Superannuation dilemma. LF further opinions

Discussion in 'Superannuation, SMSF & Personal Insurance' started by Icarium, 5th Apr, 2019.

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  1. Icarium

    Icarium New Member

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    Hi guys,

    Just looking for some advice/opinions regarding my current dilemma with super.

    A bit about me: 29 year old government employee with a tad over 101k in superannuation. I have investment properties around Melbourne and Brisbane and my portfolio is slightly positively geared. I have a decent cash buffer aside also for a rainy day.

    My current superannuation scheme doesn't allow me to use my super for a SMSF. The only way to access this is to quit my job basically. Was playing around with my super calculator and it estimates I'll have around 600k at retirement age provided I work until then. Give or take.

    Playing with a compound interest calculator, if I was to use my super in a SMSF and put it into an index fund returning approx 8% per annum, total amount could be well over a million at retirement age, whether I work or not.

    Only downside is I'd have to quit my job to access my super and probably take a pay cut for the time being. I've calculated my yearly expenses and I could easily live off a pay cut.

    Just looking for any other thoughts or opinions regarding my situation.

    Thanks
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    What index fund returns 8%pa?
     
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  3. Icarium

    Icarium New Member

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    Im looking at Vanguard international share fund consisting mainly of American companies. Past 10 years returned 11% per annum on average. I'm using 8% as a conservative number.

    Another thing i forgot to mention is that if I do go the route of changing jobs and a SMSF, while I'm employed I'll still be contributing to the SMSF, which means more money I'll be putting into the index fund.
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    You need specific financial advice from a licensed adviser. This is complex stuff
     
  5. Scott No Mates

    Scott No Mates Well-Known Member

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    Use a different calculator, that one's broken. My calculator (FV function on excel) gives me $645k in 38 years @ 5% (nett). I get $1.4m if you contribute just $7k/yr until retirement at 67.

    In 8-11 years you've accumulated $100k, you've another 38ish years before you can access your super. That's at least 4-5 times what you've already accumulated not even considering you're not at the top of your career yet.

    Are you able to rollover some of your super to another fund (then to a SMSF)?
     
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  6. PandS

    PandS Well-Known Member

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    You know 10 years ago we came out of GFC one of the lowest point to last year all time high?
    going forward you aren't going to get that sort of return even at 8%
     
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  7. kierank

    kierank Well-Known Member

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    ... especially in a low interest environment ;).

    Years ago, I used to use 10%. When interest rates came down, I did all of my forecasting based on 8%.

    Now, I would be doing my number crunching on something like 6% :eek: and stress testing it at something even lower.

    Gotta get those pesky rates to start rising :D.
     
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  8. Chris Au

    Chris Au Well-Known Member

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    If you're adamant about moving into a SMSF and are aware of the ongoing administration and legal requirements, @Scott No Mates suggestion was one I was thinking about, or, allowing your employer to continue contributing to their fund, and you set up a second fund that you salary sacrifice into.
    I would look seriously at whether the expected returns are realistic and sustainable. I assume you have spoken with the payroll/HR section; many companies and gov/t agencies are outsourcing super so have options for employees to choose their own funds (not sure about SMSFs, there's probably a requirement, across public and private companies to put the legislated employer super contributions into a 'recognised' (ie not SMSF) super fund.
     
  9. Chris Au

    Chris Au Well-Known Member

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    Shhh you retiree !! :D
     
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  10. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    I think your calculator is broken. You balance is likely to be way more than $600k at retirement age and you are probably on a pretty sweet additional super percentage being a govt employee at the moment?

    If you like your job and you can see good career aspects I'd stick with it. I see little point leaving a job to go to a lower paying job so that you can do a SMSF
     
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  11. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    DIY projections ignore the fact that markets do downturn. And when they do it takes more upside than the downside to merely recover. I would argue that isnt factored into your calcs but is in the fund projections. Warning - The past 28 years are unheard of. No recession. No major collapse.
    Index funds will crash just as much as the market...

    eg 40% crash means a 66.67% increase is needed to recover the loss. If you dont predict a 40% crash and ride it down do you think a 67% reversal is also going to occur ?

    Most people think they can outperform market pro's. That cant. They dont.

    Cut income to trigger super access ? Super is regressive and reflects 9.5% of earnings. Dop $20K and super drops just $1900. You are focussing on the ant and not the elephant it wants to bite. I would factor in higher fees eroding earnings. And the lower income will impact balances and compound growth too.