Latest / The Money Puzzle / The retirement 'sweet spot' is under threat

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The retirement 'sweet spot' is under threat · The Money Puzzle

0:10
Speaker 1: Hello, and welcome to The Australian's Money Positive podcast. I'm
0:13
Speaker 1: James Kirkby. Welcome aboard everybody. We hear so often in
0:17
Speaker 1: investment circus this question how much should you have in super?
0:21
Speaker 1: But you know another question that's almost as relevant. It's
0:26
Speaker 1: certainly relevant for the majority of Australians because you probably
0:29
Speaker 1: know the majority of Australians have access to a full
0:33
Speaker 1: or part pension. So a better question sometimes is what
0:38
Speaker 1: is the optimal amount I should have in super so
0:42
Speaker 1: that I can access the government pension because thirty thousand
0:45
Speaker 1: a year income stream is nothing to sniff at government guaranteed. Now,
0:51
Speaker 1: inside financial advice, this is called the retirement sweet spot,
0:55
Speaker 1: and whether you intend to access this or not, you
0:58
Speaker 1: should know what it is so that you can optimize
1:02
Speaker 1: your own SUPER accordingly. My guest today is Hugh Robertson.
1:08
Speaker 1: He's a Baron's Top hundred financial advisor. He's at Center
1:12
Speaker 1: of Financial Services and he has been a regular on
1:16
Speaker 1: the show.
1:16
Speaker 2: How are you, Hugh, I'm really good, James, So I'm
1:19
Speaker 2: excited about today's topic.
1:21
Speaker 3: It's right now sweet spot, so it's a good day.
1:24
Speaker 1: Well, I'm glad it is because I thought I knew
1:27
Speaker 1: an awful lot about this area. I'm still amazed at
1:31
Speaker 1: the majority of people, that is, the majority of people
1:34
Speaker 1: over in their sixties and onwards who are of that
1:38
Speaker 1: age have access to a pension or a part pension.
1:43
Speaker 1: So this sweet spot is where there's an argument to
1:48
Speaker 1: say instead of certainly an argument to say, unless you
1:52
Speaker 1: have plenty in super and you don't care about the pension,
1:58
Speaker 1: then most people and a lot of listeners on this show,
2:01
Speaker 1: we'll want to know what is the amount I should
2:03
Speaker 1: aim for. At the same time, I can get that
2:05
Speaker 1: government pension because I'm entitled to it because I've worked
2:08
Speaker 1: all my life, and that's fair enough. So let's talk
2:10
Speaker 1: about that. Maybe we'll just make it simple for everybody.
2:14
Speaker 1: We'll talk about couples, okay, because that's a sort of
2:17
Speaker 1: very much a key sort of unit in this area. Now, what,
2:22
Speaker 1: very broadly, what is the if I'm thinking and I'm
2:27
Speaker 1: in a couple, I'm thinking, we're doing this, we're saving,
2:29
Speaker 1: we're trying to build up our super. But I don't
2:31
Speaker 1: want to be at that point where I've got a
2:34
Speaker 1: good bit of super, but I completely missed the pension.
2:37
Speaker 1: But I don't have so much in super that I
2:38
Speaker 1: can have a yacht on Sydney Harbor. So what's the
2:42
Speaker 1: what is the sweet spot?
2:44
Speaker 2: What?
2:44
Speaker 1: Very roughly you and I know it's not easy, but
2:47
Speaker 1: let's just have a go at it. What is what's
2:49
Speaker 1: the dollar range here that we're talking about.
2:52
Speaker 2: This is a great question and something I'd love all
2:56
Speaker 2: the listeners to really understand because it's the number we
2:59
Speaker 2: would say is between that sort of six to eight
3:02
Speaker 2: hundred thousand, and it's the strategies that come with that
3:05
Speaker 2: before the age of sixty seven when we're all eligible
3:08
Speaker 2: for age pension, that we've really got to enable in
3:12
Speaker 2: terms of what we can do with concessional contributions, catch
3:15
Speaker 2: up contributions, quite possibly bring forward contributions. So it really
3:20
Speaker 2: goes head in hand with what we can do with superannuation,
3:24
Speaker 2: what we can do with gifting. So that would be
3:28
Speaker 2: our sweet spot. For a homeowner couple, we've got to
3:32
Speaker 2: probably make that distinction as well, that we're assuming that
3:34
Speaker 2: they're homeowners. Then you are looking at that six to
3:37
Speaker 2: eight hundred thousand.
