Episode 14

Savvy Super: Tips on what you can do now with little effort or sacrifice to maximise your future

Have your Super set up – do yourself a favour!

  1. What will kill your retirement? Not looking at your super now.
  2. Would you trade 15 minutes now for $350,000 in 30 years?
  3. That is all this episode is, little things now for the future self – not hard, and your future self will thank you.
    • Tips on what you can do now with little effort or sacrifice to maximise your future

 

What is super?

  1. Most people think of superannuation as just something your employer pays into, which you can’t access until you turn 60
    • Even though your employer pays into super, that is your money! 9.50% on average
  2. Don’t care and why would you right? Out of sight, out of mind and decades away from becoming relevant.
  3. If you could log into your bank account and click a few buttons to save a few hundred dollars a year, would you?
  4. The real cost of super is opportunity cost – doing nothing now will hurt
    • Any problem ignored long enough will grow – until it is too late
    • Pay attention and make it work – don’t regret the future
    • One thing I hear clients say all the time is ‘I should have looked at this years ago’ – regret is worse than the effort

Real use of super

  1. Forced savings – YOLO safety net.
  2. It allows me to diversify my investments and secure my future. My businesses can fail, go broke but at least by the time I am 60 I will have enough in my account to sustain myself for the rest of my life.
  3. Tax effective investment account – if you are investing for the long term, why not use?
    • Same investment of 10% p.a.: Compounding returns of 8.5% p.a. vs 6.1% p.a.
    • $20,000 over 30 years = $231,000 vs $118,000 – or almost double the money

 

What are your options:

Super is a vehicle to invest funds for retirement – A car is a vehicle

  • You can get a Mazda, or Mercedes but the aim is to get you from point A to B!
  • Like cars there are different types of super accounts with different features

 

Retail 

  • A Master Trust is a superannuation fund in which a large number of members deposit their money.
    • The trustee of the Master Trust pools the money together and purchases interests in the underlying investments, typically managed funds.
    • The value of the investments of each member incorporates the fees, franking credits and some taxes from the underlying investments.

WRAP account

  • External super trustee but you have control over investment decisions
    • You get a cash account
    • Then you select third party investments – Managed funds, Direct Shares, LICs, ETFs

Industry

  • Industry super funds are multi-employer funds (employer associations and unions)
    • Investments – limited to around 10 multi-sector investment options (eg. Growth, Conservative, Balanced), limited insurance options

 

What to do to make sure you make the most out of it?

  1. Pay attention – get the right investments
    • Cars: You can have a Ferrari but if the driver (investments inside the account) is awful, the car may crash! Not getting to point B!
  2. Make sure your contributions are going in there
  3. Treat it like your own, because it is – If you think you don’t have any investments, well you do in your super
    • Managed funds are investments – just doesn’t look like it with industry funds

 

Strategies:

  1. Consolidate accounts
    • Like a lot of people, I had different employers
      • 4 super accounts v 1 account – Each costs $80, plus $300 in insurances ($380 total)
      • $1,500 p.a. : $20,000 in super = 8% costs – good luck for investments to beat this
  2. Check your costs – Some accounts are higher than overs (in the last Furious Friday ep)
    • Admin fees: Standard is about $78 which is good for lower balances
      • The platform I am with costs $175 p.a, but it’s worth it. Any managed fund I want, any direct shares (Australian or International).
    • Investment fees (MER/ICR) – these can be hidden
      • Recently industry funds went from very low to about 1% – Disclosure required
      • The higher the MER – the lower the net returns depending on investment strategy
      • Don’t get caught out.
  1. Insurances or not?
    • What is your situation like?
    • Do you have dependents and debts? Or are you paying for something you don’t need?
    • If you are studying still, with many super accounts you are probably over insured!
      • Don’t pay for things that you don’t need.
    • If you are a professional – Chances are you are paying too much for the cover
      • Standard Covers – Same premiums for all – Builders vs Accountant
      • Premiums – statistical likelihood for claims
  2. Investments – Depends on the account.
    Premix – Balanced for someone who has 30+ years might not be the best choice.

