Super for Lazy People - how to grow it if you don't want to SMSF

This has been a worthwhile exercise, after due consideration I have gone the other way - Australiansuper High Growth. A few reasons ; exposures that I cant effectively replicate myself at such low cost or of equivalent quality (incl. direct property/infrastructure/PE), super being the most tax efficient structure to house an active strategy, a hedge against what I am doing outside of super (which is largely indexed) and given that I have a 20 year runway to preservation age the CGT/Pension phase issue is not on the radar and I expect will be resolved by then.

 

CIPR is trying to address this is in getting Retail / Industry Super to adopt retirement products that will resolve some of these issues. In theory with the typical unitised balanced fund if there’s sufficient bonds this should help in reducing drawdowns so when the member draws their pension as units the impact is not quite so bad. But in reality most Super Balanced Funds are still largely dominated by growth assets. Hence if there is not a separate CASH component that can be utilised when there are large drawdowns then permanent damage is done to the member’s portfolio. The losses are locked in.

But the vast majority of Super Fund members are clueless and at the mercy of their Fund Mgrs.

As you say I don’t know the solution. You’d think education would be the key. But the trouble is when it comes to money it’s the behavioural not the knowledge that rules. Even the smartest of people do stupid things when it comes to money due to emotions overriding logic.

Thankfully those of us who take an interest, attempt to understand how markets work and most importantly try to manage our emotions stand a better chance of our retirement savings seeing us through.

A simple cash buffer to avoid drawing on growth assets when markets misbehave will do the job in most cases. It’s that simple. The professionally managed Super Funds need to do better. Trouble is the unitised structure works against them.

 

I recognise this is decidedly drifting from the title of this thread but it triggered some thoughts which have been raised in both general conversations I've had and observing the attitude of some on what retirement means for them in the context of superannuation.

I'm sure many have encountered people who say their super lost $xxx amount and have had to work an additional number of years before they were able to retire. Sure you can be indifferent to their situation and some are. However, it was a case of unfortunate timing. When I've heard such tales, I did get the impression there was an underlying assumption of putting X amount in and they would be sure of getting Y amount out on retirement rather than That's the market for you! Another small issue of education which probably ain't going to work.

I don't know of others who may have encountered this as it is likely dependent on the circles in which you move. Individuals in relatively low paid occupations and nearing 60 or 65. Comparatively very little in superannuation and the attitude is How long can I live on that amount of money until I qualify for the pension?

As usual, it all depends on where you are placed.

 

100%. To the unititated, high growth sounds a lot better than balanced or conservative right? Who doesn’t want high growth?

Obviously this leads to potentially diabolical outcomes for investors who do not understand the trade offs one makes for high returns.

As I think about it, Target date / defined benefit / liability matching kind of stuff has to be better for the average person when you consider outcomes and stress. Being able to select all kinds of investments without so much as a basic understanding of characteristics of the different assets can’t be a good thing.

 

Yes. Also the irony of it is that the less money one has the less risk they can afford to take. And probably in most cases ignorance is bliss. It protects them from themselves.

 

Good post...because I am struggling with this myself...go high growth or balance risk.

I decided the optimum for me was Index funds with 35% in International Shares.....35% in Australian Shares and 25% in fixed interst/cash.

When I looked at Host Plus's Index Balanced that was close to it.

Not saying I will change...but i looks okay for the moment.

However, I will be putting together a separate porfolio outside of Super and that would look different as I intend to have ETFs and LICs in that.

So doin'g something similar "El Falcone"!

 

Sash you have ended up in the same Super point I arrived to a little while ago.

I put all my Super plus some deleveraging $ from my tax bomb (dangerously high fee) managed fund outside of super all into the index balanced Hostplus default deal for now.

I am doing other possibly higher risk trades and looking at ETF / LIC ideas outside of Super.

Whether I run a similar strategy as outside on the inside too via the Choiceplus is yet to be determined. For me it would then be a close to a double up of the similar share strategy under two different ownership / tax structures which would probably devalue the purpose some-what.

I was anti super my whole working life only having a few k in there. Finally bit the bullet, redirecting some surplus in and see it as a fantastic strategy of further tax effective investment diversification which is a great feeling. Keeping it very simple and lowest fee option makes me sleep well at night on that one

 

I like @The Falcon’s idea. You just can’t get this type of exposure as an individual investor. You can own all the LICs you want outside of Super.

 

Yes in Super keep it simple ...and other go for ya life strategy...luv it!

Its all apples....

 

I worked with someone around the time of the GFC who moved all their super into fixed return investments post GFC and was going on about how smart they were, the markets a joke, everyone else was going to keep loosing money. From memory they could still meet most of their retirement goals with this new plan

It is a shame that they never considered their needs until the crunch came.

If you just get defaulted to an industry fund (Australian super, HostPlus etc) maybe the "its not my money" type attitude is surprisingly helpful.

 

Combining the super with your younger spouse will mean you can start to access the money earlier. This is an advantage worth considering.

 

I am licensed to give the advice that my advice is not licensed.

 

ING Living Super's system processes force compliance. They were a good option for flexibility without going SMSF.

When ING backstabbed their customers by significantly increasing fees I had to leave for both emotional and objective reasons. It cost me around $10k after paying brokerage and capital gains. I will never use ING again and I will tell everyone who is interested this story.

I'm with Sunsuper now and my fees are very low while I can choose an asset allocation from a few main Vanguard based index etfs. This is truly a lazy option with flexibility if required e.g. changing allocation without any fees including CGT.

 

This is not really correct because each person will have their own 'accounts' in super - even though it may be one big asset the members will have notional accounts. An olders spouse will not be able to pull out the share of the super that belongs to the younger.

But it could be the case if contributions are made to the older persons super instead of the younger.

 

I have spent some time learning more about my super.
I have noticed that all my insurance via Super is $2098.44 pa in payments.

Question - that money gets paid out of my Super contributions - so does that mean I can pay $25k pa + $2098.44 at the 15% (so pay the max of $25k pa and the insurance costs?). Or is the max of $25k pa just a max limit regardless of the insurance that I also pay out of that?

Since it's $25k pa less 15% tax it is really only $21250 pa.
Less the insurance money is $19151.56 pa.

Is that right?

 

$25k in total.

 

Yeah thought that might be the case - that is a bummer.
I guess paying the $2k out of post tax $$ will leave more in the Super fund.
I will have to look at options.

 

@sharon maybe you can elect to opt out and insure personally (ain't a tax deduction the way.)

A link:

Total & Permanent Disability (TPD) Insurance | Canstar

Now out full time for a bit.

Ciao

 

Would like to answer this more thoroughly but I can't give personal advice on the forum. Might be worth considering super linked policy - has both inside and outside super components. Allows for cost efficiency plus better policy definitions available in outside super environment due to removing the restrictions of SIS act. There is a lot more to consider than this too, @sharon let me know if you want some help sorting it out.

 

Sure but what a lot of people don't take into account is what inflation is going to do to that figure.

People see it an go...OMG I'm rich.

While not calculating that house prices have doubled every decade etc so tak that figure and halve it for every 10 years you have left working and then divide the final figure x 4% and tell me you still feel rich.

eg if your calculations showed you as having $2m at retirement and you are 45 today......then to calculate in todays dollars divide by 4 (eg 2 x 10 years) and then x 4% for annual draw down.....

$2M in 20 years from now is worth about $500pw in todays spending power.

This is the oen thing that ****** me off about the Australian govt getting greedy and putting their hands out for any super above $1.6m even though they collected on the way in already.

Basically they are saying you can live on $1,230pw.......even though their own pension funds pay way way more than this.