3:38
Speaker 1: Okay, okay, So first of all, folks, you've heard you've
3:42
Speaker 1: heard it here. For us, the sweet spot is six
3:44
Speaker 1: hundred sweet hundred thousand. That's our current numbers. Okay, all
3:46
Speaker 1: sorts of provisers around that, but that's broady arranged for
3:49
Speaker 1: the sweet spot. Now if that's a sweet spot here.
3:52
Speaker 1: The other question I want to try and get sort
3:55
Speaker 1: of on the table simply for this show, is there's
3:58
Speaker 1: probably a patch then where, like everything else, when you
4:02
Speaker 1: have social welfare or you have government incentives of any description,
4:06
Speaker 1: including the age pension, there's probably a band that you
4:08
Speaker 1: don't really want to begin where you just missed the pension,
4:12
Speaker 1: but you don't have you don't have blue Sky, right,
4:15
Speaker 1: you don't have so much in super that you don't
4:17
Speaker 1: care what the pension is. What would that band be?
4:21
Speaker 1: What would be the danger zone there or the trouble zone?
4:25
Speaker 2: The danger of the trouble zone is really around that
4:28
Speaker 2: nine to seventy five thousand up until the up until
4:32
Speaker 2: about a million fifty The age pension for a couple
4:38
Speaker 2: runs out at one million fifty nine thousand currently, So
4:41
Speaker 2: if you're getting up around that limit, that's a worrying
4:45
Speaker 2: time because you don't for the majority of listeners out
4:48
Speaker 2: there we've ever had to go through an age pension
4:51
Speaker 2: application process, you wouldn't want to have to rego through
4:54
Speaker 2: that because that would bring up PTSD.
4:56
Speaker 3: For a lot of people. That's quite yes, quite a process.
5:00
Speaker 1: When you get a full pension, it's an income stream, right,
5:03
Speaker 1: I mean, how much do you think you'd a person
5:05
Speaker 1: to get that amount a couple annually that they getting
5:10
Speaker 1: the pension that income stream? How much do you reckon broadly?
5:15
Speaker 1: Somebody would have to have invested to get that.
5:19
Speaker 2: Yeah, so when we look at for that, you're a
5:23
Speaker 2: couple would get forty five thousand if they qualified for.
5:26
Speaker 3: A full age pension. Even if you've got.
5:30
Speaker 2: Just do easy maps and say well, if I got
5:32
Speaker 2: four and a half percent on my money in a
5:34
Speaker 2: term deposit, that's forty five a year, I've got to
5:37
Speaker 2: have a million dollars.
5:39
Speaker 3: So for a full age pensioner to get their.
5:42
Speaker 2: Forty five thousand, it's the same as someone having a
5:44
Speaker 2: million dollars. So that that's where you say, people say, well,
5:47
Speaker 2: why am I working so so bloody hard to put
5:50
Speaker 2: all my money away if I could get the same amount?
5:53
Speaker 2: And that we could touch on that later because there's
5:56
Speaker 2: every chance that the rules changed significantly over the next decade.
6:00
Speaker 1: They're not going to they're not going to get more generous. Okay,
6:03
Speaker 1: but that's the point. That's such a good point. You
6:05
Speaker 1: know that you needed to have that money to get
6:08
Speaker 1: that income, you'd want to have about a million saved.
6:14
Speaker 1: Put simply, it's worth a million dollars. So it's worth
6:17
Speaker 1: thinking about and listeners. You can make your own mind
6:20
Speaker 1: up whether you want to play this game or don't
6:22
Speaker 1: play this game, or you aspire to say I don't
6:25
Speaker 1: care what the pension is because I'm going to pass
6:27
Speaker 1: those levels. But as I say, look at the numbers,
6:30
Speaker 1: the majority of Australians have access to full pensions. So
6:33
Speaker 1: it's extraordinary how it works. So, just in terms of
6:38
Speaker 1: before we go into what might happen to it, you
6:41
Speaker 1: that are people aware of it outside of financial advice circles,
6:46
Speaker 1: That do people design their super strategies around it?
