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Discussion in 'Introductions' started by k8canb, 28th Dec, 2014.

  1. k8canb

    k8canb Member

    Joined:
    28th Nov, 2014
    Posts:
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    Location:
    Canberra ACT
    I am a self funded retiree live in ACT with my wife, we are empty nesters and have industry fund pension and defined benefit PSS pension; also we get a small age pension.

    Some 10 years before my retirement, I took keen interest in my super, investment and Centrelink matters. I mainly got self - educated in finance by reading books, attending various free seminars by super funds and Centrelink Financial Information Systems.

    While we have adequate assets to enjoy our retirement, I take active interests in my industry superannuation account who allow the members to choose investment types and there are around 10 selections. I can change every week if needed.

    I have always followed a thumb rule of investing in growth assets by a formula (100 - my age); this has worked well for me. Just before the GFC I changed to 100% cash and sat there and avoided the huge losses.

    When I became eligible, I started Transition to Retirement Pension and 100% salary sacrificed to my industry pension, contributed maximum allowable amount to my PSS defined benefit pension fund. All these strategies have resulted in a sizable super account balance.

    In the current climate of low interests and volatile stock market, I am worried about the future and like to learn how others are managing their assets.

    Cheers

    k8canb
     
    Last edited by a moderator: 29th Dec, 2014
  2. Liverpool St

    Liverpool St Well-Known Member

    Joined:
    21st May, 2007
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    96
    Location:
    Sydney
    Hi K8canb

    Would you mind elaborating on your formula? How does that work? Also, what made you go to cash prior to the GFC?
     
  3. k8canb

    k8canb Member

    Joined:
    28th Nov, 2014
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    Location:
    Canberra ACT
    Hi Liverpool St,

    The formula is as stated 100- your age = percentage to be invested in growth assets. For example if investor is 30 years old then 100-30= 70 so invest 70% in growth assets. As one gets older then the investment in growth asset gradually reduces, for example at the age of 70 the formula gives 100-70=30 and only 30% of the assets need to be invested in growth assets. The justification of the formulae is as people grow older they cannot afford to lose assets due to the down turns in the markets. I picked this formula from a friend and it has worked for me. However, one should get professional advice before deciding to invest:).

    About my move into cash just before the GFC, I regularly watch TV programs like CNBC and Bloomberg and also read a number of financial news papers and magazines. I felt that something was going wrong in USA and Europe and decided to move into cash to take shelter.

    Hope that helps

    k8canb
     
  4. Liverpool St

    Liverpool St Well-Known Member

    Joined:
    21st May, 2007
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    Location:
    Sydney
    Canberra

    Thank you,

    I am an ex Canberra Public Servant myself now living and working for private enterprise here in Sydney. Well done on the defined benefit, hard to get these days.
    I had property in Canberra and offloaded my last one last year. Are you a property investor?

    LE
     
  5. k8canb

    k8canb Member

    Joined:
    28th Nov, 2014
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    Location:
    Canberra ACT
    ComSuper defined benefit super is a worry free and even cover the spouse after the death of a pensioner; there are no investment worries as the tax payers (the Government) forks the bill.

    I have never ever invested in property as it did not appeal to me. Now in my 70s I just concentrate on preserving my capital. There is no need to seek growth.

    I am of the view that currently the property is highly overvalued and one should be cautious when investing in property.

    k8canb
     
  6. Liverpool St

    Liverpool St Well-Known Member

    Joined:
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    Location:
    Sydney
    Thanks k8canb,

    Coming up to 64 I am still working as a contractor here in Sydney. I have just recently purchased two units in Brisbane, one in New Farm and one in East Bris. Being an ex Navra client cured me of shares. Once I take the final step to retirement I will start to sell off the older properties, take some capital and look for further growth.

