Whatever the average balance is not as relevant as you may think. They are by and large paper gains, until realized they mean nothing. The income stream that the fund is generating is the number that we should be focusing on.
I'm going to disagree with you here. Imo too many people focus on income, ignoring what their capital is doing. You need to keep the capital growing.
And in a market downturn there should be more attention paid to capital protection. i.e. get out with profits largely intact when the market turns down, shop around for the best cash return, and buy back in when the market turns back up.
I know there's no unanimity on this strategy, but there seems to me to be way too much passive approach to Super, instead of actively managing it.
Over the last three-ish years, so many people have bemoaned how much money they have lost. Well, if you just sit back, watch the market falling, and do nothing, then yes, you'll lose money.
The above is directed toward people nearing or at retirement. Much younger people can more realistically take a longer term view.
If it is not sufficient then we will see redemption regardless of fund size.
Why are you so sure there are going to be wholesale redemptions? The new retirees are still going to need an income stream. I don't see why you wouldn't just continue the same strategy you've used during the accumulation phase, leaving the capital invested and simply pulling out whatever amount you need to live on. There's presently a dispensation of 50% from the government regarding the percentage of fund capital that must be drawn each year as income, but presumably this will end when we are deemed to be officially out of the GFC.
The other thing to think about is the possibility of a decent recession in the long period that these funds will need to preform over. That may tip the balance.
Perhaps, but again active management will cope with much of this.
The other thing is it takes a bucket load more to retire comfortably than you may think! I know a couple that retired early 90's with a good Syd property and in excess of 1 mil in funds. The have maintained a good middle class lifestyle but have shifted down the property gradient twice and now live country. That was a big number then! Over estimate your needs people! and you might come close. Many of their friends of similar or lesser means have lived a little more lavishly and are now struggling with maybe 10 to 15 years to go.
Well, isn't this a case of needing to have a 'long term budget'? i.e. simply working out on the basis of life expectancy how much you can afford to spend each year? If you have, say, 1 mil, and expect to live 20 years, decide how much that capital needs to generate each year in order to provide a reasonable income, preferably with enough left over to add to the base in order to allow for inflation, and manage it accordingly.
Lifestyles will vary and people will have different priorities for their money in retirement. Some will want to travel round the world every year, replace their car each year, and others won't.
IF all the baby boomers exit on a market upswing using say an influx of overseas money then it is conceivable that they as a group get out in good shape but real life does not work that way... people tend to stay on the ride until it stops. Anyway net net more will lose in the end than win, the losers simply give their money to the winners.
Sure. And what better reason could you have to educate yourself financially so as to be one of the winners, rather than a passive observer?
(not using 'you' in the personal sense here, Mr Z.)
When you are assuming that the baby boomers are en masse going to exit the market, what do you have in mind that they will do? Just take the lump sum and spend it?
Blame has been laid at the feet of the boomers, rightly or wrongly by some. I have already seen one book on the topic of intergenerational tension without looking. If we get to plugging gaps in super with government assistance and increased taxation I expect that to be passionately discussed social theme. In fact you can start a good fight with that one already! (ducks and steps back, just in case!)
Agree indeed that such a scenario would be a justifiable cause for social unhappiness, but I'm just not convinced it's going to happen like that.
As a BB born in the late 1940's, I was a little concerned the other day when I read that Ms Gillard doesn't particularly value the retiree/near-retiree vote, as her preception is that most of those voters vote conservative/non-ALP anyway.
With the ALP leading in the polls with only 3 days to the election, I'm just a little concerned for our SMSF super nesteggs, both near-term and longer term.
So, another reason for doing it yourself, rather than expose your funds to the so called professional fund managers.
In today's paper, there's a small item about a suggestion from the Libs that they would issue infrastructure bonds, not government guaranteed, however, but with a 10% tax break attached, in anticipation that plenty of Super money would flow into these. Obviously at this stage, this is going to absolutely be a choice, but I'd be getting pretty wary of more to come.
Thanks for starting the thread, Mr Z. Interesting discussion.