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  1. Hi Trish,
    Thanks again for running such an informative site.
    I’m puzzled at the use of 5%-7% as a benchmark for investment return. My bog standard super fund has never produced a personal return of less than 10% and last year returned 19%. I see my super balance go up by the same amount as the personal return rate, so it does not appear to be smoke and mirrors reporting. Am I missing something?

    • Robert Barnes says:

      Hi Steve
      Thanks for your comment. The long-term return of a super fund over the past 22 years is just over 7%, and some years were negative and some were positive. If you are in one the larger super funds, yes, the past couple of years have been double-digit returns but I recall 2011/2012 year was 0.5%. I included 5% scenarios because some readers believed my 7% a year was too optimistic especially in retirement. Note that the lump sums are based on investment in retirement, and many people do choose to invest in more conservative assets.
      Hope this explanation helps

  2. If I am a chook farmer and I can survive on a diet of eggs, then as long as the chooks keep laying their eggs I will have enough to live on and it will not matter how long I live. Similarly, if I grow apples in my orchid, and I can live on a diet of apples (or I can sell sufficient excess apples to buy other things), I am set for life. The required size of the orchid is set by my income needs; not by the length of time I expect to live (in retirement or otherwise).

    So why does this article suggest that I need more money if I expect to live longer? This assumption only makes sense if I am selling assets to fund my retirement needs – which is, of course, exactly what happens if I am funding my retirement in a retail super fund. In this case they are selling my units in the fund every time a take a pension.

    The length of time it takes to sell all of my units depends on how many units I had to start with, how fast the unit price is growing (because I need to sell fewer units as the price rises and I need to sell more as the price falls) and how many units I am selling with each pension payment (or how quickly I am drawing down on my savings). Clearly it is only a matter of time before all the units are sold.

    But if I have sufficient capital to generate sufficient income I do not need to sell any capital – ever. If the capital (and associated income) grow at least the same pace as inflation I still do not need to sell any assets – ever. So it does not matter how long I live because I will not run out of money.

    If I have a portfolio of properties generating $60,000pa after maintenance costs and after taxes then it should be able to keep me (and my heirs) in sufficient income in perpetuity. But it would need to be a large portfolio of properties because the after cost, after tax yield on property is quite low.

    I prefer to use Australian shares inside a SMSF because the after costs yield is higher, Australian shares have tax advantages that property does not and a super pension fund has tax advantages on top of that as well. In fact the shares in my SMSF consistently pay 7% after-tax yield. Therefore, I need $8600,000 to generate enough income and that income increases yearly as company profits increase.

    Most important, because I do not need to sell anything, the volatility (risk) of shares has no impact on me.

    People who follow this strategy find they end up with more money, not less, and their yearly income increases as well.

    And yet all the “experts” including this site continue to tell me I am going to run out of money!

    • Ehm… If you are chook or apple farmer at the age of 80 then you haven’t retired. Honestly if you carry on working, eating apples and eggs and have no medical or other bills at the age of 80 then I tip my hat to you.

      If you rent out your farm then that assumes you bought one at some point and now you get a return on your investment.


  3. Mick Goodwin says:

    Trish, I just stumbled upon your site and just wanted to commend you on it. finally someone will give relevant and meaningful data on a very important and confusing subject. Your other contributors to this forum also ask relevant questions and give very good advice. well done and I will continue to visit and contribute when I can.

  4. Arthur Kingsland says:

    Some things I can’t seem to understand about discussions about how much super is needed…

    Why is the life expectancy relevant? I have participated in some (admittedly naive) surveys and would expect to live well into my 90s, and my partner is likely to live even longer with two close relatives at 92 & 95, and a recent death of an aunt at 97!

    Why not assume that the money should never run out, i.e. that we might expect to get $55,000 from now until eternity? If are both dead at 72 then our estate gets a great windfall. If we both live until 105, then we’ve still got sufficient funds to support what is likely to be an ever increasing health bill.

    Why shouldn’t the financial adviser assume that we need this income (adjusted for inflation) from now until 20-30-40-50 years from now? How long we live should be irrelevant.

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