Retirement Living Standards Aren't So Bad........

Hey mate...you might want to check this ...but he should be able to qualify for almost full pension if he structures correctly assuming he has no other major assets.

If he structures correctly...he should be able to get 22k in pension plus his 10k per annum from super. Hope this helps....

Also if he retired at 67...there are bonuses pa for people who retired later. Talk to Centrelink or get some decent advise...maybe someone on this forum who is financial planner who can give direction.

 

Thanks mate...as I mentioned, I'm not sure on the exact figures, but he's 77 now and been retired for 10 years. The only assets he has are the PPOR and his super. I'll ask him to check his figures and see if he's receiving all possible benefits. Cheers.

 

Precision Private Wealth is a financial planning firm in SA worth talking to about retiring, they're on top of that stuff.

 

I think it's far from clear why Super was set up. Changes over the years are even more unclear. Perhaps it was set up to help tame inflation?

Then why is there no restriction on how super is spent? One can withdraw it all and blow it in the first year of retirement currently. RBLs at least provided an incentive not to do so.

A low paid workers super will never replace the state pension as it stands. If super was set up to replace the state pension then why was it available a decade before the pension?

Tightening state pension rules around assets and income is far more politically palatable than messing with super rules.

Super is currently a massive tax rort - one that I participate in.

 

Fact check: Was superannuation designed to get people off the pension?

The claim: Assistant Treasurer Kelly O'Dwyer says that Australia's superannuation system "was set up to be an alternative to the aged pension so that people didn't have to rely upon the aged pension or even the part pension".

The verdict: Key figures in the introduction of compulsory super in Australia say it was introduced for a number of reasons, including a desire to relieve pressure on the social security system as the population ages. But the governments of the day did not sell the policy as a way to get people off the pension and instead said that most people would still get at least a part pension. Ms O'Dwyer is ill-informed.

That aside (and this is all taken from the link) -

Finding a clear "objective" for the super system is not a straightforward task, given that the policy developed over time and was influenced by many people. Multiple aims were cited at different times, including:

• extending superannuation beyond professional workers;
• providing portability of superannuation between jobs;
• meeting union pay demands without raising inflation;
• boosting the viability of industry super funds;
• satisfying future lifestyle demands of baby boomers; and
• securing the social security system for those truly in need.

In the late 1980s, superannuation was sold as a supplement to the aged pension.

Worth noting that when Bob Hawke's government came to power in 1983, up to half of employees, mostly professional workers, had some form of super.

The SGC extended the regime.

 

If I can get away with paying 15% on my contributions rather than 42%, I will

A 9.5% employer contribution to super from age 18 will not meet the needs of the employee without their own contributions (sustained above an additional 6%)

There should be some access & control over the withdrawal and application of retirement funds (as I have previously indicated)

Super has been around for a very long time - available to public servants (defined benefits schemes) and to the selected few in industry (usually largely unregulated via company super funds). Its purpose - to fund your lifestyle in retirement

 

We are retired and living off super plus some outside super investments. Fortunately I worked for the state government so eligible for very low cost super. Annual fees capped (below $1500) maximum.

You can't simply depend on employer contributions. We used salary sacrifice to maximise results. And you have to monitor any investment - we escaped the gfc with very little loss by quick switches to safer options, moving back as things stabilised.
Marg

 

Here are some numbers
link attached and overview
Why you don’t need $1m in superannuation | The New Daily

Super is a supplement to the Age Pension, not a replacement

“To say that $1 million is not enough just sends the wrong message to the Australian public,” says Tom Garcia, chief executive of the Australian Institute of Superannuation Trustees.

He says that the superannuation system was “never designed for rich people”, and was always meant to complement the Age Pension, not replace it.

This is reflected in the eligibility threshold. If you and your partner retire with less than $287,000 in savings, you qualify for the full Age Pension. For a single person, you qualify if you retire with less than $202,000. The threshold is even higher if you don’t own your home.

The cut-off point for a part pension, meanwhile, is $776,000 for singles, and $1,151,500 for a couple.

If you and your spouse retire with a joint superannuation balance of $1 million, and have no other assets other than a family home, you still qualify for a part-pension of $226 a fortnight.

In making that calculation, Centrelink estimates that you and your partner will be paying yourselves an income of $1,204 a fortnight (or around $28,896 a year). Ignoring both inflation and interest (a stupid idea, admittedly), on that basis $1 million would last you almost 35 years – or until you are 100 years old.

