Got SMSF?

Discussion in 'Superannuation' started by Nugget, Jan 23, 2011.

  1. Nugget

    Nugget Well-Known Member Silver Stacker

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    http://www.couriermail.com.au/news/...for-baby-boomers/story-e6freooo-1225992928246


     
  2. rbaggio

    rbaggio Active Member Silver Stacker

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    Good find Nugget. SMSF ftw!
     
  3. intelligencer

    intelligencer Active Member

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    Super threat for baby boomers?

    More like super threat to the younger generations who have to get the bb gorilla off their backs.
     
  4. Clawhammer

    Clawhammer Well-Known Member Silver Stacker

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    I kind of feel like everything we do is about securing our old age.

    From having kids to look after you, to secretly stacking PM's or owning one's own dwelling, it's all about investing in the future. To me, Super Annunation is just a way of hedging my bets against the other avenues failing to deliver.
     
  5. Big A.D.

    Big A.D. Well-Known Member Silver Stacker

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    Interview with Paul Keating about superannuation:

    [youtube]http://www.youtube.com/watch?v=PwRcXpPoKEI[/youtube]

    Skip to about the 5:00 mark for his thoughts on raising the rate from 9% to 12%.
     
  6. MelbBrad

    MelbBrad New Member

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    So, can someone please explain to me?
    I'm 36, self employed since 2008 with about $250k in an industry fund that I started when I was working for an employer in my early-mid 20's. By reading this, I take it that the money I and my employers have put in is being used by now-retiring BB. I only get to use it later in life, after another 24-odd years of working. Is this not a form of Ponzi? Why should I allow my funds to be used by BB who have been blessed for the best part of fifty years with unprecedented economic growth (last few yrs the exception) unrivaled increase in property and stock portfolios, no world wars, free tertiary education....if retiring BB haven't the foresight to prepare for self-funded retirement, they can use the govt pension. Sorry if this offends, but I get the feeling any BB in here has planned adequately. Should I start a SMSF? To me, super is but a part of my 'retirement' plan. I'm not planning on it being my sole retirement investment.
     
  7. Slam

    Slam Well-Known Member Silver Stacker

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    Glad I went SMSF route, I am getting my brother and relatives into it.

    Since this will be a problem coming, why not front run it now and secure your own wealth =D.

    Slam

    Edit: The problem is as people retire more people are cashing out. So the industry funds have to sell assets to meet those cash outs. Kind of like a run on a bank. What the stupid government is doing is forcing the younger generation to contribute more, so there is less of a run. This is the biggest ponzi scheme ever. Just front run the basturds and manage it yourself. Let it all crumble to pieces while you have your Super in real assets like PMs and later when its right investment property.
     
  8. Big A.D.

    Big A.D. Well-Known Member Silver Stacker

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    Er, you sort of got it right but the problem described in the article is about the liquidity of redemptions rather than any generations' equity in the system.

    The problem is that if retired people want to pull money out of their super to live on, they take it as cash. This means their super fund has to have cash to give them. This means the super fund has to sell something to get the cash.

    If there are more people taking cash out of the system than depositing cash into it, then all the super funds have to start selling stuff at the same time. Doing that means the market value of all those investments that they're selling will go down because everyone is selling and nobody is buying. The result is that the stock market goes down, real estate prices go down and nobody can borrow any money to get anything done.

    It isn't an "X-ers vs Boomers" issue, its more about getting enough people to keep putting money into the superannuation system so that investment doesn't dry up. Making it simpler and giving more inventives would be a good start.
     
  9. intelligencer

    intelligencer Active Member

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    They could just increase the tax on withdrawing your funds as cash for the BABY BOOMERS themselves.

    Tax THEM on their superannuation withdrawals and keep their money to stimulate the super funds.

    Its their problem. So keep it limited to them.
     
  10. Big A.D.

    Big A.D. Well-Known Member Silver Stacker

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    Again, it isn't a generational issue.

    Boomers are going to be withdrawing their funds that they saved for their retirement.

    Gen Xers are going to keep depositing their funds that they are saving for their retirement.

    Unfortunatly there is a discrepency between the amount the Boomers will be withdrawing and the amount that Gen Xers will be depositing and the danger is that this discrepency will take liqudity out of the superannuation system - the system that provides great big piles of money to keep they economy ticking along. If the source of funds dries up, asset prices will be pushed down as well as the level of economic activity. Nobody will be able to start or expand businesses because they can't get any credit.

    Taxing Boomers more is counter-productive because the whole point of super was to ensure there was money to fund their retirement. If you take that money away from them then the whole exercise was pointless.

