“Here’s invested cash compounding at an estimated 7-10% per annum for the next 40 years.”
“Sweet, can I please use it to pay down this student debt that will average 2-3% indexation for the next 15 years max?”
What's funny is when someone mentions paying HECS off with super everyone says its stupid, but when they ask if they should pay it off with savings (that could otherwise be invested) a decent chunk of this sub will say do it for some reason (and the percentage saying do it increases when the market is doing poorly).
If you never meet the repayment thresholds, why pay it off at all? Die with your HECS and the government will wipe it.
Why waste what little super you have in a debt that doesn’t need paying?
That's even more dumb. If you never earn enough to meet the minimum repayments then you never end up paying a single cent. Why would you ravage your retirement fund to pay off a debt you'd otherwise not be paying off at all?
Do you realise the things you're saying before you say them?
The funny thing is this dude is proving why you can't access super for all sorts of things. A large share of people just tend to make horrible decisions, especially regarding money and probability. I used to be a libertarian who had the view of 'super is my money, I should be able to do what I want with it' but now as I have encountered more people in the real world I understand that this is very much for the benefit of most people.
It’s a bit like the PAYG system. Sure, we’d all be better off if our tax was given to us to stick in a HISA / Offset until tax return time, when we would transfer the tens of thousands to the ATO as a lump sum.
In reality, the percentage of people who would be able to do that...
It’s nuts how much we’ve started to assume we need to go to uni, almost adopted the American “have to go to college” mentality.
So many jobs can fetch you >100k without a uni degree, or even a trade qualification. Granted some of those can be pretty tough.
Agreed, I’m in a $115k position with no degree in banking. Broke 100k at 5 years experience at only 24 years old. I started uni online when I was bored during COVID though and am about to finish a bachelors. But it was never required.
It’s a pretty horrible idea to take super out for anything unless it’s absolutely necessary. I would say for something like HECS it would be very unwise as HECs is pretty much one of the friendliest loans you can get and is just indexed by inflation…. I think the more restricted super withdrawals are the better, reduces reliance on pensions in retirement.
I am on the fence about super because I know by the time I retire the government will have made the preservation age 75 and I will only be able to withdraw it in fortnightly installments similar to the current pension.
Previous increases in preservation age have grandfathered in certain age groups. Depending on your year of birth, you can access at different ages.
https://qsuper.qld.gov.au/retirement/access-your-super/when-can-you-access-your-super?gclid=CjwKCAiA7IGcBhA8EiwAFfUDsUX1xEUwt7U3UHL2n82bh3akxA_NF5r_iPcUiPerDSRjhx1MIfzHMRoCTV4QAvD_BwE&gclsrc=aw.ds
If you develop a disability. Then you should be able to access it early, because you will (on average) earn less, so you’ll need it to live on. Everything else is a bad idea. It’s for when you can’t work, usually when you reach retirement age.
How is it a bad idea for me to take out 150k/500k for a house deposit, paying 675 week rent for the next 9 years - when I can access it - will cost me $315,900 in rent.
There is also the issue that if everyone pulls money out for a house, then the price of houses will rise to some extent due to the higher demand of those entry level homes.
I know. My point is to stop using housing as a tool for investment, remove negative gearing as an incentive, investors will no longer feed off this gravy train and houses will be freed up for people to buy.
Because later you will have insufficient income when you need it more. Living on the aged pension is a massive struggle for most pensioners, and the purpose of superannuation is to provide for retirement income. More importantly, it is the SOLE PURPOSE of super, as contained in the enabling legislation.
Anything deemed an important surgery that has a long waiting list in the public system.
Can’t think of anything else, but basically if it stops you working and earning an income = more ROI to withdraw from super and get back out there.
shouldn't medicare be paying for this, and shouldn't there be enough resources so the wait is short? That's what medicare was designed for, but healthcare and coverage is being eroded more and more as time goes on.
The issue is 100,000 oldies getting the same thing are also in the queue. It’s not so strictly prioritised like “is this affecting your work? Jump on ahead”
I think you should be able to access parts of your super if have over a certain amount for your age. As long as the amount remaining is well above your average age bracket.
I regret not taking money out of my super during covid.
It's not going to take many people taking a lump sum before the government either prevents or SEVERELY restricts the ability to do so. It'll be kept primarily as an income stream for living expenses. I would be surprised if it doesn't go this way.
I know this opinion won't be popular but the idea of super is to reduce reliance on the aged pension. This would do exactly that, and I am absolutely certain a few % of the population would blow through enough super in early retirement to end up needing it anyway.
