we use our pension payments to cover this shortfall.

We aim to make our Net Worth fairly resilient.

If the sharemarket crashes, we try not to be concerned, especially if the dividends stack up.

If the property market has a major correction or interest rates rocket up, we try not to be concerned as we have significant cash reserves outside Super (in Offsets) and in Super.

So far, it is working for us.

If I was 30 today, I would do exactly the same as I have done. That is, maximise our contribution to Super, preferably a SMSF for maximum control and maximise the use of the remaining funds in investments outside of Super.

I have seen a number of people (who didn’t have a lot in Super) lose everything outside Super (including PPOR, cars, etc) because a business went belly-up, a property transaction goes horribly wrong, ...

They will continue to work for a very long time.

 

my old fashioned company matches additional salary sacrifice beyond the 9.5% to a certain point, so for me its a no brainer. Riskfree investment of instant 100% return before tax advantages

but also with share investing, i take a long term hold mentality and just do indexes/ETF. So having it in super for next 20 years, forces discipline at least in a portion of my investing. And for compounding effect

 

Once you realise that Super is real money and not some pot of gold at the end of the rainbow you realise how powerful salary sacrifice can be. It is money for free. If I could go back 10 years I would definitely add more into super. Once you start sacrificing you adapt to your new salary and deal with it. Just think of it as a pay rise.....but kind of in reverse

 

If you want to retire, your doing the wrong thing anyway !. Giving away you 25% of your earnings compounding year after year is throwing a massive amount of money away. A little early saving means you could have enough funds early enough that you don't need to save after 45, because they will grow, because you wont be paying tax, You would have enough funds for when you are 7,. and have more disposable income after 45 because you don't have to save as much .

 

Since last year (or was it year before?) you can can make a person contribution and claim a tax deduction - so effectively like salary sacrifice. It used to only be self employed could do it, but now anyone - so could help with timing.

Personal super contributions

Also, what fund are you in? Retail (bank) fund or Industry fund? Generally the Industry funds have performed better, less fees - so you get better growth too. (Of course there is variance even between Industry funds)

 

Unless you guys have 200K in super the costs may not be worth it..
I am of the opinion that I would rather my money today and use it to compound my wealth at my discretion, rather than SMSF. SMSF for me is worthwhile as a strategy heading into your 50's. I cannot give financial advice, but in my opinion, make your $ work for you today!

 

I am in a similar state of confusion in regards to my Super. I already make 5.5% (Barefoot advise) as a salary sacrifice to super, but am thinking of topping it up to the max concessional cap (25,000) mainly for tax savings purposes. The way I see it, this decision is based on personal cash-flow situation and intended investment alternative (property/shares/crypto etc).

Lets say you salary sacrifice an extra 1000/year, this will be taxed at 15% as opposed to 34.5 - 39% for most Australians. So,you will either have 850 (with Salary sacrifice) or 610 (without Salary sacrifice @ 39%) in your investment bucket*. If you want to grow the 610 to 850, you will need to get 28% return on investment. While this is possible in some cases, its not achievable for all. If investing in shares in a passive way (index/managed funds), I think its better to invest through super instead on investing from after tax salary.

The main things to consider is whether you need access to those funds now or in near short term or can you hold them off as an ultra long term investment. Also can you grow it at a higher rate than the tax/compounding benefits seen above.

 

Everyone’s situation is different. For me it’s a no brainer to build your SMSF in your 30s esp if you are
- self employed
- have high surplus income
- have hit your normal servicing barriers due to a large prop portfolio outside super.

The best benefits are
- SMSF Capital is totally protected from all creditors
- you can gear through a bare trust and as the asset is limited recourse, lenders view it much like comm property security — LVR lower, rates higher , but the ability of the asset to generate income to service debt is paramount.
- you can purchase business premises and divert your ABN Profits away from a 27.5% tax environment to a 15% tax environment.
- buy a long term growth asset as a young SMSF investor as the CGT is capped at 10% And CGT Free if sold once in pension phase

Gearing in smsf can be hard as rates tend to be circa 6% and negative gearing in a low tax environment is no fun... add unforeseen repairs, vacancies, land tax AND you will erode your 25k you pump in every year and your cash balance will be stagnant...

Of course As you get older, an SMSF
Should ideally Reduce / eliminate its gearing and swing towards income
Generation through shares or commercial
Property.

Get it big enough and you can buy a large TAX FREE income generating commercial property that provides your pension drawdown without eroding the capital balance for decades.

 

To me the debate isn’t about whether or not super is a good investment vehicle...I mean that’s an absolute no brainer.

The debate is whether your better off investing outside super with the aim of an early retirement OR plan on retiring when its available.

For me personally the idea of investing outside of super with the aim of retiring at 55 is a far bigger driver than investing in super and retiring at 60. No argument it’s a much riskier strategy but with my risk tolerance, 5 years extra non working life is worth it.

 

I don’t think anyone who is Investing additional amounts into super is planning on retiring at 60. It is not super “or” early retirement it is “and”

The changes to superannuation law (none of which impact preservation age) only make early contributions to super more important (if you expect to live beyond 60 anyway)