Category: Commentary Archives

In an article for the website SMSF Adviser, Katarina Taurian talks about how the Federal Government has stayed true to its pre-election promise and not made any harmful alteration to the Superannuation structure. Jordan George, Senior Manager of the SMSF Association (technical and policy) feels that the government’s stance of keeping things unchanged only proves that we are stable enough to survive without making changes.

An article on the website Professional Planner talks about the Federal Government’s stance on the Superannuation sector; one that it has made abundantly clear through the latest Federal Budget. The government had stressed as a part of its pre-election gimmick that it would not be making any changes in the structure of Superannuation in its first term of office. In many ways, it is heartening that the government has stuck to its promise.

Retiring with a million dollar in your bank account is something that’s desired by a lot of Australians, but those who’re actually expecting to have $1 million by the time they retire are in for a shock, according to one of the leading providers of retirement incomes.

Jeremy Cooper, a superannuation industry veteran and chairman of retirement income at Challenger, notes that a typical $1 million nest egg was used to buy a lifetime income and with the current interest rate environment, you’re looking at $1297 a fortnight, which roughly the same as a government pension.

Assuming that you’ll have $500,000 or even $1 million in super leading to a comfortable retirement can be suspect, given the current environment, states Cooper.

A comfortable retirement can cost more because $1 million is the fair price for the age pension with today’s interest rates. An individual is looking at an income of $33,717 a year for that $1 million. This is the brutal reality, Cooper points out.

Cooper’s statements are based on the government’s intergenerational report wherein by 2055, Australians’ life expectancy could climb to 95.1 years for men and 96.6 years for women, compared to today’s 91.5 and 93.6. This calls the need for more retirement planning.

Read the rest of the article by clicking on this link.

What I think about retiring comfortably

It just goes to show that the current low bond and interest rates can be a big factor that can affect the returns of investors and many of whom are preparing for a lump sum windfall instead of a steady income.

The way things are now, we are currently on the quest to ensure that our super taxes are equitable and that we are in danger of facing heavy collateral damage to a large group of people who we intend to help. These people are the middle income households hoping to accumulate a large enough nest egg that will self-fund a reasonable yet comfortable retirement.

$1 million is not a comfortable amount for retirement and that assets below $2.5 million shouldn’t be taxed in order to boost savings.

 

At the risk of facing adverse and unintended consequences, myths around the tax status of self-managed superannuation funds or SMSFs are being perpetuated, according to Chartered Accountants Australia and New Zealand superannuation specialist, Liz Westover.

She pointed out that the SMSF industry has had to get rid of the myths and misconceptions that surround the SMSF, including those that say that the SMSFs operate under special tax laws.

Misconceptions like these are being continued or spread by people who should know better. The myths also gained momentum because the flow of funds into the SMSF sector has been a concern for some of the larger funds for some time now.

Westover points out that there are no special tax laws for SMSFs and that the tax rules are the same for all superannuation entities.

One of the advantage of the SMSFs is they were able to manage the rules more efficiently than their larger counterparts and they cited the example of sale of assets for capital gains tax purposes or the timing of investment transactions with pension commencement.

In an adverse outcome of the continued myth surrounding SMSFs, people are driven to establish SMSF or to make enquiries about SMSF simply because of the tax reasons.

Read the article here.

What do I think about this?

The myths surrounding the SMSF, or at least any myth surrounding money, can be very misleading and oftentimes, it can lead to serious consequences whenever they are listened to and accepted on face value. Let’s face it. Retirement income is a very serious topic for discussion even at the early age of 30 and 40 years old because you don’t want to retire broke.

But the thing about these SMSF myths is that they not only mislead people into getting one but they also make SMSFs look bad.  This is why whenever I talk to people about getting an SMSF, I make sure to clarify these myths or issues surrounding them.

A story on news.com.au beautifully asserts that Australians’ saving may not be enough to grant them a decent retirement and the reasons why.