6:54
Speaker 2: No, at this stage no, I feel there's been so
7:00
Speaker 2: much regulatory change and legislative change with the superhneration system,
7:05
Speaker 2: with the age pension system that people haven't really factored
7:08
Speaker 2: that into the strategy. You've extended the age to sixty
7:12
Speaker 2: seven for both males and females to access it now,
7:16
Speaker 2: so really you've got to start thinking about it at
7:18
Speaker 2: age sixty two around.
7:20
Speaker 3: You know, because you could.
7:20
Speaker 2: Utilize quite possibly you could utilize gifting strategies to your kids.
7:25
Speaker 2: Why would you want to do that? Well, number one,
7:27
Speaker 2: it might help them into the housing market right now.
7:29
Speaker 2: Number two, it might be able to maximize your age
7:32
Speaker 2: pension entitlements. But if you did it within five years,
7:35
Speaker 2: it's going to count towards your assets and might impact
7:39
Speaker 2: your eligibility for a pension.
7:41
Speaker 1: Well, they tracked back five.
7:43
Speaker 2: Years, five years, So you've got to be very intentional
7:48
Speaker 2: with what you do. And that's probably our challenge to
7:50
Speaker 2: clients is all our financial plans need to have that
7:53
Speaker 2: element of intentionality with them.
7:55
Speaker 3: Let's not become successful by accident. Let's do it on purpose.
7:58
Speaker 1: So you can't turn around as sixty for and say
8:00
Speaker 1: I know what I'll do, I'll double the size of
8:02
Speaker 1: my home and get back in onto the pensions too late,
8:05
Speaker 1: is it.
8:06
Speaker 3: Well, no, we could do that.
8:07
Speaker 2: We could definitely do that, because the home is going
8:09
Speaker 2: to be an exempt asset under undercurrent rules that may change.
8:14
Speaker 2: Have got to be careful and definitely that's a strategy
8:17
Speaker 2: that some people have thought is I'll just put more
8:18
Speaker 2: money into a house. The challenge there now is the inflation,
8:23
Speaker 2: the inflated price of renovations or new houses. Plush your
8:27
Speaker 2: stamp duty plus your agent fees selling means that you've
8:31
Speaker 2: probably to do that.
8:32
Speaker 3: You've probably given up a couple one hundred thousand dollars.
8:35
Speaker 2: And the reason why you want to still maintain that
8:37
Speaker 2: you do have a balance throughout your tirement is also
8:42
Speaker 2: for age care down the road.
8:44
Speaker 3: So you don't want to you don't want to leave
8:45
Speaker 3: yourself with nothing.
8:46
Speaker 2: You kind of want to be able to live off
8:48
Speaker 2: the income, maximize the age pension where you can, but
8:53
Speaker 2: still have enough that if one spouse needs to go
8:55
Speaker 2: into age care, you can. The dilemma baby boomers are
8:58
Speaker 2: going to have around that is that there's probably more.
9:02
Speaker 2: I went through it with my mum recently and there's more.
9:04
Speaker 2: There's more people wanting beds that there are beds available.
9:07
Speaker 1: I know, yes, almost entirely separate. Sure we could do
9:11
Speaker 1: on that and I should seem to do it in
9:13
Speaker 1: the future. Just on just still on this issue about
9:16
Speaker 1: you said gifting so one way obviously, and none of
9:21
Speaker 1: these are productive and you can understand why they are.
9:23
Speaker 1: Under a few folks, and we'll talk about that in
9:25
Speaker 1: the next segment, tell us about the gifting. What can
9:28
Speaker 1: you do to get back into the sweet spot?
9:33
Speaker 3: Yep, to the sweet spot. Really great question.
9:36
Speaker 2: So ideally we can give five years before our entitlement,
9:40
Speaker 2: you know, but again do it.
9:42
Speaker 3: Don't play defense just for defense sake, you give gifts
9:46
Speaker 3: to it.
9:47
Speaker 2: If you had a younger spouse, you could try and
9:51
Speaker 2: maximize their superannuation instead of yours. Then when you are
9:54
Speaker 2: of age pension age, your superannuation will be accessible, but
9:58
Speaker 2: there's wouldn't be.
9:59
Speaker 3: So you can be really clever around that.