    LE
     
  7. k8canb

    k8canb Member

    Joined:
    28th Nov, 2014
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    Location:
    Canberra ACT
    Good Luck

    k8canb
     
  8. FinanciallyFreeAustralia

    FinanciallyFreeAustralia Member

    Joined:
    17th Jan, 2015
    Posts:
    7
    Location:
    Adelaide, SA
    Hi k8canb, I am new here too.

    I recently reviewed my investments and also settled on the same formula of 100 minus age in Growth assets. Congratulations on your genius move into cash on the cusp of the GFC. Warren Buffett says you only need to trade often, only a handful of good decisions in your lifetime will be enough and that is a great example. I can't say I was so skillful/lucky myself, but fortunately I also didn't sell assets at the bottom, just hung on and rode it out. Nowadays I try to hold more cash and will be try to be braver to load up on cheap shares if another financial crash presents.

    I am also pondering the low interest world we appear to be entering into. Firstly we can be thankful in Australia that we can still achieve 3% on cash, compared to other developed countries it's a huge advantage. Japanese and German 10 year govt bonds are paying 0 to 0.5% interest! I wonder how retirees will manage in these countries. Furthermore, the ASX also has a relatively high dividend yield, and franking credits on top. Relatively speaking we are very fortunate, but still I am sure many will be alarmed and annoyed that 5% term deposits are no longer around. Personally I will be aiming to stick to my plan and target asset allocation and keep a diversified portfolio. I am not to keen on fads like the "hunt for yield". I did look into some of the high yield share funds focusing on dividend shares, but in the end decided I am happy enough sticking with basic ASX index ETF's (VAS, IOZ, etc)

    cheers, FFA
     
  9. k8canb

    k8canb Member

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    Location:
    Canberra ACT
    Hi FFA,

    Thanks for your message. The fluctuation of stock market is a big problem for older investors - particularly who have retired; during the downturns, they will not have time to ride through the financial losses. However, younger propel have time to expect market to rise and make good their losses.

    Many of my retired friends are sitting on defensive assets like cash and bonds; currently they do not get 5% returns, however, they are forced to draw minimum 5% pension from their account based pensions. This process results in loss of the capital and nothing can be done about it. Many are scared to invest in growth assets as the memory of Global Financial Crisis is still fresh.

    The Government although allowed smaller than 5% pension draw downs for few years in the past, now the minimum draw downs are strictly enforced back.
    The public servants who are on defined benefit pensions have no problems of investment performance as their pensions are assured for their and in most cases their surviving spouse as well.

    k8canb
     
  10. FinanciallyFreeAustralia

    FinanciallyFreeAustralia Member

    Joined:
    17th Jan, 2015
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    Location:
    Adelaide, SA
    Yes the low interest rates are a challenge indeed for savers/retirees. I guess the choice is 1) accept more risk in growth assets or 2) find a way to live with the lower return from defensive assets. For anyone who is scared as per your last sentence, I would suggest 2) is the best choice, so personally I think your friends are doing the right thing sitting in cash and bonds... Yes it can be hard to watch from the sidelines as shares and property rise. But it's unlikely to be sustainable if one exceeds their risk tolerance, and who wants to be under such financial stress in retirement. From an international perspective, we can still take solace that Australian retirees/savers are in a much better position than most other countries, as I said in my earlier post.

    Just one point regarding the 5% drawdown, the super balance will see a loss of capital if the investment return is less than 5%, but on an overall basis this money drawn out can always be re-invested (outside of super) if desired, right? So overall portfolio does not necessarily lose capital in my way of thinking.
     
  11. Tropo

    Tropo Well-Known Member

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    NSW
  12. FinanciallyFreeAustralia

    FinanciallyFreeAustralia Member

    Joined:
    17th Jan, 2015
    Posts:
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    Location:
    Adelaide, SA
    Hi Tropo, to clarify my quote there was in reference to relative interest rates of Australia vs many other developed countries, not regarding relative level of retirement savings. Thanks anyhow for the link which paints a concerning picture... FFA