    The only real solution is to make sure that people put more money into super in the future. That isn't a bad thing. It isn't necessary for them to be putting their funds into the superannuation "industry" either, so SMSFs aren't going to mess things up. If you think you can pick stocks better than your idiot fund manager, that's just fine and dandy or you can put your funds in precious metals or real estate or in term deposits. All that matters is that you keep it invested in something and don't piss it up against the wall. That's it.
     
  11. intelligencer

    intelligencer Active Member

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    Asking the next bunch of people to put an extra 6% of their income to keep a flawed scheme alive is definitely generational.

    Forgo the benefits of 6% of their work and effort today, only to perhaps never see the money at the other end.

    If the systm is so brittle as to require rule changes within decade timeframes then what faith can we place in it?

    I say let them be taxed. Its their problem. Take the money as an annuity and not a lump sum or be taxed on it.

    Your problem bb.
     
  12. rbaggio

    rbaggio Active Member Silver Stacker

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    At first glance, the way the article is written it _sounds_ like a ponzi scheme.

    While Mr Haratsis says the government will never actually allow the funds to freeze, it must act soon by increasing the super guarantee to 12 per cent as quickly as possible - and then to 15 per cent for a period in order to make sure that funds have enough money to meet the impending "hump" in retiree numbers caused by the retiring baby boomers.

    http://en.wikipedia.org/wiki/Ponzi_scheme

    The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going.
     
  13. intelligencer

    intelligencer Active Member

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    Moreover, if YOU BB have been paying your monies into the hole of super, and if those monies are being invested then how can taking YOUR money out of that system ruin it?

    This super system started with nothing.

    Surely its not just another fractional system?

    Super should be a full reserve system. Money in and money out should not affect its liquidity. It should be a flexible system that grows and contracts.

    The super industry is admitting here that there is a hole here.
     
  14. intelligencer

    intelligencer Active Member

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    So it is either full reserve where it stores, invests and returns peoples money minus fees at the end of their working life.

    Or it is a Ponzi.

    It should be full reserve, but here is the REAL ISSUE. The system has grown to the point that the industry itself, ie. the institutions and people in the super industry cant be funded by a contraction in the size of funds invested.

    They would be forced to downsize.

    Thats what they are really facing, and resisting.

    F' them I say. I'm not going to feed the parasites.
     
  15. Slam

    Slam Well-Known Member Silver Stacker

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    The problem is the overvalued investments.

    Its like people are contributing and saving money, so the industry funds invest for them. Stocks and other investments go up, but when they all decide to sell. Everything falls to pieces and the prices now contract. So those ready to retire will get most benefit, while the younger generations see their investments fall.

    This whole ponzi scheme comes back to ever increasing amounts of profits and asset prices to keep afloat.

    Again this is no different to the fiat money system we have today, too much money chasing too little goods / assets. So everything in this world has been inflated to higher values relative to fiat. But problems arise when everyone tries to cash into fiat. If it was all maintained in gold and held purchasing power over time. Lump sum withdrawals don't matter, but no the whole system is designed around interest and keeping ahead of inflation.

    I'd say let it all crash too, I don't want to invest 15% of my income into Super, when no end in sight.

    Slam
     
  16. Big A.D.

    Big A.D. Well-Known Member Silver Stacker

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    Look, no matter how much you want this to be an agument about the morality of financially supporting the previous generation in their old age, it isn't.

    The video I posted of the interview with Paul Keating explains how easily the issue can be fixed:

    - Wages growth is 4.3% per year.

    - Take 0.5% of that and put it in a superannuation fund.

    - Take-home wages increase by 3.8%.

    - Repeat for 6 years and the superannuation rate is 12% and the problem is pretty much solved.


    Keating's original plan was to keep increasing the superannuation rate so that it forced people to save enough money to live on when they retired. 9% just isn't enough, regardless of whether you're a boomer or a Gen X-er and it was entirely possible to "have faith in the system" as it was designed but somebody *cough* Howard *cough* buggered around with it.
     
  17. Big A.D.

    Big A.D. Well-Known Member Silver Stacker

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    But!

    If the asset prices fall and the younger generation continues buying anyway, their average cost will be lower over time. Once the anomoly of the aging population is removed from the system, growth will continue in a more usual way and asset prices will start to rise again. The younger generation has also been buying at a higher rate, so they'll have more of them and at a lower average price.
     
  18. boston

    boston Well-Known Member Silver Stacker

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    Don't forget we are all still paying 0.5%, which is included in our tax, for our old age pension. Get the feeling there is a bit of double dipping on the part of the government. :(
     
  19. Randomz

    Randomz New Member

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    Keep in mind, that your clever new tax on super, will be at a much higher tax rate by the time you come to collect your super. Will you still see it as a good idea when that time comes?
     
  20. Randomz

    Randomz New Member

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    So for clarity, are you still blaming the boomers or have you now shifted to blaming the super industry?
     

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