10:02
Speaker 2: You could also something that's probably a little bit future planning,
10:05
Speaker 2: but when you are looking at what to do is
10:09
Speaker 2: how you're going to leave your estate, not necessarily to
10:13
Speaker 2: your spouse, because then as a single age pensioner, if
10:17
Speaker 2: you left all your money to them, they might then
10:20
Speaker 2: lose out on the age pension. And you could do
10:24
Speaker 2: the renovations around the house. You could spend the money
10:26
Speaker 2: on the holidays and the things that you want. And
10:29
Speaker 2: that's probably our ideal goal with clients is well they've
10:31
Speaker 2: got the health, fit and the ability and the want.
10:34
Speaker 3: To travel and do all those experiences, do.
10:37
Speaker 2: Them while you can, and knowing that if I'll give
10:41
Speaker 2: a quick case day, like if you had eight hundred
10:43
Speaker 2: thousand in retirement, and say that's a couple homeowners and
10:47
Speaker 2: they're accessible. Typically as an advice, we'd say draw down
10:50
Speaker 2: about five percent of the balance a year, so that
10:52
Speaker 2: would be forty thousand a year from there. We're assuming
10:57
Speaker 2: that it's a superannuation income stream from there, and their
11:00
Speaker 2: age pensioning titlement would be about twenty thousand, one eight
11:03
Speaker 2: nine a year, So that total would give that person
11:06
Speaker 2: with a couple with eight hundred thousand, they would get
11:09
Speaker 2: sixty thousand.
11:09
Speaker 3: One eight nine a year. If though that person spent.
11:13
Speaker 2: One hundred thousand on the holidays and these great experiences
11:16
Speaker 2: and memories for life, we would then still say, okay,
11:19
Speaker 2: now you've only got seven hundred thousand, so draw five
11:21
Speaker 2: percent of that a year. So they're taking thirty five
11:24
Speaker 2: thousand out of there. But here's the kicker, Jameson and
11:27
Speaker 2: something that always amazes me, they would now get close
11:30
Speaker 2: to twenty eight thousand year age pension in titlement as
11:33
Speaker 2: a couple. So instead of the sixty one to eight nine,
11:36
Speaker 2: the one hundred and nine that the couple got with
11:39
Speaker 2: eight hundred k, the couple with seven hundred k actually
11:43
Speaker 2: gets close to sixty three thousand dollars a year, so
11:46
Speaker 2: they get more cash flow even though they've got less capital.
11:49
Speaker 2: So this is why we're talking about wesson speak throt.
11:51
Speaker 1: Maybe it just really spelled us out. They spent one
11:55
Speaker 1: hundred thousand having a good time and they get more
11:57
Speaker 1: income because they did that. Hey, we're going to take
12:01
Speaker 1: a break here because folks, you're going to have to
12:03
Speaker 1: digest that. And it also does give us something of
12:07
Speaker 1: a entree to the issue of whether this is all
12:10
Speaker 1: making sense and whether it should be reviewed. Okay, back
12:13
Speaker 1: in a moment. Hello, Welcome back to The Australian's Money
12:30
Speaker 1: Puzzle podcast. I'm James Kirby talking to Hugh Robertson of
12:34
Speaker 1: Centaur Financial Services and we're talking about the retirement sweet spot.
12:38
Speaker 3: Now, if you.
12:39
Speaker 1: Could actually believe what Hugh was just telling you in
12:42
Speaker 1: the first segment about how there are situations where having
12:45
Speaker 1: less money is better in terms of your retirement income,
12:51
Speaker 1: that's part one. That's all about the pension assets test.
12:55
Speaker 1: Now overriding all this, we have this month what they
12:59
Speaker 1: call the productivity somewhat but which really should have been
13:01
Speaker 1: called the tax summat and that's coming up pretty soon.
13:04
Speaker 1: That's Jim Chalmer's big It may be more than just
13:08
Speaker 1: talkfest in camera, but if you look at it closely,
13:12
Speaker 1: the submissions that are being met to this are all
13:14
Speaker 1: about tax, and I would take a sweep and say
13:18
Speaker 1: virtually half those submissions are about wealth tax and introducing
13:24
Speaker 1: elements of wealth tax, which can certainly be justified on
13:27
Speaker 1: the basis that the system is very much tilted in
13:30
Speaker 1: favor of older Australians and against younger Australians in accumulation phase,
13:35
Speaker 1: particularly in Super Okay, Now here's the thing. The pension assets,
13:40
Speaker 1: even the numbers you were putting out there, Hugh, there
13:43
Speaker 1: are an I can actually zone in on the Department
13:47
Speaker 1: of Social Services Tania Plippersex Department has had internal advice
13:52
Speaker 1: that this area should be reviewed and pension asset tests
13:57
Speaker 1: are likely to be reviewed as part of this summat
14:00
Speaker 1: could be reduced. Is that a fair assessment of the situation.
