Simple independent superannuation information
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2 comments

  1. Jon Kalkman

    On the guest contributor section of this website, I point out how $1 million can last longer than you by using an account based pension from a SMSF where the asset allocation is mainly Australian shares with imputation credits.

    I have a friend who receives a part age pension from Centrelink which means he satisfies either the income or assets tests. He also use an account based pension from his SMSF and that means he benefits from the advantages listed above.

    Even though he is on the age pension, he also uses my strategy where his SMSF is mainly based on Australian shares with imputation credits. This brings him a number of benefits.

    1. He says he can achieve about 8% yield on his SMSF but his part age pension is determined by his deemed income not his actual income. So any SMSF income he gets above the deeming rate is a bonus and it does not affect his Centrelink pension.

    2. Because he has the income security of both Centrelink and the predictable income from dividends, he can afford to take on more volatility risk. That means he can afford to have an asset allocation with a higher proportion devoted to growth assets, in this case Australian shares. So he gets high income from growth asset. He gets the best of both worlds.

    3. Because his age pension is set by the assets test, when the share market has a periodic downturn, the market value of his assets (his SMSF shares) declines so he is entitled to a higher Centrelink pension, but his dividends from his SMSF are largely unaffected. So a market downturn actually means more income for him.. His Centrelink pension acts as a huge shock absorber to the volatility fo the share market..

    He reckons he has the opposite problem. Because his income comes from a growth asset, he is concerned that the assets in his SMSF may grow to the point where he is no longer eligible for the Centrelink pension. I tell him that is a high quality problem to have.

  2. Regan

    Comletely agree with you Jon.
    Most couples that I see currently need around $40,000pa to live off as long as they own their own home.
    That is quite achievable just by having $200,000 in an account based pension.
    A couple that has $200K in an account based pension drawing 6% annual income will take home $12,000pa tax free along with the maximum rate of age pension $29,354pa (as long as their combined assets don’t exceed $265,000).
    That will give them a tax free take home pay of $41,354pa.
    Based on your investment strategy in the article recently published the $200,000 should go a long way to outlasting them!
    Cheers

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