    • Higher levels of volatility can be good for regular contributions
    • Example: 15 mins for $300k
      • Earn $60k p.a. growing with 2.5% and starting super balance of $30,000
      • In 30 years: Super earning 6% = $707k, or 8% = $1,060k
      • Doesn’t have to be earnings but reduced insurance costs as well
  1. Contribute – Tax savings and asset gain
    1. Salary sacrifice when on a decent marginal tax rate – Earn $100k, each $100 you put in there is $60 less you have in pocket, but $85 more into your super account.
    2. Non-concessional – Lower MTR – Can get up to $500 from the government in government co-contributions (free money!)

 

What’s right for you?

  1. Type of account
    • Retail – Lots of options
    • Industry – low options, standard based on risk profiles
  2. Investment options
    • Long term growth
    • About to retire – protect your capital
  3. Boost your super
    • Cut costs or consolidate
    • Make effective contributions

Most important things – Pay attention

  • Don’t regret the future wishing you had consolidated your super or reduced your costs 20 years from now.
  • Doing the right things now means that your eventual retirement can be more financially secure!

 

Thanks for listening!

B!tching about the budget: What does it mean to your back pocket, Santa Claus, wage growth and the cocaine economy

Furious Friday B!tching about the budget: What does it mean to your back pocket, Santa Claus, wage growth and the cocaine economy Welcome to ...Furious Friday! Today’s episode is a special edition covering off on B!tching about the budget Why are people complaining?...

What can a Kondratieff Wave and what can it tell us about the economy over the long term?

Welcome to Finance and Fury, The Furious Friday Edition With the current state of the markets – and the focus only on today's news and short-term cycles - In this episode – we will be looking at economies and markets in relation to Waves and cycles in a complex system...

What 5 factors create poverty?

Welcome to Finance and Fury, the Furious Friday edition This episode is a flow on from the previous furious Friday episode question from Nick, about poverty. Last episode we talked about how poverty is defined and the economic factors of poverty, which play only a...

How do you change your investment strategy over time as the portfolio value increases?

Welcome to Finance and Fury. This week the topic is from a listener, Gabriel. That is “how do you change your investment strategy over time as the portfolio value increases? more specifically, how do you see someone building a growth portfolio starting with $10,000...

Why work your whole life, just to have nothing left over at the end?

Episode 8 Why work your whole life, just to have nothing left over? Pay yourself first! Keep your own money – why work for others, then have nothing left to show for it? You earn more over your lifetime with this strategy – you save more and get rich right? Regular...

How to use your home for Investments

Welcome to Finance and Fury Today we have Jayden here, and we will be talking about using your home for as an investment and as a forced savings account. You can start turning the bad debt into good debt. Through paying down the loan quicker, and then redrawing on the...

How can the combination of an argument from authority and fear be used as a method of enforcement, allowing the economy to be shut down?

Welcome to Finance and Fury, the Say What Wednesday edition. This weeks question comes from Scott in Texas. “Thank you for your steady course on the social and resultant economic collapse from Govt reaction to the covid 19 virus. I am just as dismayed as you that we,...

Beggar thy neighbour – How devaluation of currency can make or break economic growth domestically, or for trading partners

Welcome to Finance and Fury, the Say What Wednesday edition  Today's question comes from Jessica. Jessica – Hey Louis, You mentioned something about a Yuan devaluation in the Tech Share episode. I’m just wondering what this is and why a country would do this? Thanks...

The number of homes being put up for auction across Australia has plummeted as falling property prices and fewer cashed-up buyers shake the confidence of owners looking for the right time to sell

Episode 25 The number of homes being put up for auction across Australia has plummeted as falling property prices and fewer cashed-up buyers shake the confidence of owners looking for the right time to sell The decline of auction rates and confidence in the market...

Say What Wednesday: The skinny on bonds and fixed interest

Welcome to Finance & Fury, the ‘Say What Wednesday’ edition. This week’s question comes from Gab; “Hi Louis, I was looking at different asset classes and how someone could get exposure to them (outside superannuation) and got stuck on "fixed income". If I...

Pin It on Pinterest

Share This