14:06
Speaker 2: Yes, we've got an aging population, We've got this dependency
14:10
Speaker 2: ratio used to be four workers to.
14:12
Speaker 3: Every one retiree.
14:13
Speaker 2: Now we're get into this operation two two and a
14:15
Speaker 2: half workers two workers. So at some point it's how
14:20
Speaker 2: are we going to fund an age pension system. We've
14:24
Speaker 2: probably been the lucky country from resources in terms of
14:28
Speaker 2: our taxes there, but at some point the wealth tax
14:32
Speaker 2: is going to come in. I think we all can
14:34
Speaker 2: see it in one way or another, and I think
14:36
Speaker 2: that you're also going to it. At some point age
14:40
Speaker 2: pension will drop down.
14:42
Speaker 1: Do you mean you mean the access to the not
14:45
Speaker 1: so much eat because it's indexed to inflection, but the
14:49
Speaker 1: access to it will be tightened. Is that where we're
14:52
Speaker 1: Is that what's on the line.
14:54
Speaker 2: I feel it needs to be, because otherwise you're going
14:56
Speaker 2: to I don't know how you keep taxing young people
14:59
Speaker 2: when we that affordability is such an issue, has in
15:02
Speaker 2: such an issue. So we're in a pretty it's a
15:05
Speaker 2: pretty big pickle at the minute to try and resolve.
15:08
Speaker 2: So I hope that the people in Cambri can work
15:11
Speaker 2: hard to solve them.
15:12
Speaker 1: I mean, it is it's ludicrous. I mean, the amount
15:14
Speaker 1: that you can put into super hasn't changed for years,
15:18
Speaker 1: but the amount you can have tax three and super
15:20
Speaker 1: goes up all the time. It's two million now, But
15:22
Speaker 1: the amounts you can put in at the other end,
15:24
Speaker 1: Paranamus thirty thousand, don't changed. It was thirty thousand ten
15:27
Speaker 1: years ago. That's the sort of thing that I think
15:30
Speaker 1: justifiably should be reviewed. It's going to be reviewed, folks.
15:34
Speaker 1: I think there's two things to understand. I suppose this show.
15:36
Speaker 1: One is a retirement sweet spot. You heard Hugh's numbers.
15:39
Speaker 1: Just be aware that those numbers may drop if various
15:43
Speaker 1: lobbyists and factions that are ready to roll up to
15:47
Speaker 1: this summit have their way, which is coming up this
15:50
Speaker 1: month of August. One other thing you mentioned about the
15:53
Speaker 1: tax about the family home being exempt. So all these
15:56
Speaker 1: numbers we talk about, we assume the personnels their home
16:00
Speaker 1: and the home is just not included. Is that right?
16:02
Speaker 1: Do you think it will ever be included? The value
16:04
Speaker 1: of the home.
16:06
Speaker 3: It's been discussed, it's certainly being discussed.
16:09
Speaker 2: And whether it's really difficult, like the price of a
16:13
Speaker 2: house in Sydney. Does someone get disadvantaged because they live
16:15
Speaker 2: in Sydney close to their family, part of their community
16:18
Speaker 2: forever versus someone who lives in Tasmania where the house
16:21
Speaker 2: is cheaper. Would you then segregate it based off what
16:25
Speaker 2: state you live in, what region you live in?
16:27
Speaker 3: So I the.
16:31
Speaker 2: Kind of almost like the div two ninety six and
16:33
Speaker 2: the issues that we had with that.
16:34
Speaker 3: It's how do you actually administer rule rules like that?
16:39
Speaker 2: And is it The example that we used to use
16:41
Speaker 2: was if someone's lived in that house, if there's a
16:44
Speaker 2: typically women live longer than men's. If there's an old
16:47
Speaker 2: widow that lives in the house that the family grew
16:49
Speaker 2: up in and they've been there for forty five years,
16:52
Speaker 2: but now it's worth five million.
16:54
Speaker 3: She's not she should she? So that should she be
16:57
Speaker 3: penalized for that?
16:58
Speaker 1: If she had no cow should be on the pension?
