Superannuation - Lessons Learned

Hi All,

I've recently taken greater interest in my Superannuation. Although there's plenty of time ahead for me (current age: 30), I was hoping to reach out to wise-souls and leverage your lessons-learned around Superannuation.

The way I look at Superannuation, is that it's purely a bonus for when I eventually get access to it in 30-40yrs time, primarily because:

1. I plan to be financially independent with property/real estate as my primary vehicle
2. Potential changes to "preservation age" for Gen Yers
3. Crystal ball / future unknowns re: what the Govt might do for Superannuation-laws in the future

Nevertheless, I understand the value of time; compounding; and how decisions/actions today will/can have a significant ripple effect in the future.

Personally, I'm not interested in SMSF as I want to leverage my time for other value-add / wealth generation opportunities.

General lessons I'm mindful of:

• Identify low-fee Superannuation funds and/or question every fee/outgoing associated with Super
• With time on my side, select a high-growth investment mix
• Consider salary sacrificing into Superannuation for tax benefits (however, be mindful there won't be any access to these funds for another 30-40yrs)
• Find lost Superannuation and consolidate
• Compounding is your friend

Any other thoughts/contributions those in the know would recommend/include to this list?

 

If you're going to be in super, no idea why you'd not prioritise getting a smsf.

- Can still consolidate / rollover lost funds into it
- can still have your employer contributions go to it plus salary sacs if you desire.
- can choose what you want it to invest in - shares, real estate, lic/etf, etc


This is not financial advice and you should definitely see a professional (such as Precision Private Wealth) but seems like a no brainer?

 

A couple of years ago I managed to increase my salary by 35k overnight. I decided to put $500 per month into super through a salary sacrifice arrangement. I can't remember the exact number but due to the amount being sacrificed pre-tax, I was effectively getting $500 into my super and it was only costing me $400 to do so.

Doing this quickly saw my balance grow, and I also started to manage the allocation of funds myself (what percentage went where). I started to put a decent sum of it into 'Property' allocated funds, and these have outgrown even my 'High Growth' allocation.

Now that I am self-employed this is no longer an option, but I found the whole process very easy and fairly rewarding. Note: I am 30 as well.

 

Are you still contributing? Being self-employed doesn’t mean that you can no longer contribute but can still take advantage of the tax benefits of contributing.

 

Should have said I am employed, but I am the Director of my company and am only contributing the minimum.

 

It seems the 'self managed' bit is what the op wants to avoid.

 

Thanks DT. All my funds etc were consolidated about 8yrs ago, so working well in that department. Currently prioritising time elsewhere and mindful of compliance requirements and associated fees doesn't make sense at present.

Awesome - yes I currently have options re: where I can allocate my funds and in specific percentages too which makes life easy. The returns weren't there in FY16 and it's still tracking sideways.

I'm contemplating salary sacrificing into my super, however mindful that once I do that, I quarantine the funds for 30-40 years.

 

Not true with SMSF. Its this very perception that limits peoples ability to generate better returns than most other entity structures. Just need a few fundamentals, a very structured plan, and a very good accountant.

pinkboy

 

Some members here use the DIY Mix from Australian Super and go 100% Australian shares, this option would seem to meet your goals in that;

- Absolute lowest ongoing management effort, set and forget
- Low fees, currently 0.31%
- Suits a long time frame
- Australian Super allows easy consolidation and from memory can search for lost super

Been 100% shares also acts as balance to your current investments which sound largely property based.

 

I don't mean to be condescending or rude when I say this, but I think you are taking the completely wrong and a somewhat simplistic view on super when you say you see it purely as a bonus. Personally, I think you will do yourself a great disservice by not taking it more seriously particularly at your age--after all if you take super more seriously and adopt a clear strategy early on it will definitely contribute to your number 1 goal of being financially independent even with property/real estate.

In saying the above I do have SMSF in mind and not one of those big managed institutional super funds (the latter of which I have little time for). I know you mention that you are not interested in an SMSF, but if you haven't already done so you should take some good professional advice on SMSFs because they can help form part of an efficient and effective tax structure and investment vehicle for your investments. I'm not suggesting that you use your SMSF for all your assets, just that it may be part of a bigger investment structure. SMSFs aren't that difficult to manage.

I do tend to agree with your comment re what governments will do with super laws, but I think it will always be safe to assume that super will offer beneficial tax positions. Governments will only tinker with the level of those tax positions.

Anyway, good luck on your endeavours.

 

Super should be seen as more than just a bonus. I'm a great believer in planning your wealth creation and structuring to give you maximum flexibility in regard to early retirement if you choose. Hence that means balancing savings between inside and outside of Super.

In it's most simplistic form it might mean having sufficient assets outside of Super to get you financially independent as soon as possible and able to live well until you can earliest access Super. But one would be crazy not to maximise the tax advantages of Super to play a greater role when access is available.

Would definately be worth speaking to an expert in structuring and SMSFs. Depending on your circumstances and level of assets (not just now but likely future holdings) trusts, companies and a SMSF can be a powerful combination.

 

Get educated! The government offers some good tax incentives to put your money into super (although i wish they would stop continually tinkering). Go see a good independent financial planner who can give you strategic advice based on your specific circumstances, needs and goals. Its the best way to get an understanding of what is going to work for you. SMSF's are not for everyone but neither are cheap balanced options. Work out a strategy first and fit the product in afterwards. And don't be afraid to shop around financial planners until you find someone you are comfortable with and think you can work with over the longer term.

 

Disclaimer: No advice, general information only....

Agree 100% Super is like a legal 'tax haven' for investing and retirement income streaming and needs to be taken very seriously as part of a big picture strategy. Not the 'be all and end all' but none the less it is a vital component of an effective strategy. Having tangible assets outside Super is more exciting while you are younger however if these end up funding your main source of retirement income you will pay a lot more tax than if those assets were in a Super environment. If you are an average - high wage earner you will also pay a lot more tax on asset growth and earnings in an outside Super environment than the super rate of 15c/$.

Having said that I do generally advocate eliminating and recycling non-deductible debt before putting too much focus on Super as a debt recycling strategy offers greater efficiency than a salary sacrifice strategy due to a number of factors - leverage, improvement of income and tax position due to the 'recycling', and portfolio growth. How do I know this? I wrote the industry leading debt recycling software and regularly train advisers on highly this specialised strategy. If you are considering it as a strategy I strongly encourage you to seek advice as it is extremely important to set it up correctly and there are a mountain of details involved.

Once non-deductible debt is out of the picture (and this can be done astoundingly quickly using a debt recycling model) the ability to make significant Super contributions over a longer sustained period is far greater due to freeing up the home loan payment as savings. Of course human nature is such that most people will find a way to spend that extra money so it's important to be consciously planning and receiving quality guidance in the planning process.

Depending on circumstances there are also a few ways to get free money/tax break from the Government in relation to Super - low income earners contribution, spouse contribution (tax break), government co-contribution. These incentives are all about a reward for building Super.

Why does the government want to continue to offer those Super benefits? Because they DO NOT want to have to fund your age pension, frankly they would rather you did not qualify for the age pension because you have too many assets. With Baby Boomers retiring 'en masse' over the coming 20 years we will see tremendous stress on the current pension system. So the solution is sanctioned by legislation whose goal it is to enforce & encourage compulsory savings for all Australian workers kept in a tax advantaged trust structure that ensures release only under strict conditions being met.

All the best,
Alex

 

@Alex Straker what is the name of the debt recycling software you're referring to? What is it's claim to fame?

 

Hi Hedgy,

It's DR Pro. If you would more info or a demo please send me a PM and I will put you in touch with Head of Debt Advice from AMP to run you through it and licencing fees. It's not available to public, only advisers.

 

I'm using ING Direct for this. From my research, they offered a much better selections of ETFs, LICs and direct shares (ASX300).

My main reason for going down this path was to avoid the overheads and admin burden of setting up an SMSF. I wanted the flexibility to direct invest in shares but wasn't interested in property investment in my super.

I've maintained about 10% of my super and got my regular contributions going into my employer fund but will periodically rollover funds to my ING account.

 

Ok hoping someone could help with this one.
Married couple with the same superannuation(sunsuper).
Would like to save on doubling up on fees payable such as admin etc etc, sunsuper will not allow to combine the total of 140k
If we have money aside, is death and disability insurance really worth the cost? I know you have to have it with sunsuper, but not sure with others.

Any advice as how to improve the scenario?

 

Only someone licensed to give financial advice could answer this legally.

it is no only the money costs to consider - the estate planning aspects needs to be considered as well as the insurance side.

 

Thanks Terry, meeting with advisor this week. Lots to ask, lots to learn.

 

For those worried about the Goverment changing the rules, for God sake, don't invest in property .

As I have posted my times on PC:

Learn the rules, play the game.
If they change the rules, change your game.​

Otherwise, you will do nothing.