Super reforms - what do you think?

[toOZ2012]

You may not have heard of the 8th wonder of the world.

 

Compound Interest.

That early $40K taken out will make a huge difference in 30 or 40 years time.

 

Sounds like a super fund advertisement.

 

Figure me this, if your super fund has a gain of 100% this year and followed by a loss of 50% the following year what are you left with? That's right what you started with minus admin fees and performance fees and whole bunch of other fees.

 

Super funds rarely keep going up(unless you picked cash in which case the paltry returns don't matter much), they have downs and quite terribly ones at that.

 

So, my estimate of 1 to 2 years of self funded retirement in 2050 dollars may be bit conservative but probably accurate.

Edited September 3, 2015 by toOZ2012

[itegoa]

From page12:

 

Mandate that superannuation contributions be made from after-tax (net) income

 

Would this mean that super paid to one during retirement is tax free?

 

If not, it would be taxed twice.

[toOZ2012]

Would this mean that super paid to one during retirement is tax free?

 

If not, it would be taxed twice.

 

It'll be tax free as it currently is. Just the tax on ingoing super may change. Also depends on how soon one retires - http://www.superguide.com.au/accessing-superannuation/tax-free-super-for-over-60s

[Keith and Linda]

That's just it. Age pension is not an entitlement. How about I ask for extra money while I have a full paying job? Or holiday pay to take a vacation? Why cause I paid more taxes than a average person?

 

Please don't make it personal, you don't know me or what I do or my assets and liabilities.

 

But it is an entitlement, and some looked at that, factored it in and thought.........mmmmmmmmm maybe that will not allow me to enjoy my later life, now if I scrimp and save and go without a little more whilst I am young then maybe, just maybe, later on I will have that little bit extra, and then start doing those things with my money at retirement the likes which some people chose to do earlier in their life. A very risky strategy as one may not live long enough to reap all the benefits of such a frugal earlier life style.

However both options are freely available to all, you should not get penalized for the one you choose. It is also worth noting that it is possible that those that saved could still end up paying income tax after retirement, whilst those on solely Gov pensions will not.

[toOZ2012]

But it is an entitlement, and some looked at that, factored it in and thought.........mmmmmmmmm maybe that will not allow me to enjoy my later life, now if I scrimp and save and go without a little more whilst I am young then maybe, just maybe, later on I will have that little bit extra, and then start doing those things with my money at retirement the likes which some people chose to do earlier in their life. A very risky strategy as one may not live long enough to reap all the benefits of such a frugal earlier life style.

However both options are freely available to all, you should not get penalized for the one you choose. It is also worth noting that it is possible that those that saved could still end up paying income tax after retirement, whilst those on solely Gov pensions will not.

 

Good on them for who did the sensible thing and saved and if they ever run of those savings they have a safety net to fall back onto.

 

Both options are indeed available and people who blow all their savings because of their lifestyle choices are no different to people who just rely on dole payments forever. They are bad for the system and should be considered as abusers more than anything else.

 

The entitlement feeling is a funny thing. Every year at tax time, you hear all the SINKs(Single income no kids) and DINKs (dual income no kids) complaining that they didn't get any tax benefits while still shelling out massive taxes. Excuse me, if you are on a single income(no benefits means you are already getting decent income) with no kids and complain that you are entitled to benefits then to quote Matt Okine - "you have a serious drug problem and you should stop spending money on drugs".

 

At the time of retirement, if you are sitting on a fortune(again talking about people with million dollar homes) by way of family home it's safe to classify them as someone with no need for a helping hand.

 

I say it is fair to include family homes that are worth over say 150% of the median price or something in the assets test to determine payment rates for aged pension. The new proposal also suggest measures like deferred income schemes so that people don't draw down super as a lump sum and are back in the system the following year. One things clear, if people are not forced to save then most wouldn't even think about it.

Edited September 4, 2015 by toOZ2012

[flag of convenience]

First home buyers are in it for the long run. I agree that they may pay a lot more than its intrinsic value but so do a lot of others. First home over 20 to 30 years is relatively safe investment.

