Today, I went online at my super fund's site and switched my money from 'Balanced' to 'Income Focused'. I did this because I am approaching retirement and wanted to adopt a lower risk profile (mostly because, if my super plunged in value, there is little or no time left to build it up again). The choices with my super fund are 'Aggressive', 'Balanced', 'Income Focused' and 'Cash', in decreasing order of risk profile. I wasn't game to switch it all into cash just yet, though I was tempted. The principal difference between Balanced and Income Focused is the latter is less exposed to equities, but it also puts more of my money into property and cash. I could alternatively split the balance between Income Focused and Cash if I wanted to reduce risk still further while maintaining some upside potential. I am 60yo with a range of health problems that might mean I retire within the next year or two. In my circumstances, what would you do and what are your opinions regarding the typical investment options available in super?
In that case split between Income Focused and Cash, or just go cash. The stock markets are already high bordering on crashing depending upon who you ask, and so is property in many cases. i.e. more downside than upside left really, especially within a year or two. At this stage you should be pouring everything you have into super as it will be tax advantageous. Perhaps even consider switching to a SMSF and then you have total control over every cent. This can be important if you have health issues and need the money. There are many news reports about very or terminally ill people getting the run-around from the super funds and not being able to get their money. If you have a SMSF then you don't have to deal with anyone or ask permission. But I don't personally know about SMSF as an actual retiree. Here is some info: https://www.ato.gov.au/uploadedFiles/Content/SPR/Images/SPR00352279.pdf
For clarity, when I talk about moving funds into 'Cash' I am still leaving it in my super fund, not withdrawing it.
These are the differences. Obviously, the 'Cash' option is exactly what it says. Asset class Allocations Balanced: (my previous choice) Equities 45.00% Infrastructure 1.00% Fixed interest 14.00% Other 15.00% Cash 15.00% Property 10.00% Income Focused: (my new choice) Equities 15.00% Property 24.00% Infrastructure 1.00% Fixed interest 20.00% Other 10.00% Cash 30.00%
Not bad. I suppose the compounding effects of fees wouldn't have much an impact if you're retiring in 2-3 years. Who's your Super with, AusSuper? Ps 'reported to the Godly Pantheon' :lol:
Rather than a hypothetical, I am 65 and a while ago I moved all my super to cash. I think when the SHTF all other options will collapse in a screaming heap.
So what form of cash are people using? My SMSF auditor has frowned on the idea of a SDB full of $100 bills.
I wonder if super schemes actually have to keep the required amount of cash on deposit, equivalent to members' cash in super? In other words, if a member chose to have $400K of his super invested in cash instead of equities, would they sell $400K of equities and put the cash on deposit, or is it just dealt with in ledgers?
Nope, I'm allowed to have poorly performing investments and even lose money. They also don't like gold or silver coins, but allow gold and silver bars, and paper PMs such as unallocated.
^ sounds like you've got yourself a psychopathic auditor. :/ Tell em to f*#k off and find another one.
The auditor needs to satisfy themselves as to the existence of an asset and because the cash component is probably a material amount of the overall asset balance it is something they will want to look at. There's no way (short of actually going out to the SDB with you) of getting any certainty that the cash is actually there and you haven't been using it like a piggy bank. Personally I'd by fine with it as long as you were happy to pay for the time it takes for me to go out there and count the cash. It would definitely increase the cost of the audit (probably double it or more). Cash in the bank means a verification from the bank can be provided in about 5 minutes. It would also depend on if it complies with the investment strategy and I doubt it would - as I assume the strategy doesn't say "I wish to achieve returns of 0% on my investments". Do your own due diligence this is not financial advice and you need to speak to a professional about your specific circumstances etc. Cheers