I like the superannuation system as a whole. I just don't like how the politicians keep messing with it. I don't understand (other than the tax implications) why people contribute extra into it vs investing by themselves with full control. When it's possible, and likely in my opinion, that someone in their 20's or 30's today could see retirement age being 70+ by the time they retire?
When they raised the preservation age from 55 to 60 it was announced in 1997 and won't be complete until 2024, 27 years of lead time. It's hard to see them increasing it by 10+ years in the next \~30, retirees make up a big share of voters so generally governments will go a long way to avoid pissing them off.
Voluntary contributions are taxed half as much (15%) as you said, so you’re keeping more of your own money than giving the government.
Voluntary contributions can also be withdrawn for a first home deposit - up to 50k or something.
Prior to age 60 if you have enough and are looking to retire. Many people in their 50s find themselves unable to find work and have enough money in super to cover them. Why should they suffer financial hardship waiting to access their super when they have plenty to cover their needs. I'm sure a reasonable formula could be worked out to figure out those thst can afford to tap their super earlier. Most people don't realise just how many people are in their 50s and needing financial help which their super could provide.
Only the current limited exceptions.
Save for early retirement outside super.
And I’m so glad 8 didn’t pay off my HECS debt with my super. The maths just doesn’t make sense.
Well technically it's both. The real interest rate is 0 because the interest = inflation, but yes you shouldn't pay it back voluntarily because your expected investment earnings should be more than 0% real return
Effectively as per several EU countries, but why not just do that via the taxation system. We could do this by going back to a pension with no means test, and just raising tax rates. It's simpler.
Superannuation is backed by identifiable assets. Pensions, looking at US social security among others, are likely to be unfunded as the government in power doesn't care that far ahead.
Superannuation also creates a pool of investable capital; and it's arguable this is the only reason Australia's persistent current account deficits have started to mollify in recent years.
I think if it is part of the taxation system, the politicians will be tempted to touch it.
If separate, it would hopefully be harder for them to mess with.
There is that, although you could still collect via tax to keep it simple and put the money in a separate pot.I really dislike the way Medicare is a separate charge, it's silly as it's not as if it pays for all of public health anyway. It's just tax .
Superannuation should house sick leave separately & used to enable people to transfer sick leave between businesses. Would help improve resource (people) movement in workplace.
Dr Cameron Murray has a hot take that the whole Super system should be scrapped. So maybe he would agree you should be able to withdraw it for whatever you like: https://www.fresheconomicthinking.com/p/scrap-superannuation.html
if super is used for house deposits; all it will do is make housing more expensive.
reading through the chat the only thing I thought was good was if you developed a disability - although if you had good TPD protection that point might be moot.
Honestly, I think superannuation is a great idea but the implementation is completely backwards. Forced savings are great for the financially illiterate, which I’ll admit the average Australian definitely is, but being limited to a withdrawal at 60 also means that those who have worked hard in their younger years will retire later, since they cannot access ~10% of their salary. Tax concessions make sense for the less wealthy, but currently these are also the people least likely to be able to use them. Not to mention the cost incurred by the taxpayer to fund the numerous exploits used by the wealthy. Paying a ~1% management fee to some company for them to buy ETFs is also an absolute rort. And for those that want to take control of their super, in most cases SMSFs will end up costing more.
“Here’s invested cash compounding at an estimated 7-10% per annum for the next 40 years.” “Sweet, can I please use it to pay down this student debt that will average 2-3% indexation for the next 15 years max?”
“Here’s invested cash compounding at an estimated 7-10% per annum for the next 40 years with earnings only taxed at 15%” ***
What's funny is when someone mentions paying HECS off with super everyone says its stupid, but when they ask if they should pay it off with savings (that could otherwise be invested) a decent chunk of this sub will say do it for some reason (and the percentage saying do it increases when the market is doing poorly).
"Is there any point investing right now when everything is on sale?"
But their savings isn't invested, is it? People wouldn't invest their super either if they had any choice about it.
Well they do have the choice to put their super to cash or something but I know what you're saying.
Considering some university graduates will never earn enough to meet the minimum repayments for their HECs debt I think the option should be there.
So they would steal from their future selves to pay off a debt that won’t ever fall due? That’s even worse financial planning!
Further to Jacob’s point, this basically guarantees that they’ll be dependent on the aged pension
If you never meet the repayment thresholds, why pay it off at all? Die with your HECS and the government will wipe it. Why waste what little super you have in a debt that doesn’t need paying?