17:00
Speaker 1: So should her a pension be reduced because the houses
17:02
Speaker 1: were ten million that she bought it for five nineteen
17:05
Speaker 1: sixty two?
17:07
Speaker 2: Yeah, so you know, that's the equity conversation. He's in
17:11
Speaker 2: terms of a financial equity, but what's a fairness? So
17:14
Speaker 2: I can't see it ever, especially with the majority of
17:18
Speaker 2: voters being of more grayer hair, I can't see a
17:22
Speaker 2: government bringing that in right, that would be that politically
17:25
Speaker 2: divisive for them.
17:26
Speaker 1: Okay, that's the inclusion of the family home. But interestingly,
17:30
Speaker 1: you do allow for the fact that they could review
17:32
Speaker 1: the pension as a test. Yeah, okay, very interesting. We've
17:36
Speaker 1: got some really good questions. I want to get to
17:39
Speaker 1: them in a moment before I do. He was a
17:41
Speaker 1: little announcement to make for somebody.
17:44
Speaker 3: I thank you.
17:45
Speaker 2: I would like to wish my son, Archer, a happy
17:48
Speaker 2: eleventh birthday.
17:50
Speaker 3: It's an amazing thing. We get to help all these retirees.
17:52
Speaker 2: And the one thing they always tell me is never
17:55
Speaker 2: miss out on your kids growing up, because that's the
17:58
Speaker 2: one thing you can't get back. So I did ask
18:00
Speaker 2: James if I could give a shout out to him,
18:02
Speaker 2: and hopefully he listens to this podcast.
18:05
Speaker 1: Well, at least he'll hear. He'll probably hear that he
18:08
Speaker 1: was mentioned Donald. Well, my story straight off the top
18:11
Speaker 1: of that about birthdays terribly. I make sure I never
18:14
Speaker 1: missed a birthday. But I did miss one birthday and
18:17
Speaker 1: it was my daughter, and it was October two o eight,
18:20
Speaker 1: and it was the day the world came very close
18:23
Speaker 1: to collapsing. The nearest thing in my life it leads
18:26
Speaker 1: to a complete and total financial collapse. Was this Saturday
18:30
Speaker 1: in October, which was her birthday, and I was being
18:35
Speaker 1: asked to do so many things. It was a Saturday,
18:37
Speaker 1: I was on Sunday newspapers and I was on radio
18:41
Speaker 1: and I missed this birthday party. Two. Wait, so what
18:46
Speaker 1: was she nine? Well, let me tell you, boy, did
18:48
Speaker 1: I get it in the neck about that? So I
18:51
Speaker 1: explained to her, And in recent times she whenever I
18:55
Speaker 1: bring it up, and I bring it up more than
18:56
Speaker 1: she does now I say to her, So you see,
18:58
Speaker 1: it was the most dangerous day financially in the history
19:01
Speaker 1: in my life. And I'm a financial journalist. So Darling,
19:04
Speaker 1: sorry about that, but I hope I can never make
19:06
Speaker 1: it up, but I can explain it.
19:07
Speaker 3: All right.
19:08
Speaker 1: We'll be back in a moment with some great questions
19:10
Speaker 1: from George and Bruce and Paul f. Hello. Welcome back
19:23
Speaker 1: to The Australian's Money Puzzle podcast. James Kirby and Hugh
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Speaker 1: Robertson here now listener questions. This week, there's a terribly
19:32
Speaker 1: act question from George. I want to read that first,
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Speaker 1: Dear James, your article in this week's Australian that the
19:38
Speaker 1: super inheritance tax can be avoided by withdrawing all your
19:44
Speaker 1: super money before you die or by a recontribution strategy.
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Speaker 1: I think there is a third way around this, if
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Speaker 1: you make a binding nomination in your super fund that
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Speaker 1: upon your death, your benefit is paid to your estate,
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Speaker 1: then it is my understanding no taxes payable then. And further,
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Speaker 1: when the result in super cash is received by the
20:04
Speaker 1: estate is paid out to the beneficiaries in your will,
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Speaker 1: no tax is payable then either. Gee, I don't know
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Speaker 1: about that, but I happen to have a few robertson
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Speaker 1: in the studio, and he's going to tell us if
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Speaker 1: that's true, true or false?
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Speaker 3: George that he's false.