 

 

 

While renting is good, the money is pretty much wasted. However if that was used to pay off the mortgage - they'll have a sizable nest egg when they retire.

 

 

 

Always the case but the matra "Time in market and not timing the market" truly applies here because of very long term holding.

 

Even the US market with it's horrible housing market crash. Most places have started to regain their value - There are some that are very close to what people paid 10 to 20 years ago but they still own it. As opposed to having nothing by renting.

 

I strongly believe home ownership is a good way to save for retirement.

 

Anything to break away from the present short termism and houses seen as little more than vehicles to flip that create a road of eternal wealth must be welcomed.

 

It depends where one is talking about. Mortgage rates are not normally at such low rates(a major part of the problem) but in countries like Australia it is certainly better to own regardless of the cost during retirement.

 

Whether house prices in recovering markets can sustain that recovery or we are just building up for another crash, well lets say the jury is out. I personally hold some grave doubts and unconvinced much has been learnt.

 

Whether one thinks it wise to buy in what is obviously an over heated property market in Australia gets down to a personal decision. Crunch the figures do the homework and work out the cost to repay the bank come a return to normal interest rates. Remembering a loan is for a long time.

[Keith and Linda]

Good on them for who did the sensible thing and saved and if they ever run of those savings they have a safety net to fall back onto.

 

Both options are indeed available and people who blow all their savings because of their lifestyle choices are no different to people who just rely on dole payments forever. They are bad for the system and should be considered as abusers more than anything else.

 

The entitlement feeling is a funny thing. Every year at tax time, you hear all the SINKs(Single income no kids) and DINKs (dual income no kids) complaining that they didn't get any tax benefits while still shelling out massive taxes. Excuse me, if you are on a single income(no benefits means you are already getting decent income) with no kids and complain that you are entitled to benefits then to quote Matt Okine - "you have a serious drug problem and you should stop spending money on drugs".

 

At the time of retirement, if you are sitting on a fortune(again talking about people with million dollar homes) by way of family home it's safe to classify them as someone with no need for a helping hand.

 

I say it is fair to include family homes that are worth over say 150% of the median price or something in the assets test to determine payment rates for aged pension. The new proposal also suggest measures like deferred income schemes so that people don't draw down super as a lump sum and are back in the system the following year. One things clear, if people are not forced to save then most wouldn't even think about it.

 

I still do not understand how having a $m home means you have the income to live? OK so I buy my house for say $300k, I like the house, I like the location, and it was bought for those two reasons because it also would, down the track, be our ideal retirement home (another planning ahead thing), now say my neighbour did exactly, whom also happens to do the same job as me at the same work place and the same wages and benefits. over the next few years my neighbour goes out for meals and drinks regulary at weekends, smokes, goes on holidays, and has no savings and a small super,whilst I tend to be a little more frugal during those same years which now give me a nice little savings sum and a enhanced super. Now we both retire on the same day, we both now have $m homes which we both wish to stay in for the remainder of our lives, and now I start going out and having holidays, whilst my neighbour cannot afford to with no wages or savings.

Now who is entitled to get the gov pension?

[toOZ2012]

Anything to break away from the present short termism and houses seen as little more than vehicles to flip that create a road of eternal wealth must be welcomed.

 

It depends where one is talking about. Mortgage rates are not normally at such low rates(a major part of the problem) but in countries like Australia it is certainly better to own regardless of the cost during retirement.

 

Whether house prices in recovering markets can sustain that recovery or we are just building up for another crash, well lets say the jury is out. I personally hold some grave doubts and unconvinced much has been learnt.

 

Whether one thinks it wise to buy in what is obviously an over heated property market in Australia gets down to a personal decision. Crunch the figures do the homework and work out the cost to repay the bank come a return to normal interest rates. Remembering a loan is for a long time.

 

That's the thing no one really knows the future and most predictions are speculation at best. Now, everyone has a 20/20 vision looking back. Property in Australia is indeed overpriced but its not the only place. Now the average person can listen to all the spruikers and doomsayers and be overwhelmed by it or just shop around (with some common sense) for what they can afford and hang tight. Both the spruikers and doomsayers will be right at one time or the other. Property as a investment/PPOR has higher odds of succeeding in the long term.I also find that having a mortgage kind of inspires people to work hard and bring it down as much as possible. Once sufficient equity has been built, the interest rates won't be so bothersome.

[toOZ2012]

I still do not understand how having a $m home means you have the income to live? OK so I buy my house for say $300k, I like the house, I like the location, and it was bought for those two reasons because it also would, down the track, be our ideal retirement home (another planning ahead thing), now say my neighbour did exactly, whom also happens to do the same job as me at the same work place and the same wages and benefits. over the next few years my neighbour goes out for meals and drinks regulary at weekends, smokes, goes on holidays, and has no savings and a small super,whilst I tend to be a little more frugal during those same years which now give me a nice little savings sum and a enhanced super. Now we both retire on the same day, we both now have $m homes which we both wish to stay in for the remainder of our lives, and now I start going out and having holidays, whilst my neighbour cannot afford to with no wages or savings.

Now who is entitled to get the gov pension?

 

Neither. The asset-rich income-poor problem is not new and there are solutions for it, reverse mortgage for one. It'll let you stay in your family home as long as you want while giving you a regular income.

 

Aged pension tests for means (both assets and income).

[Keith and Linda]

Neither. The asset-rich income-poor problem is not new and there are solutions for it, reverse mortgage for one. It'll let you stay in your family home as long as you want while giving you a regular income.

 

Aged pension tests for means (both assets and income).

 

So the one who's only income is the pension, gets his reverse mortgage and suddenly having money again returns to his drinking holidaying and spending sprees, with new car and caravan to boot, what happens when his reverse mortgage funds run out in a couple of years?

Also who ultimately reaps the benefits from the reverse mortgage? wealth is passed onto ????? someone is going to get richer but certainly not the family anymore.

[toOZ2012]

So the one who's only income is the pension, gets his reverse mortgage and suddenly having money again returns to his drinking holidaying and spending sprees, with new car and caravan to boot, what happens when his reverse mortgage funds run out in a couple of years?

Also who ultimately reaps the benefits from the reverse mortgage? wealth is passed onto ????? someone is going to get richer but certainly not the family anymore.

 

I would imagine reverse mortgage will be a income scheme not a lump sum access to equity.

 

The person that benefits from the reverse mortgage will be the retiree himself, ofcourse. It's his money after all.

 

Retirement savings are well savings to be spent during retirement and by definition an expense. If one wants to invest part of the income then go for it, create more wealth.

Edited September 5, 2015 by toOZ2012

[Parley]

Evil things reverse mortgages.

Luckily very few banks offer them here.

 

Just designed to take advantage of old people.

[toOZ2012]

Evil things reverse mortgages.

Luckily very few banks offer them here.

 

Just designed to take advantage of old people.

 

This I agree with. The govt probably will expand the pension loans scheme.

[Keith and Linda]

I would imagine reverse mortgage will be a income scheme not a lump sum access to equity.

 

The person that benefits from the reverse mortgage will be the retiree himself, ofcourse. It's his money after all.

 

Retirement savings are well savings to be spent during retirement and by definition an expense. If one wants to invest part of the income then go for it, create more wealth.

 

So you only imagine hey! reverse mortgages do not work like that they give you a lump sum to spend how you please. Well I suppose it could help the unemployment as we will now need chaperones as spending police to tell us how to spend our own money.

So the lender does not benefit then? and the family could end up losing the home too.

It is not about creating more wealth (though there is nothing wrong with that) it is about the more prudent working man trying to provide a more comfortable and stress free time during retirement, forcing someone to unnecessarily basically pawn off their home is just not right.

[Paul1Perth]

You missed the point with asking extra money thing.

 

Those pension arrangements are fine so that you can give your savings one last boost. Nothing wrong with that. I am guessing you worked hard for it, now enjoy your sunset years.

