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new super/ppor strategy?

Discussion in 'Superannuation, SMSF & Personal Insurance' started by Nigel Ward, 8th Jun, 2006.

  1. Nigel Ward

    Nigel Ward Team InvestEd

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    With the new changes to super taxation one of the sacred cows of financial wisdom may be heading for the abbatoir...:p

    The usual wisdom is that you should buckle down and pay off your non-deductible home loan. Now that RBLs are gone, PERHAPS some people would be better off to make extra super contributions and then use that super lump sum on retirement to pay off any remaining debt on their home...

    I haven't looked at any modelling on this...but I think it's an interesting possibility...

    Of course you can't borrow against your super nest egg...something many planners seem to forget when doing comparisons.

    Maybe a third "radical" approach if you've got a home and extra cashflow would be instead of paying down your home loan to instead switch to interest only, and use the additional cash flow plus the savings on the home loan payments to support further borrowings to acquire even more growth assets... :eek: crazy? some would say so...others would disagree

    Just putting some approaches out there for discussion...

    Cheers
    N.
     
  2. austing

    austing Well-Known Member

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    Hi Nigel,

    Yep those certainly sound like good ideas. However my concern with Super is the legislative risk. The changes allowing withdrawal of Lump Sums from Super are drawing harsh criticism from some quarters including researchers in this area who are concerned people won't make rational decisions when they finally have access to their super and its sustainability etc. For younger people in particular there is a possibility that by the time they retire the lump sum withdrawal option might have long been scrapped or changed in some way. If they are locked into long term fixed interest only loans and have put a large portion of their savings into Super any unexpected change in this area could cause problems. Also weathier superannuants are always more likely to be a target for any negative changes to Super. I just don't trust Governments.

    Some suggest that a wise strategy depending on your circumstances is to restrict Super contributions to tax deductible contributions (to the max if possible), put half of remaining savings into the mortgage and the other half into conservatively geared investments. Certainly not as aggressive as Steve's LOE but for at least all bases are covered and the SANF factor is good.

    Cheers - Gordon
     
  3. Nigel Ward

    Nigel Ward Team InvestEd

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    Gordon

    You're spot on. About the only thing you can predict about the future is that the government will regularly change the laws around super!

    Cheers
    N.
     
  4. Tropo

    Tropo Well-Known Member

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    "Also weathier superannuants are always more likely to be a target for any negative changes to Super. I just don't trust Governments".

    Gordon,

    Same here.
    To me Super is too risky to even contemplate it as a serious investment.
    :cool:
     
  5. austing

    austing Well-Known Member

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    Hey Tropo,

    For my personal circumstances I'm not sure I would go quite that far. Despite any changes to Super it is likely to be given favoured tax treatment in retirement compared to other alternatives. But certainly younger people would no doubt be better off investing mostly outside of super until they are closer to retiring age. Even huge fans of Super such as Noel Whittaker recommend that younger people only put the minimal required amount into Super.

    But rest assured I would never have all or the majority of my investments in Super by a long shot. I'm aiming to have a nice balance between the SMSF and DT/HDT's in the hope that the flexibility of these combined structures will meet our overall needs in terms of investing and tax outcomes.

    Cheers - Gordon
     
  6. Simon

    Simon Well-Known Member

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    This shouldn't apply to many here but I believe Super is designed as a safety net for those who do not purchase assets through their life to fund their twilight years.

    I agree that the only definite is that legislation will change between now and when I am eligible to draw upon it. Hopefully for the better - but who knows for sure. We maintain family contributions contributions and see super as a bonus - not the main vehicle for retirement.

    Cheers,
     
  7. Tropo

    Tropo Well-Known Member

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    Gordon,
    You are right that everybody's circumstances are different.
    That is what I said it's only my personal opinion.
    ;)
     
  8. austing

    austing Well-Known Member

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    Hey Troppo,

    I just had to remind myself that InvestEd was originally kicked off by Steve N and hence the LOE view is no doubt propular here for investing and tax reduction compared to the likes of Super. I seem to getting more conservative over time so for wimps like me Super still has it's place. But no doubt for those who are willing to take different paths Super is certainly unlikely to be of great importance.

    Cheers - Gordon
     
  9. Tropo

    Tropo Well-Known Member

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    Gordon,

    Do not get me wrong !!.
    If you feel O.K. with Super that is what really matter !!.
    On the other hand what is good for me, not necessarily may be good for you !!.
    ;)
     
  10. austing

    austing Well-Known Member

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  11. Jacque

    Jacque Team InvestEd

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    Exactly :)
    And also a safety net for the govt to minimize handouts in the future like the current pension....
     
  12. Giddo

    Giddo Active Member

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    I agree Simon. As an investor, I really hate the idea that my money is unavailable to me. Although now I am 50 I am starting to reconsider a bit more. It is only 5 years now before I can access my meagre super $$$.

    Re the comments about legislative changes, doesn't the govt usually offer some sort of moratorium, guaranteeing the sums already invested will be treated the same as intended. terms like "pre 1984 components" hint this to me.
    Am i right in thinking the govt is here to help me?:rolleyes: