New strategies post APRA

@BPhil @Shogun @Ian87

What are your game plans moving forward?
Strategies, thoughts on markets, things to avoid?

 

Yes 35 years away, but still supports retiring early as you can spend your other funds on fast cars and fast women (or men) as you have this massive nest egg waiting for the next 35 years.

Super 25k pa contributions are pre-tax, you save your MTR - 15%.

Re: panicking etc, I believe this is because most people will not reach those figures as they make no top-up contributions. Median salary 80k times 9.5% is 7.6k pa, less than a third of what could be put in. Hence the need to educate people, but you can see it's like pushing **** uphill as I cant even convince you who cares about investing!!

Funny comment that you make about leaving investing to go focus on super, super is investing too... usually active, can be passive, whatever floats. And as Rolf said, super is just one part of an overall strategy (albeit an incredibly low effort high reward part for lazy people like me).

 

Not keen on Aus property atm. US equities overvalued. Looking at Aus equities to debt recycle so in a good position to borrow when the next Melb boom comes around (don't want to buy sight unseen in Bris or whatever, and too lazy to fly around doing groundwork).

And of course giving future me a big hand by investing into low fee diversified super, with all share allocation (not silly default option with 25-30% cash).

 

I salary sacrifice a bit from each pay into super. It doesn't look like a lot but with compounding over decades it adds up.

I also actively invest in resi property for cashflow and capital gains and forced equity.

I agree it's not one or the other (property or super). Why not both?

 

The cashflow from residential real estate is far too low a return to be a good retirement strategy - The holding costs are far too high. Australian shares paying high yield fully franked dividends is far more effective, stable with higher returns.

 

Salary sacrificing 25k to super is important - got me my decent super balance

 

No they haven't, they have gotten worse. My accountant finished last years financials on Friday and immediately sent them to my broker. I received his eagerly awaited response with hopes of being able to easily fund next settlement. Just this afternoon, I had an in depth discussion with him He said no way the banks may ask for more principal to paid down on the loans I have ! Luckily I suspected this would be the case, and I already paid down 200k since July with carried forward income and taking some profits on small cap tech stocks after they got way over priced after the last reporting season . He said there is still a real possibility banks could call in loans. So now I will proceed to plan B, which is using some funds in my superfund to buy one or two property of myself, which will pay most of my debt and part fund my latest purchase which I can settle next month for a 15% discount or in 2years with "rent to buy" finance. The broker said it was now impossible to get finance in a SMSF. The screws are really getting tightened.

 

So I keep getting told.

Have had several known brokers say I couldn't refinance for the last 6 months. CBA in house broker told me the same.

Last week, just settled on moving my loans from Liberty to CBA, and pulled out an extra $50k. Nothing had changed in my personal circumstances. I had paid down $0 in loans that entire time. Sounds like dumb luck

It had become a mission to go back to Tier 1. So many phone calls.

 

all the big banks have stopped SMSF lending. We were lucky to get ours sorted just in time. I can see why, too much work and risk for too little return.

 

There is more than one way to skin a cat. You can convert you super to accessible cash, especially if you own property. You can use funds in your SMSF to buy a property from yourself, your SMSF holds the property and you can get the capitals gains tax free, while you can pay off debt, buy shares outside super that you can liquidate when cash is needed or at an opportune time, buy property and leverage into shares. You might need to find a good accountant/business consultant . For some-one who claims to earn a high income I don't know why you wouldn't take advantage of the generous positive benefits of super, and dwell on non-existent negatives You seem unaware taxation issues a good adviser should inform you off. You can lease a property or business in a SMSF to yourself and still earn income from it, outside off the SMSF.

 

Apparently it makes no difference anyway as to wether you borrow in a SMSF or not, your calculated serviceability is the same. It is just robbing Peter to pay Paul. What I am hoping to do in the coming months is swap every thing around, put some of my property in super and take my shares out. I had always believed in buying property outside ( for leverage ) and buying the more risky shares in super. It will wipe out nearly all my debt or have funds available to buy a property or 2 if I must buy.

 

This is correct. I am also as per previous advice, looking further into super.

In regards to my previous comment on refinancing, at this point in time, you'll get better results dealing directly with the bank than a broker. Just how the market is at the moment. I went through about 3 or 4 CBA brokers before finding one that could do my refinance. That advice was given to me by an independent mortgage broker friend.

 

Agree, as I've stated previously, it's best to give yourself a full body financial work-out, not just do bicep curls.

As for investing extra in super:

Income
$100k av household income (higher than median of $80k which is skewed upwards by high income earners)
$73k post tax. Australia Tax | 2018/19 Salary example for $100000

Minus
$19k IO mortgage repayments (based on $400k average mortgage debt on our current super low interest rates) What's the Average Australian Home Loan Size?
$33k (basic living expenses based on family of 4 - removed mortgage repayment as it seemed OTT) Living Expense Calculator | How Do Banks Calculate It?

Leaves you with $21k/yr saving.
Keep in mind this is for BASIC cost of living. So:
NO repayments on your PPOR.
NO overseas travel.
NO contingency for major events such as the need to replace your car, or have a major roof repair, or medical procedure.
Pray interest stay low, cost of living doesn't go up, don't get sick, break down, divorce, have a condom break, or loose job.

Seems tight.
I'm too low risk to be about that life.

Alternative is stay single, have no kids, don't buy PPOR, get super at 67, move to Pattaya, get 2 girlfriends (or boyfriends, or both).

You're strategy has legs by the sounds of it, I don't deny that. It's just not for the average income earner, and from a young age when you're saving for a wedding, deposit on a home, doesn't sound feasible that you'll start depositing additional funds until a much later date.

Once again, none of these strategies work for the average income earner. You NEED to work on step 1 to get ahead:

1. increase income.
2. reduce debt.
3. save.
4. invest.

I have taken on board your comments on learning more about super. Had a good chat to my dad about it. I'm clearly lacking knowledge in this area and am grateful for the tips.

I also agree you should live the good life now as well. At 35% profit on turn-over, which is a 200% cash-on-cash return from my business, I can invest in IPs, top up super, and have fast cars and fast women (though I'd rather leave those days behind me), and boy do I love my international travel (going on my 3rd trip this year in Dec). Can't do that with the example provided above.

In the words of the little taco girl:

 

Your borrowing capacity in SMSF in dictated by how much super you can contribute on a yearly bases, atleast that was our case anyway.

 

Another great thing about super is that it’s protected from most trying to take your cash.