 

Just a personal question here - feel free to not answer. If the allowances weren't there would you have faced financial hardship or be living in poverty or something along those lines? Do you feel that the younger generation should subsidize your retirement lifestyle?

 

If the pension wasn't there I think we would have struggled as we got older for sure. It's pro-rata so if you have a lot of savings you don't get much pension, which is fair enough. When you go the the presentations and they are working out how much you need to retire they base it on a fictitious character who runs a decent car, goes on a cruise once a year and spends more on another holiday. We've never been able to do that whilst we've both been working and all the retirees I know seem happy to get down the beach, have a swim with their retiree mates, a cup of coffee and a chat and back home. In reality I don't think you need that much money when you retire. Hopefully we should get by OK. Won't be thinking of cruises and multiple holidays abroad though.

 

Until you retire I don't think you have any idea of what your incomings/outgoings will be. Not being one to plan and worry about things I guess we'll just have to cut our cloth to suit when the time comes. Same as we've done all our lives.

Edited September 7, 2015 by Paul1Perth

[toOZ2012]

If the pension wasn't there I think we would have struggled as we got older for sure. It's pro-rata so if you have a lot of savings you don't get much pension, which is fair enough. When you go the the presentations and they are working out how much you need to retire they base it on a fictitious character who runs a decent car, goes on a cruise once a year and spends more on another holiday. We've never been able to do that whilst we've both been working and all the retirees I know seem happy to get down the beach, have a swim with their retiree mates, a cup of coffee and a chat and back home. In reality I don't think you need that much money when you retire. Hopefully we should get by OK. Won't be thinking of cruises and multiple holidays abroad though.

 

Until you retire I don't think you have any idea of what your incomings/outgoings will be. Not being one to plan and worry about things I guess we'll just have to cut our cloth to suit when the time comes. Same as we've done all our lives.

 

The current aged pension system is not fiscally sustainable. By not handing out payments to those who don't need it, it'll still be available in 50 years time.

 

With retirements expected to last 20 to 30 years, most retirees would eventually go on the aged pension. By managing it better, people in need can get better payment rates.

 

My parents have a family home here, they are not millionaires but are financially comfortable. I would rather they spend their wealth, after decades of hard work than worry about passing it down or putting their hand out for pension. A lot of younger Australians are just taking their parents wealth for granted and not doing their bit to move up. How can they, when housing affordability is a joke and their taxes are being used to fund people who don't really need it, aged pension or otherwise.

[Parley]

I think it would be a reasonable compromise to have a limit on the value of the family home which is exempt from asset test.

For example $1.5M or something like that.

 

It probably is extreme if someone is living in a $5M home and getting the full pension.

[toOZ2012]

So you only imagine hey! reverse mortgages do not work like that they give you a lump sum to spend how you please. Well I suppose it could help the unemployment as we will now need chaperones as spending police to tell us how to spend our own money.

So the lender does not benefit then? and the family could end up losing the home too.

It is not about creating more wealth (though there is nothing wrong with that) it is about the more prudent working man trying to provide a more comfortable and stress free time during retirement, forcing someone to unnecessarily basically pawn off their home is just not right.

 

Read up on pension loans scheme and the document in my first post.

 

It is necessary for aged pension to be sustainable. Guidance in money management is not wrong as it took compulsory super contributions to force people just to think about retirement. Dole queues are also getting stricter. All welfare payments are prone to abuse but welfare is such a wonderful thing - giving people in need a helping hand and another go at life.

 

I believe, health and education are two most important factors for any economy but we spend 40% of our tax on welfare - certainly room for improvement.

 

[toOZ2012]

I think it would be a reasonable compromise to have a limit on the value of the family home which is exempt from asset test.

For example $1.5M or something like that.

 

It probably is extreme if someone is living in a $5M home and getting the full pension.

 

I think it can be something like any value of the house over say 150%-200% of median price(Australia wide) or something like that. Asset limit (effective 2017) for non-home owners to qualify for full-pension is around $600k but for home owners it is around $400k so they reckon the average family home is only worth $200k?