But there is no stipulation that you spend your superannuation savings so frugally. You can pay yourself whatever you like – $60,000, or $100,000, or $500,000 a year – and still qualify for the extra part pension payment of $226 a fortnight.

Of course, the more you pay yourself early on in retirement, the quicker your money runs out. But when your money runs out, you can then go onto the full Age Pension.

In other words, saving $1 million of super can give you two years of unbridled excess (followed by X years of frugality on the Age Pension), 10 years of comparative opulence, 20 years of comfort, or 35 years of frugal living, just above what you’d get on the Age Pension.

It all comes down, therefore, to how long you think you will live.

 

Marg
when I was a public servant I was on that super system where you were guaranteed 1 year income for every 5 years of work, they abolished this, it was a gravy train.

 

Whatever it's original purpose, superannuation was well-named. It's shortened name of "super" implies security since it's a word we all understand to mean "excellent".

 

@JacM - well it's better than the alternative.

 

@Scott No Mates indeed. Better than having nothing, but still. Clever branding of the super name to almost imply people cannot lose.

 

Agreed. With current tax benefits of holding/and selling properties in your super, its a wonder more people aren't using this avenue. Although, the government can change these regulations at any time, this is cause for concern.

 

I know a recently retired person who got their pension cut $1,700/year the last financial year - because they have some small super. Nice government.

 

This article from Verne Gowdie, for those interested

Did the government just suggest retirees place 100% of their portfolio in shares?

In last night’s budget, there was a surprise announcement on how much you can transfer into the tax-free pension phase of superannuation.

The retrospective cap is set at $1.6 million.

According to Scott Morrison in his budget address last night: ‘A balance of $1.6 million can support an income stream in retirement around four times the level of the single age pension.’

Spoken like a true taxpayer funded superannuant, Scott. You have no idea mate.

The full age pension (with pension and energy supplements) for a single person is $22,721 per annum ($873.90 per fortnight).

Let’s do some simple math.

If we multiply the single age pension of $22,721 by four times, we get a figure of $90,884.

For $1.6 million to generate an income of $90,884 requires a 5.7% rate of return.

Please tell me Scott, where we can get that rate of return?

Cash and term deposits pay are around 2–3%.

Buy one of your 10-year government bonds and we get 2.5%.

Invest in a residential property and, after expenses, we’ll get 3% (if we’re lucky).

So what does that leave us with? Fully franked shares.

Scott, with corporate earnings coming under pressure due to the global deflationary squeeze, will companies be able to maintain the current dividend policy?

Let’s put that obvious question to one side; Scott, are you really suggesting that retirees place 100% of their portfolio in shares?

Financial planners would be hanged, drawn and quartered for doing this without proper risk analysis.

On the one hand, the government is rightly clamping down on irresponsible advice from financial planners, yet we have the Treasurer — indirectly — suggesting retirees go full tilt into the share market, risking the potential to expose their retirement funds to substantial capital loss.

Or perhaps Scott is thinking retirees can invest in some junk corporate bonds. Now there’s another good idea…not.

Our Treasurer’s reasoning for the cap fails the most basic of scrutiny. But his statement plays well to the crowd.

A conservative retiree with $1.6 million invested at 2% will generate $32,000 per annum…about $10,000 more a year than if they had not saved.

And, if interest rates go to 1%, they’ll earn less than if they were on the full pension.

Where’s the incentive to save?

This is the madness that passes as sound financial management.

 

MTR....what % of retirees do you think have over $500k in Super...you would be very surprised...not a lot.

At $1m plus...it thins out totally. This budget was quite in offensive.

The 500k cap for 15% deduction based on contributions (this is the way a ready) ..reveals how politics on voter numbers was clearly used to analyse number of people affected.

 

I understood the $500k cap to be a lifetime cap on non-concessional (post-tax) contributions.

The concessional cap was $25k per annum. In super, that is generally taxed at 15% (or 15% on superannuation "profits" which in a SMSF can be negated with depreciation schedules and such).

snippet from the transcript;

 

Lets see how exactly that will pan out.

But from where I sit...I don't think will hit the 500k in contributions...thought I will have more than 500k in super in the next couple of years due to the growth in my funds.

 

The $500k cap rule will be a really problematic one for people who don't really get serious about retirement planning till quite late and rely heavily on the ability to shift money into an environment (super) that will offer a lower taxation rate (presently 0%) on investment income in retirement phase. The very same income-producing asset (whether it be money, shares, property) would be taxed very differently outside super. Even if the annual difference to the person is an extra $5k in their pocket it is a worthy exercise. That's almost $100 per week for groceries each week for the year.