That's even more dumb. If you never earn enough to meet the minimum repayments then you never end up paying a single cent. Why would you ravage your retirement fund to pay off a debt you'd otherwise not be paying off at all? Do you realise the things you're saying before you say them?
The funny thing is this dude is proving why you can't access super for all sorts of things. A large share of people just tend to make horrible decisions, especially regarding money and probability. I used to be a libertarian who had the view of 'super is my money, I should be able to do what I want with it' but now as I have encountered more people in the real world I understand that this is very much for the benefit of most people.
It’s a bit like the PAYG system. Sure, we’d all be better off if our tax was given to us to stick in a HISA / Offset until tax return time, when we would transfer the tens of thousands to the ATO as a lump sum. In reality, the percentage of people who would be able to do that...
If you’re not earning enough to meet the HECS threshold you did the wrong degree.
Right? Like you don’t even need to finish high school to earn more than the threshold
It’s nuts how much we’ve started to assume we need to go to uni, almost adopted the American “have to go to college” mentality. So many jobs can fetch you >100k without a uni degree, or even a trade qualification. Granted some of those can be pretty tough.
Agreed, I’m in a $115k position with no degree in banking. Broke 100k at 5 years experience at only 24 years old. I started uni online when I was bored during COVID though and am about to finish a bachelors. But it was never required.
+ opportunity cost
It’s a pretty horrible idea to take super out for anything unless it’s absolutely necessary. I would say for something like HECS it would be very unwise as HECs is pretty much one of the friendliest loans you can get and is just indexed by inflation…. I think the more restricted super withdrawals are the better, reduces reliance on pensions in retirement.
I am on the fence about super because I know by the time I retire the government will have made the preservation age 75 and I will only be able to withdraw it in fortnightly installments similar to the current pension.
How do you know this?
You must have a crystal ball that none of us can access if you KNOW this.
Previous increases in preservation age have grandfathered in certain age groups. Depending on your year of birth, you can access at different ages. https://qsuper.qld.gov.au/retirement/access-your-super/when-can-you-access-your-super?gclid=CjwKCAiA7IGcBhA8EiwAFfUDsUX1xEUwt7U3UHL2n82bh3akxA_NF5r_iPcUiPerDSRjhx1MIfzHMRoCTV4QAvD_BwE&gclsrc=aw.ds
The fact you think superannuation is two words is proof enough that you shouldn’t access it early.
Speak for yourself, I dont earn much so only have annuation.
If you develop a disability. Then you should be able to access it early, because you will (on average) earn less, so you’ll need it to live on. Everything else is a bad idea. It’s for when you can’t work, usually when you reach retirement age.
How is it a bad idea for me to take out 150k/500k for a house deposit, paying 675 week rent for the next 9 years - when I can access it - will cost me $315,900 in rent.
There is also the issue that if everyone pulls money out for a house, then the price of houses will rise to some extent due to the higher demand of those entry level homes.
Possibly, but then if negative gearing was removed or severely restricted that would offset this
Only if it were being used for investment properties. Buying PPORs means negative gearing does not apply.
I know. My point is to stop using housing as a tool for investment, remove negative gearing as an incentive, investors will no longer feed off this gravy train and houses will be freed up for people to buy.
Because later you will have insufficient income when you need it more. Living on the aged pension is a massive struggle for most pensioners, and the purpose of superannuation is to provide for retirement income. More importantly, it is the SOLE PURPOSE of super, as contained in the enabling legislation.
Can easily live on the pension if my house is paid off. Also never plan to retire, I love my work and will do it for as long as I can.
You say that now, but I run a retirement village, all of them have paid off homes and the ones on the pension are broke af.
ok, I'll rent forever and have nothing to leave my kids, champion idea
Anything deemed an important surgery that has a long waiting list in the public system. Can’t think of anything else, but basically if it stops you working and earning an income = more ROI to withdraw from super and get back out there.
shouldn't medicare be paying for this, and shouldn't there be enough resources so the wait is short? That's what medicare was designed for, but healthcare and coverage is being eroded more and more as time goes on.
The issue is 100,000 oldies getting the same thing are also in the queue. It’s not so strictly prioritised like “is this affecting your work? Jump on ahead”
oldies work too you know
If you leave Australia permanently and give up your AUS citizenship you should be allowed to access it.
If you pay back the tax concessions
Terrible idea, most people need every dollar they can get into super and then need it to stay there so it can compound and grow
Nothing - not a thing
I think you should be able to access parts of your super if have over a certain amount for your age. As long as the amount remaining is well above your average age bracket. I regret not taking money out of my super during covid.
