lousy interest rates & SMSF dilemma in pension mode

Discussion in 'Superannuation, SMSF & Personal Insurance' started by ethereal, 11th Aug, 2019.

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  1. ethereal

    ethereal Member

    20th Jun, 2012
    Adelaide, SA
    It seems everyone advises that in pension mode you keep a couple of year worth of cash to draw from to avoid forced sale of shares at low prices in a downturn. I resent this as the cash is not earning enough.
    I reckon we have some reliable growers that I do not want to sell significantly to raise cash. Therefore I am thinking to have the only cash as it comes in from dividends and keep half our assets in the growers and the other half in reliable franked dividend payers e,g, LICs e.g. CAM, Argo, Soul Pats. They have historically paid AND MAINTAINED divs through thick and thin.
    After franking the div yield would be around 6% and cover half the pensions. The obligatory pensions must be 6% at my age. From the 8 carefully chosen growers I reckon (and proven) I can get a conservative 12% growth average p.a. so I would sell 6% to complete the pension.
    On paper, I have applied this thinking to 3 scenarios which are A) average years when the growers come in at 12% B) bad years when both earners and growers are down 30% C) good years when earners are up around a conservative 10% and growers 30%. I take into account that the pensions will be 6% of the total assets i.e. small in bad and high in good. We can actually live o.k. with zero pensions and I’d rather just let the super grow or even pay the 15% tax on earnings but I’m not sure if that can be done. With annual recalculations, by my amateur reckoning, and in our circumstances, I think this works. I think I have a dilemma with the SF Strategy acceptance by the ATO and Actuary.
    Please comment, call me a dill, call me naive, whatever.
    2 people like this.
  2. twisted strategies

    twisted strategies Well-Known Member

    3rd Nov, 2013
    gee ,

    i would rather not call you a dill , the market might turn tomorrow and prove me a complete idiot

    conservative LICs ( and some better REITs ) yes i have a healthy selection of them in a world of low interest rates ( when i would normally hold some bonds and interest-rate bearing securities )

    i probably should worry about ratios of these but in a choppy market i would rather focus on opportunities ( to add more )

    ( i hold CAM and SOL ) also look at BKI ( i hold some of those as well but have a lot more CAM because the price dips savagely every now and again )

    i found negotiating Super fund laws like playing on a shifting field ( i don't swim in rough surf either ) so liquidated my super completely and just call it an investment portfolio .

    apart from wrestling with the complexity of super fund rules , i like your thinking a lot

    i couldn't pick just 8 'growers ' so just add something when the opportunity and available cash coincide ( some i have got very right , some very wrong , but you can only lose 100% of the cash invested , and something still have to do something , either way , just don't borrow to invwxt is my motto .. let the maths whizs do that if they like

    best of luck trying scenarios , i have been in the market since 2011 and the only stock i hold that grew close to my hopes was MQG i hoped for 100% ( plus growth) by now and it rose 350% and they gave me some SYD as well .

    many of my blue-chips ( and 'core holdings ' have been duds ) AMP , ORG , LEI , CTX , are all gone but at a profit , ARI/OST crtstallized a loss ( as did others like GFF )

    take-over/merger activity claimed several other nice stocks

    and a cheeky lirrle healthcare/tech stock bought as a div. payer is currently up 17,400% since 2012 and paid a div. every 6 months since i bought in and will soon be included in the ASX top 200 .

    from what i have seen since 2011 ... apart from BHP and a few others all bets are off ( WOW just keeps stumbling , RIO just keeps selling assets )

    i would suggest you look at DRP for some growth ( NOT on everything since you need some cash coming in ) some plans let you say get 50% of the divs in cash the rest in shares .

    but tweak your divs to whatever suits you best