Knowing how much you need in retirement is more about knowing what kind of lifestyle you desire when you have retired, or, transitioning to retirement.
According to the ASFA Retirement Standard, for a single person that magic number is $545,000.
But according to the ABS – the average super balances for the entire working population1 would suggest that we are not even close to that mark, however, a closer look into the average balance by age group reveals that the average balance for men between 55-59 is $237,022 and for women it is $123,642.
So how can we boost our super balance?
When every dollar counts, here are a few sneaky ways to squirrel up your super balance;
- Make sure you’ve consolidated all of your super2 so to save on incurring multiple fees across multiple accounts. Just keep a careful eye on any nasty exit fees.
- We nearly all have super guarantee provided by our employer3,
Self-managed super funds have often been criticised for lacking diversification when it comes to their investments, specifically that SMSFs have too much in Australian shares and cash and not enough in international investments.
This criticism is somewhat unwarranted as SMSFs access international investments via Australian managed funds and ETFs. Research from Class Super shows that the underlying exposure to international equities across the top 20 managed funds and ETFs is 57% and 58% respectively (Source: Class SMSF Benchmark Report June 2016).
A large portion of SMSF trustees desire access to international investments, namely the US as the largest financial market in the world, however investing directly has traditionally been a costly and complex exercise. Trustees face a mountain of paperwork, complex forms and typically expensive trading fees.
Looking at trading fees, the cost to an SMSF to purchase AUD $10,000 of US stocks will be anywhere from $41 to $134 ($88 on average) per trade if conducted via the international broking solutions of the big four banks (Nabtrade,
The downsizer contribution initiative is due to come into effect on the 1 July 2018. Late last year the Government passed its policy which allows super fund members over the age of 65 to sell a main residence and contribute funds into their superannuation accounts without contribution cap and work test issues.
While it may seem quite straight forward, like any government policies, there are a few hoops to jump first. There are three key steps that need to be taken if a member would like to be eligible to make downsizer contributions.
The first step a member needs to take is to confirm that their contributions will be eligible to be contributed to their fund. An eligible downsizer contribution is where:
1. the contribution is made to a complying super fund by a member aged 65 years or older;
2. the amount is equal to all or part of the capital proceeds received from the disposal of an ownership interest in a dwelling that qualifies as a main residence in Australia;
The recent surge in the price of Bitcoin has many investors seriously looking at crypto-currency as a part of their SMSF investment portfolio.
So, can an SMSF invest in bitcoin and crypto currency, and if so, what must trustees and advisers be aware of?
There are a number of key areas that trustees need to consider and address if they are looking if invest their SMSF monies into Bitcoin and other crypto-currencies / crypto-assets.
Is it allowable under the SMSF trust deed?
For any investment to be allowed, it must specifically be enabled and included in the trust deed of the SMSF. As Bitcoin and other crypto-assets are part of a relatively new asset class, it is unlikely that most SMSF deed would include a provision for investing into these currencies.
The ATO’s view is the Bitcoin and other crypto-assets are NOT currencies:
“Our view is that bitcoin is neither money nor a foreign currency,
When planning for retirement, it’s important to understand your SMSF household needs, and outline your goals with your adviser.
The latest report on the financial health of SMSF trustees heading into retirement has found that the amount needed for a 65-year-old couple to afford a comfortable retirement has risen by 17 percent from $702,000 in the previous year to $824,000.
Unfortunately, this report has also found that one in four are unlikely to achieve their SMSF goals.
Realistic wealth goals for SMSF trustees
Of course, achieving your ideal lifestyle is easier if you start with more wealth. The direct link is the greater level of initial wealth, the higher chance an SMSF household will be able to live their desired lifestyle in retirement.
The last seven years has seen a rising trend of median SMSF balances, but recent weak investment markets have resulted in low returns, and only a small increase. This brings the median balance for two member SMSFs to $1,137,000 with the median imputed investment return of 1.0 percent,
Over the last few months, many of our clients have been asking us what they need to do – if anything – following the raft of super changes that were made law in November that come into effect 1 July 2017.
Before I explain our approach for working with SMSF trustees impacted by the changes, I need to provide some context around the magnitude of these new laws.
Sustainable means less tax breaks
These changes will impact SMSF members more than the general population. By our calculation, at least 48% of our clients are directly impacted by the changes. Of this 48% the people MOST impacted and who have the biggest advice need are those SMSF members with pension balances over $1.6m – this equates to approximately 10% of the clients we work with.
The changes fall under a piece of legislation called the “Fair and Sustainable Superannuation Act 2016”.
Don’t let the title fool you, even if you are not a Millennial you may benefit from these fantastic apps. These tools could help you save for your first home, new car or your next holiday adventure. But most importantly, they can help you build your wealth which seems to be an area that millennials are struggling with the most.
GoodBudget is a budgeting app that allows the user to create a budget that is easy to stick to, making saving money a lot easier. GoodBudget uses a virtual form of the old envelope system where you put your money into an envelope for each expense and when an envelope is empty to stop spending. You start with a savings envelope then allocate funds to your expenses. You have planned your savings before your expenses so you don’t overspend.
GoodBudget comes with a free plan that includes 10 regular envelopes and can be used on 2 devices.
On issuance of the Practical Guidance in June this year for related party borrowings, the ATO acknowledged that further information was needed.
Recently, the ATO released Tax Determination 2016/16 which dealt with the subject of when a limited recourse borrowing arrangement has not been entered into on arm’s length terms.
The core principal at the heart of the release of the information from the ATO is that all dealings between a related party of the SMSF and the SMSF must be on ‘commercial terms’, or ‘arm’s length’. The meaning of commercial terms or arm’s length in relation to obtaining a loan in an SMSF, is that the terms of the loan, ie the interest rate, amount borrowed and term of the loan, must reflect what can be obtained from a third party such as a banking institution.
An example taken directly from the ATO tax determination compares a non arm’s length LRBA and an Arm’s Length LRBA, provides the following example:
The SMSF purchased a commercial property;
With the Government abandoning its policy to introduce a $500,000 lifetime cap for non-concessional contributions are you clear on what non-concessional contributions you can make to superannuation now?
Non-concessional contributions are contributions that are made to super from after-tax income or savings.
Instead of going forward with its proposed $500,000 lifetime cap on after-tax contributions, (with a retrospective counting of the last ten years) the Government has decided to go back to the current rules for after-tax contributions but with a lower annual limit of $100,000.
This will now allow individuals to:
- make non-concessional contributions of up to $100,000 per year
- have the ability to bring forward 3 years’ worth of contributions to a single year (allowing you to contribute up to $300,000 in a single year)
The ability to make non-concessional contributions will also be limited to people who have an individual superannuation balance of under $1.6 million. In addition,