[Keith and Linda]

If the pension wasn't there I think we would have struggled as we got older for sure. It's pro-rata so if you have a lot of savings you don't get much pension, which is fair enough. When you go the the presentations and they are working out how much you need to retire they base it on a fictitious character who runs a decent car, goes on a cruise once a year and spends more on another holiday. We've never been able to do that whilst we've both been working and all the retirees I know seem happy to get down the beach, have a swim with their retiree mates, a cup of coffee and a chat and back home. In reality I don't think you need that much money when you retire. Hopefully we should get by OK. Won't be thinking of cruises and multiple holidays abroad though.

 

Until you retire I don't think you have any idea of what your incomings/outgoings will be. Not being one to plan and worry about things I guess we'll just have to cut our cloth to suit when the time comes. Same as we've done all our lives.

 

Exactly right there Paul1Perth, we will never be certain what position we will find ourselves on retirement and some will be quite happy with a swim at the local beach and a coffee, but for those whom want the cruise and they planned for such by saving, should they be penalized for doing such? no, they took the risks with savings and investments. The only penalty should be income tax at the applicable rates.

Personally if I had $m+ cash then I would not draw Gov pension.

[Parley]

I think it can be something like any value of the house over say 150%-200% of median price(Australia wide) or something like that. Asset limit (effective 2017) for non-home owners to qualify for full-pension is around $600k but for home owners it is around $400k so they reckon the average family home is only worth $200k?

 

I don't think that would work.

[Keith and Linda]

I don't think that would work.

 

I agree, it would appear on this proposal that one could get penalized not just for the house you live in but also for the area where you live.

[toOZ2012]

I don't think that would work.

 

Won't work as is in politically or practically? Let's say I've a home that's worth $1.2mil(fully paid) and median price is around $650k so 150% of that would be $975k. So anything over that, which is $225k, is included in my assets test. If I am asset rich but income poor and the reduction in payment due to including the extra $225k will cause me financial hardship then I can take out a pension loan scheme worth $225k which will give me a regular income to top-up my pension. Thereby reducing the overall burden on welfare. Once my home equity drops below $975k I'll be eligible for full pension. Why isn't that fair?

[Keith and Linda]

Read up on pension loans scheme and the document in my first post.

 

It is necessary for aged pension to be sustainable. Guidance in money management is not wrong as it took compulsory super contributions to force people just to think about retirement. Dole queues are also getting stricter. All welfare payments are prone to abuse but welfare is such a wonderful thing - giving people in need a helping hand and another go at life.

 

I believe, health and education are two most important factors for any economy but we spend 40% of our tax on welfare - certainly room for improvement.

 

[ATTACH=CONFIG]31149[/ATTACH]

 

Others will have differing beliefs, but that is for another discussion, but why pick on pensions? the prudent working man gets picked on again, after years of paying all his tax's, has private medical so as not to burden the health system too much, along with planning for his retirement somebody wants to come along and say we'll have some more off you but not your neighbour as he was not as prudent as you!

[toOZ2012]

Others will have differing beliefs, but that is for another discussion, but why pick on pensions? the prudent working man gets picked on again, after years of paying all his tax's, has private medical so as not to burden the health system too much, along with planning for his retirement somebody wants to come along and say we'll have some more off you but not your neighbour as he was not as prudent as you!

 

It's current generation not leaving a s**t of a mess to clean up for the next. You have an interesting definition of a common-man and also assume that all people without savings are there by choice.

 

I say, people with wealth should take on more fiscal responsibility - whether it be a working person with higher income, a business with higher revenues or retirees with higher wealth than the common-man.

 

Mind you, I pay taxes (more than an average person I might add), have private insurance, don't get or expect any hand-outs and with a bit of hard work and luck, I will retire with sufficient wealth to not rely on the welfare system or anyone else for that matter but not all people are dealt the same cards.

 

The point I am really trying to drive home is that welfare is not an entitlement as some seem to believe.