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Speaker 1: I thought I've got a binding nomination on my super
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Speaker 1: I never thought it could step aside the rules.
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Speaker 3: Okay, I liked the question and I like looking at it.
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Speaker 3: But in terms of what can we do.
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Speaker 2: We can withdraw this tell us the day you're going
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Speaker 2: to die, so we can withdraw it the day before
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Speaker 2: the recontribution the because ultimately it goes to the end user,
20:44
Speaker 2: so even it goes through the estate, it will go
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Speaker 2: through to that. If he is your spouse or dependent,
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Speaker 2: a tax dependent, then there won't be that's a spouse
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Speaker 2: child under eighteen dependent in tendency if it's an adult child.
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Speaker 1: But in most cases it's adults dependent and they are The.
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Speaker 2: One I did we have seen is an insurance equalization strategy.
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Speaker 2: So sometimes if people know that they're going to have
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Speaker 2: to pay the tax for whatever reason, or they want
21:13
Speaker 2: to equalize the estate, sometimes they will have they will
21:16
Speaker 2: retain their insurance policies and pay that outside of SUPER
21:19
Speaker 2: and pay that to their children. So again that's not
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Speaker 2: there's not a tax on that. But again the insurance,
21:26
Speaker 2: the insurance premiums as you get older prohibitive.
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Speaker 1: We'd go through the roof, I thought. So, okay, very interesting, George.
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Speaker 1: That's not advice. Information only all the Georges in the world.
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Speaker 1: That's for you to ponder. But I'm afraid if you
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Speaker 1: thought you found a way around the seventeen percent de
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Speaker 1: facto inheritance tax on SUPER, that isn't one. It looks
21:47
Speaker 1: like Okay, there's a question from Bruce.
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Speaker 3: Okay, so Bruce has asked.
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Speaker 2: A recent guest was not impressed with dividend r reinvestment plans. However,
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Speaker 2: I suspect the issue is far more complex. Would it
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Speaker 2: be possible would have a discussion on the pros and
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Speaker 2: cons of such plans, what can be used instead, and
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Speaker 2: if any research is being carried out as to how
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Speaker 2: things are in the real world.
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Speaker 1: Okay, thank you, Bruce. Look, dividend reinvestment plans. I think
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Speaker 1: they're a bit like mortgage mortgages, or by that, I
22:18
Speaker 1: mean they are a discipline. And if I get my
22:24
Speaker 1: dividends in cash and it flows into my account, I've
22:27
Speaker 1: got to make a decision every time, on every dividend,
22:29
Speaker 1: what am I supposed to do with that money? If
22:31
Speaker 1: the comp I love the old thought that I don't
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Speaker 1: know where this came from, but there was that thing
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Speaker 1: that if something is good enough to have in your portfolio,
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Speaker 1: it's good enough to reinvest. I's a fact or dividend
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Speaker 1: reinvestment plans are fine or do you think you.
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Speaker 3: Pros?
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Speaker 2: Definitely the compound and if you look at even just
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Speaker 2: the ASX over time, just the price return versus the
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Speaker 2: price and dividend return, you know that compound and effect
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Speaker 2: is massive.
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Speaker 3: There's a cost of fishing. See you're usually not paying
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Speaker 3: brokerage when you're invent.
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Speaker 1: Less important than it used to be, Yes, but still relevant.
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Speaker 2: Yeah, behavioral, you don't have to think about it. But
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Speaker 2: I do know that a lot of people like to
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Speaker 2: not do the DRP that even an reinvestment plan. So
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Speaker 2: because there is the timing of when you actually purchase,
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Speaker 2: do you want to purchase. Is it an ideal time
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Speaker 2: to purchase just because the DRP has happened. Sometimes it's
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Speaker 2: better to keep the money in cash and wait. It
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Speaker 2: is if you talk twenty accounts out there, and I'm
23:33
Speaker 2: sure you've got a lot of listeners for accounts, that's
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Speaker 2: probably the bane of their existence. DRPs and accounting for them.
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Speaker 2: For our retirees, cash flow can be an impact.
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Speaker 1: Of course, yeah, but in accumulation. Look, the other thing
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Speaker 1: I would say is I have never sold. I have
23:51
Speaker 1: never closed down a dividend reinvestment plan, but I have
23:56
Speaker 1: occasionally it has triggered me to sell the share. So
24:01
Speaker 1: but that comes back to the same thing. If it's
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Speaker 1: good enough to sign up for a d ORP, then
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Speaker 1: it's good enough to have. And if it's not good
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Speaker 1: enough to have a d ORP, a dividend reinvestment plan going,
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Speaker 1: why are you in that stock in the first place?
