#Superannuation #RetirementPlanning #FinancialDecisions
Hey there! 👋 Let’s talk about a topic that is crucial for anyone planning their retirement – superannuation. Do you live off returns or do you draw down on principal? It’s a question that many retirees grapple with, so let’s dive in and discuss!
Here are some points to consider:
– Ideally, you’d want to live off the returns, dividends, and capital growth from your super, without dipping into the principal.
– But how does this play out in reality for those who have already retired?
– Do you find yourself splurging while you can, or do you try to stretch your super as far as possible before relying on the pension?
– Have you had to dip into your principal for unexpected expenses like car repairs or family events?
– What strategies have worked for you in managing your superannuation in retirement?
As someone who is also navigating this journey, I’ve found that setting a budget and having a financial plan in place can be helpful in making informed decisions about how to manage your superannuation. Share your insights and let’s learn from each other’s experiences! 💡💰
It depends how much super you have, what your returns are, and how expensive your lifestyle is ..
Do people actually plan to retire off their super?
Just work until you can “crack open the super piggy?”.
Wouldn’t you want to retire much earlier than 65?
My mother draws the minimum for her age, 5%. She gets 10% returns. The balance actually grows year upon year.
Actually in an ideal world you WOULD eat into the principal and work it slowly down so that you have very little left at the end.
It’s designed to be spent, not to be a taxpayer-subsidised form of inter generational wealth distribution.
There is a mandated minimum amount you must draw down from your super if it is in the pension phase. The minimum amount increases with age.
The government gives you tax breaks on super to fund your retirement, not so you can provide a big tax free inheritance to your kids.
I am retired and have about 75% of my investments outside of super. I get sufficient income from rent, dividends and distributions that I never have to touch the principal. I turn 60 in 18 months and will then convert my super to pension phase and withdraw the minimum 4% a year. I expect the super balance to continue to grow most years.
Ideally pension payments are less than annual earnings, to preserve the capital base.
Hostplus is trying to convince me to move to move to their pension fund. This in theory to grow while I get minimum draw down. I will check this out in 15 months time before age pension age
Parents left it in accumulation and don’t drawn down.
With one of our accounts (mine) in pension mode (drawing at the min 4%) and one (wife) still in accumulation we spend maybe 150% of what we draw from super with the rest coming from cash and investments….but we do live quite comfortably on about $125k a year.
Once we’ve moved more to the accumulation fund (partly via a downsizer contribution) and swapped that one to pension mode super min draw will roughly balance expenditure, and later on we expect to spend less than we are forced to withdraw…. as we get older and the min withdrawal rate rises. That excess will be invested outside super, and/or given away.
The Super balance is predicted to start to fall in real terms once we hit 70 (but keep rising in money of the day).
There is no pension in any foreseeable future
We did pull a lump sum out when I retired to help kids with housing.
I retired with $820K, followed by a big surge in the stock market which lifted my capital up to 950K. So far my super has been earning more than I withdraw (50K). After >3 years of withdrawals I am still ahead of my original amount. My dollars currently are very close to 900K.
I don’t draw a pension. This is just earnings from my retirement stream.
50K a year sounds like not much but by the time you retire with house paid off and dependents gone, plus none of the expenses associated with work, it’s adequate.
I work with retirement accounts and those who draw down the minimum amount are usually those who don’t need the money. Usually anyone with a balance over 300k are ‘finding it hard’ to even spend the minimum.
Depends what your expenses are
You can take it as a lump sum, and do what you want. But any gains will be taxed, although if your balance isn’t big, this may be worth doing
Or you can set up a fortnightly payment which amounts to either 4% or 8% annually. Maybe a % in between but not sure.
4% is designed to be enough to just skim of returns ( although not guaranteed) and 8% is designed to slowly deplete some of your principal (although not guaranteed).
Super had been around for 30+ years people that retiring today should have 1 mil+ in it if they have been doing semi ok.
Super has a min amount u need to pull out based on age. You can absolutely pull it out and put it in ETF’s or similar.
Presuming you have a house paid off and don’t live in a HCOL area. Then you don’t really need much.
Plus you would think you would have other investments.
I should have an ETF income stream and super pension income stream.
Yes I’ll die with money left but it’s much better then dieing with zero or relying on the govt for a pension which may or may not be around.
I’m 53M with Australian Super and Military Super (DB) and will have 2 sources of income in my retirement (not including wifes superannuation). My Military super will provide me anywhere between $20,000-$30,000 per year in defined benefit lifetime income until I die, then my wife will receive approxiamtley 66% of whatever my income. My Australian super currently worth $840,000 should be worth >$1.4m in 6 1/2 years, from that Im intending to draw down about $117,000-$130,000 per year commencing age 60. If the Australian super earns 8% in retirement, the super will last for anywhere between 26-41 years (age 86-101!). Ontop of this we’ll leave my wifes super (50F $350,000) to sit there and build up for us to either access, or the children will inherit.
##### **Spend your money before you die, Treasury urges retirees**
A growing body of evidence shows retirees are dying with most of their wealth intact.
By 2060, one in every three dollars paid out of the superannuation system will be an inheritance rather than retirement income, according to the government’s retirement income review.
“Partly because they have only ever been primed to save as large a lump sum as possible, retirees struggle with the concept that superannuation is to be consumed to fund their retirement,” wrote Treasury.
“Because retirees struggle to develop effective retirement income strategies on their own, much of the savings accrued by members through the superannuation system are not used to provide retirement income.”
The Grattan Institute’s economic policy program director Brendan Coates said “most retirees could afford to spend substantially more than they do”.
“Many retirees seem reluctant to draw down on their capital, and instead live solely on the income their savings generate,” he added.
The Grattan Institute’s Mr Coates said there were several reasons why retirees were afraid to draw down their superannuation balances, including concerns around future health and aged care costs, as well as a fear of running out of money before they die.
While retirees with low superannuation balances are eligible for the aged pension, the retirement income review found that a large proportion of Australians do not believe the pension will exist when they reach retirement.
“Surveys suggest that less than half of all respondents (48 per cent) and only 37 per cent of people aged under 55 agreed the age pension will exist when they reach retirement,” found the review.
Mr Coates said “many retirees are net savers through much of their retirement” as a result of these beliefs, and noted it was important for the government to give people confidence in the longevity of the pension system.
https://www.afr.com/politics/spend-your-money-before-you-die-treasury-urges-retirees-20210720-p58bcs