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The Trident Press Self Managed Super Fund Guide is Australia's most up to date and comprehensive guide to Self Managed Superannuation.
Updated to take into account changes due to come into effect in July 2007.
T he Trident Press Self Managed Super Fund Guide will show you:
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Exactly how to set up your own fund cheaply and efficiently
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How to ensure you get the maximum benefit for your retirement
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How to reduce your tax to the absolute minimum
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How to manage your own fund
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Where to invest for the best returns
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How to understand Self Managed Super and keep you up to date with all the law changes
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All the traps and pitfalls many people encounter when it comes to Superannuation and how to avoid them
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Plus much more
If you want a stress free retirement, The Trident Press Self Managed Super Guide is essential reading.
A little about Superannuation in Australia and why you should be very concerned about your future
Compulsory superannuation has been with us in Australia since it was introduced in 1992. When it was introduced, it was mandatory for your employer to set aside a percentage of your wages or salary into an approved superannuation fund.
The reason this was done was due to an ageing population and a future burden on government to provide us with an old aged pension. Obviously they have done their numbers and worked out that the government simply can’t afford it. So, they have forced your employer to afford it!
The statistics are alarming. For every 4 people working, there is one person on the pension. However, they have calculated that by 2010, there will be less than two people working for every person on the pension. This is a little scary if everybody of pension age decided to stop working and apply for the pension. Of course this won’t happen, also many pensioners are self sufficient, so we are not facing an economic crisis…….. yet. Hence, the government brought in compulsory super to avoid future problems.
It was a great idea, and it has worked well in many countries to alleviate future costs to the government, it brought with it two significant problems:
Problem 1 – The contribution level was never going to allow people to retire independently and comfortably. While the 9% of salary contributions seems generous, after 20 years or so of contributions (depending when you started work of course), you find yourself with barely enough money to survive unless you are drawing down capital as well as the income from investments. But more about this later.
Problem 2 – Superannuation Fund Managers Gouge so many fees that your Net Earnings Decrease not Increase. This issue has been given much publicity. Fund managers have been charging such exorbitant fees that whatever you make from the increases in the value of your fund (or earnings) are eaten away by fees. Why? Because fund managers do two things, generally. They charge their fees on the basis of a percentage of the fund’s assets rather than as a percentage of the profits made, (This is not the case with a few funds, however). This then provides no incentive for them to perform, so they don’t! You then find you are virtually earning nothing on your money or worse, your money is slowly disappearing. How many times have we heard of people contributing to their super fund only to find that all the money is gone at retirement time. I know…… I have a small amount in a fund and I have watch that erode to next to nothing. It had $.5,000 in it 10 years ago, and now it’s $.1,700. The reason? The fund managers have “stolen” the money! “Stolen”……. Seems a little harsh? No, what do you call it when someone promises to do a capable job for you and then completely stuffs it up due to lack of interest or incompetence, and then still charges full price for their “service”. In my book, that’s stealing. Of course, then the government has a go, at the rate of either 15% or 30% depending on how much you are penalised, sorry I meant to say “taxed”.
Now, as I mentioned before, Problem 1- The contribution level was never going to allow people to retire independently and comfortably. This is a disaster for many people.
Think about this……….. You contribute say 9% of your salary, for example $.50,000 x 9% = $.4,500 contribution. This means the government takes 15% and leaves you with $.3,825 to go into your fund. The fund then charges you around 2% of this amount as their fee leaving you with $.3,748 (and some charge much more).
I should also point out that the many funds also charge a further 2-6% on top of this again a “entry or load fee”. If you are in a fund that does this you will retire on almost nothing as your fund will be slowly eaten away. Your total contributions will be less than your payout, by a long way…………. These funds are out of control, some of them anyway.
Now, based on an average of fund returns in Australia you can expect to earn around 6% based on a three to five year return (source: “The Top Ten Equity Superannuation Funds in Australia – Money Magazine). This 6% is then reduced to 5% because the government takes its contribution here as well. This leaves you with a 5% return on your money less the fund taking 2% which gives you around 3% net return.
Are you excited about your 3% return ………….. well, calm down I have some bad news….. that is the current inflation rate! This means you are earning …….. NOTHING!
The only thing you will be retiring on is the money you put in…. and that’s if you put it in one of the Top Ten Funds. Feeling ill about your future yet? You should be!
Let’s take this one step further: You put $.3,748 away each year (let’s forget about growth of this amount as we know it’s eaten away by inflation, so the end number we come up with will relate to current day dollars, which is good)
You put money away for 25 years until you retire which gives you $.94,000 give or take. Now, you invest that $.94,000 at 6% and you will earn $.5,640 which means you are living on around $.100 a week. You were earning $.1,000 a week when you were working.
Can you live on a 90% pay cut?
Ok, just say you get lots of pay rises, promotions etc and during the period of you employment your pay doubled as did you contributions……….. you’re now up to $.150 a week. This assumes your last salary before retirement was $.150,000, but then you would have been paying 30% contribution tax to the government as once you get over $.103,507 you pay 30%, so you would not even get $.150 a week.
Worried Yet? You should be!
The Secret to Retirement Success is…………….
Not how much you earn. It’s what you fund earns, it’s income less tax and fees (if applicable).
For example:
If you had invested in one of my favourite funds, XXXXXXX(This Fund is revealed in the Guide). This has a three to five return of around 24% (net to investor) per annum, but say it only returned a more moderate rate of 15% per annum and that you set up your own super fund.
You will retire on $.372,350 on a salary of only $.50,000 after 25 years and taking inflation and contribution tax into account. Yes, we have taken off the 15% tax, we have reduced the amount to take inflation into account by 3% per year and the manager has been paid on performance
Your income now in retirement is (after investing it on the same basis as we did before, at 6%) $.22,341 or $.430 per week. While still inadequate in my opinion, it’s made a big difference ……….. $.100 per week or $.430 per week , what would you prefer?
What is different?
Your Salary is the same
Your Contribution is the same
Your Tax is the same
Your Inflation Rate is the same
Where and How you Invest is Different!
That’s all it took……………. Where and How you invest is Different. Your return on Investment is the secret.
Now, if you had your own Self Managed Super Fund all this is possible.
This Guide will explain in an easy to read and follow way, the reasons why you should have a Self Managed Super Fund, how to set it up yourself or use one of our recommended agents, manage it yourself and keep on top of the regulations. The Self Managed Super Fund is one of the most valuable tools available for creating wealth.
This Guide will answer every question you have ever had in a simple and concise way... we also show you a few techniques and strategies unknown to many accountants.
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