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Speaker 1: That I mean, I think that would be the larger
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Speaker 1: guide I would just I would put forward.
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Speaker 2: That's how we've basically alway, well not basically, that is
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Speaker 2: how we've done it.
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Speaker 3: The only times we've then revalued is if there's concentration risk.
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Speaker 2: So probably with bank stocks, we've got some GFC examples
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Speaker 2: from clients, and that way, we've just accumulated so much
24:36
Speaker 2: wealth there we don't want to sell. Quite possibly because
24:38
Speaker 2: of the cgt SO capital gain SAX, SORR, I've got
24:41
Speaker 2: to stop using acronyms and then so we've tried to
24:43
Speaker 2: reallocate that money elsewhere.
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Speaker 3: But that's really the time, the only time when we
24:48
Speaker 3: don't do DRPs.
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Speaker 1: Okay, we had all day long, nothing else to do,
24:54
Speaker 1: then you could stay right on top of it.
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Speaker 2: There was an ASEX shareholder study and this conclusion was
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Speaker 2: that investors using DRPs don't track their performance or rebalance portfolios,
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Speaker 2: which was interesting, and professional portfolio rebalancing with dividend cash
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Speaker 2: is more flexible and aligned with goals. So I don't
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Speaker 2: think that really answered much, but it long term DRPs
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Speaker 2: can outperform obviously when the companies do well, which over
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Speaker 2: time they always do, so we're a fan of it.
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Speaker 2: It's simple, it's easy, it doesn't take much mental brain
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Speaker 2: power to do.
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Speaker 1: So that's right, and as I said, it is a discipline.
25:35
Speaker 1: Hopefully that's useful to you. Bluse Hughes. I thought a
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Speaker 1: very strong point from view that you're probably not playing
25:39
Speaker 1: at the idea time. But then on the other hand,
25:42
Speaker 1: it's recurring.
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Speaker 3: Dollar cost averaging, dollar caast averaging.
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Speaker 1: It's a bit of it's a dollar cast averaging kicks
25:48
Speaker 1: in there as a thematic. The final question is from
25:51
Speaker 1: Paul f. He says, taxi on realize gains has always
25:56
Speaker 1: been a thing, though in directly so, why is dividend
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Speaker 1: or division two ninety six been the new super tax
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Speaker 1: so controversial? Well, it was never There was never unrealized
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Speaker 1: gains tax in your super before Paul left, So I
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Speaker 1: suppose that's what it's really all about. Okay, you can
26:16
Speaker 1: bring out the issue of land tax or whatever in property,
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Speaker 1: but it was never a case in Super. And the
26:21
Speaker 1: big question is if it's in Super, where it does
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Speaker 1: it go next. We'll have to leave it there. Let's
26:27
Speaker 1: have some questions on that, Let's have some comments on that,
26:29
Speaker 1: and I hope you found the retirement sweet spot well
26:35
Speaker 1: worth thinking about understanding. And keep in mind that that
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Speaker 1: act that first of all, the majority of Australians, the
26:42
Speaker 1: majority of retirement age, have either an age full age
26:47
Speaker 1: pension or part pension. The issue is the access. The
26:50
Speaker 1: access by some criteria has been relatively generous and it's
26:56
Speaker 1: something that is now going to be I think seriously
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Speaker 1: reviewed in the weeks ahead, this Productivity slash Wealth Tax summit,
27:03
Speaker 1: which is coming up in a few weeks. Hugh Robertson,
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Speaker 1: thank you very much for being on the show. Great
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Speaker 1: to have you as always.
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Speaker 3: Thank you very much, James. I really enjoyed today.
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Speaker 1: Really good.
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Speaker 2: All right.
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Speaker 1: The email is the Money Puzzle at the Australian dot
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Speaker 1: com dot au And also before you go, one other
27:21
Speaker 1: thing coming up in the next few weeks where we
27:22
Speaker 1: have a short series where we get some luminaries in
27:27
Speaker 1: the financial space to talk about how they made their money.
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Speaker 1: That will be presented by Julianne Sprague and it starts
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Speaker 1: Monday Talk soon