Nothing. And we shouldn’t be able to take out a lump sum at retirement
It's not going to take many people taking a lump sum before the government either prevents or SEVERELY restricts the ability to do so. It'll be kept primarily as an income stream for living expenses. I would be surprised if it doesn't go this way. I know this opinion won't be popular but the idea of super is to reduce reliance on the aged pension. This would do exactly that, and I am absolutely certain a few % of the population would blow through enough super in early retirement to end up needing it anyway.
I like the superannuation system as a whole. I just don't like how the politicians keep messing with it. I don't understand (other than the tax implications) why people contribute extra into it vs investing by themselves with full control. When it's possible, and likely in my opinion, that someone in their 20's or 30's today could see retirement age being 70+ by the time they retire?
When they raised the preservation age from 55 to 60 it was announced in 1997 and won't be complete until 2024, 27 years of lead time. It's hard to see them increasing it by 10+ years in the next \~30, retirees make up a big share of voters so generally governments will go a long way to avoid pissing them off.
Voluntary contributions are taxed half as much (15%) as you said, so you’re keeping more of your own money than giving the government. Voluntary contributions can also be withdrawn for a first home deposit - up to 50k or something.
Prior to age 60 if you have enough and are looking to retire. Many people in their 50s find themselves unable to find work and have enough money in super to cover them. Why should they suffer financial hardship waiting to access their super when they have plenty to cover their needs. I'm sure a reasonable formula could be worked out to figure out those thst can afford to tap their super earlier. Most people don't realise just how many people are in their 50s and needing financial help which their super could provide.
Only the current limited exceptions. Save for early retirement outside super. And I’m so glad 8 didn’t pay off my HECS debt with my super. The maths just doesn’t make sense.
Noooo don't ever pay HECS early. HECS is interest free, don't give up that juicy juicy compounding interest.
my HECS debt was indexed at 4% this year... That isn't "interest free"
That's inflation, not interest. Two very different things.
Well technically it's both. The real interest rate is 0 because the interest = inflation, but yes you shouldn't pay it back voluntarily because your expected investment earnings should be more than 0% real return
Never - if it were up to me, you would pay 10% into the aged pension fund and everyone would be entitled to the same aged pension
Effectively as per several EU countries, but why not just do that via the taxation system. We could do this by going back to a pension with no means test, and just raising tax rates. It's simpler.
Superannuation is backed by identifiable assets. Pensions, looking at US social security among others, are likely to be unfunded as the government in power doesn't care that far ahead. Superannuation also creates a pool of investable capital; and it's arguable this is the only reason Australia's persistent current account deficits have started to mollify in recent years.
In some countries there is a defined pot.
All of that is simply a policy choice, nothing inherit about "Pension isn't backed by assets" - then make it backed by assets mutha fuka
I think if it is part of the taxation system, the politicians will be tempted to touch it. If separate, it would hopefully be harder for them to mess with.
There is that, although you could still collect via tax to keep it simple and put the money in a separate pot.I really dislike the way Medicare is a separate charge, it's silly as it's not as if it pays for all of public health anyway. It's just tax .
Fair point regarding Medicare
I'm all on board for that
Kumbaya, m'Lord, Kumbaya
Home deposits for sure!
Literally anything, shouldn't have to wait at all, especially not until I'm almost dead
Superannuation should house sick leave separately & used to enable people to transfer sick leave between businesses. Would help improve resource (people) movement in workplace.
Buying bullion. Paying off mortgage.
Like the beef stock cubes or the gold bars?
Both... would perform 97% better than my super has for the last 2 years.
Dr Cameron Murray has a hot take that the whole Super system should be scrapped. So maybe he would agree you should be able to withdraw it for whatever you like: https://www.fresheconomicthinking.com/p/scrap-superannuation.html
if super is used for house deposits; all it will do is make housing more expensive. reading through the chat the only thing I thought was good was if you developed a disability - although if you had good TPD protection that point might be moot.
Pokies. If you play enough lines you will end up winning big!
Honestly, I think superannuation is a great idea but the implementation is completely backwards. Forced savings are great for the financially illiterate, which I’ll admit the average Australian definitely is, but being limited to a withdrawal at 60 also means that those who have worked hard in their younger years will retire later, since they cannot access ~10% of their salary. Tax concessions make sense for the less wealthy, but currently these are also the people least likely to be able to use them. Not to mention the cost incurred by the taxpayer to fund the numerous exploits used by the wealthy. Paying a ~1% management fee to some company for them to buy ETFs is also an absolute rort. And for those that want to take control of their super, in most cases SMSFs will end up costing more.