The eternal question. Some people manage money well and others don't.
My neighbours are a couple in their mid 30's, one child. She took a year off to have the child and now works half a week as a teacher. He is an electrician with Ergon Energy. So neither in any sort of massively high income bracket.
Next month they will move into their newly built house, completely debt free, value around $900K.
They will rent out the present house, also debt free, adding to the income from an IP, also debt free, purchased about 7 years ago. And they have just bought another IP, completely negatively geared.
They received no help from either set of parents.
How is that they have achieved so much on moderate incomes, while others are unable to even get up a deposit for the first PPOR?
I think you've misunderstood my post. I'm full of admiration for what these people have achieved.They achieve this by gearing, but because it is the me generation, you can't say anything.
You are the selfish one because your not paying tax on your term deposit, that is paying your wage.lol
The only amusing part of the situation, is the old adage of ' be carefull what you wish for'
I think you've misunderstood my post. I'm full of admiration for what these people have achieved.
Likewise, they have no attitude of criticism toward anyone else who has also made an honest effort.
I don't care how they've achieved it. They started with nothing and have got further ahead at a relatively young age than many have after a lifetime of working. Good for them.
The other interesting take away was that of the countries studied, Australia held more equity investments than any other country, amounting to 50% of total private pension assets. For comparison, the world average was 41%, but Germany only had 4%!
So how do you safeguard against that person, with the $1m property from selling it and spending it on cruises, for example.
Possibly one way would to be take a leger of a persons assetts at retirement age?
I mean if they have sold their house to enjoy the fruits of their labour are you saying they should be penalised in some way?
In a way yes. At what point does a person have to take responsibility?
I'd say we all know that as we get older we'll quite likely need some sort of assistance in our later years.
The current aged care system isn't working because it's underfunded. How in the heck will it cope in 15 years when the over 85 group has quadrupled? The over 65s will have doubled.
Unless we have a boom in Govt revenue there is no way the tax payer can afford to increase funding tot he levels required.
I agree, also the tax base will change over the next 10 years, the idea of the family home being a tax haven, can't last.
It won't be long in my opinion before the family home becomes an assessable assett.
Actualy, I think it already is when going into a nursing home, not sure how that works though.
Good point. I've occasionally suggested some diversification into shares might be useful but they've been resistant to this. There is, I think, the idea that property just can't lose.An interesting example. Yes the unsustainable property price boom has made many property investors wealthy in Aus. The question is though is this wealth formula still applicable today, is it sustainable and how many could apply it successfully. Not nearly enough I suspect. Your neighbors have invested wisely and rode the boom, however I have friends in the US who went broke trying to follow the real estate to riches path.
For every success story there is another story of someone who followed a similar path and did not hit the mother load. In most cases, fortuitous market timing does not make one a wise investor just a fortunate one who chose to invest in the right asset class at the right time. The real skill is discerning trends and investing in them. Property price growth on the back of easy credit and ever higher household debt levels was one such trend that has arguably run its course.
It won't be long in my opinion before the family home becomes an assessable assett.
This is already happening in the ACT.
I've enjoyed this thread, it's actually managed to remain remarkably civil. Sp, I get the feeling we will probably never agree on the issue of taxation of super, so maybe we should agree to disagree.
This is already happening in the ACT.
I've enjoyed this thread, it's actually managed to remain remarkably civil. Sp, I get the feeling we will probably never agree on the issue of taxation of super, so maybe we should agree to disagree.
I agree, also the tax base will change over the next 10 years, the idea of the family home being a tax haven, can't last.
It won't be long in my opinion before the family home becomes an assessable assett.
Actualy, I think it already is when going into a nursing home, not sure how that works though.
+1 This thread has been a really interesting read. Being in my early 20's I still don't have much to do with my super and the very small balance it holds: it brings up the question of how much of my income in the future I move into super if 40 years from now.. the rules of super could be completely different and I have all this money tied up getting taxed out at (for all I know) my marginal rate!
Wilkens
Questions like yours will become increasingly common the more governments tinker with the system. Even at my age I'm reluctant to commit more than I have to into super because of the uncertainty about the ability to take a lump sum in the future etc. My focus when I was your age was on repaying non-deductible debt first, followed by investing for the future. I don't know whether you intend to borrow for your own home some time in the future - but if you are, I'd suggest your main focus might best be on reducing any debt with interest that is not tax-deductible - if only because it's near to impossible to predict how many legislative changes may be made to the superannuation system by the time you're looking at retirement! Your generation is fortunate that compulsory employer contributions to super were introduced, as most of Gen Y will have at least a modest super balance if they remain in the workforce for 30 years or so, especially as the present 9% of gross wages gradually increases to 12%. Just don't forget about it - you still have the option of choosing which asset class/classes it gets invested in, and can switch between shares/property/fixed int options within your employer fund as you see fit over the years.
+1 This thread has been a really interesting read. Being in my early 20's I still don't have much to do with my super and the very small balance it holds: it brings up the question of how much of my income in the future I move into super if 40 years from now.. the rules of super could be completely different and I have all this money tied up getting taxed out at (for all I know) my marginal rate!
Wilkens
Don't forget to weigh the following against the legislative risk of negative change when making your choice.
The more you put in early the less your total contributions need to be to meet X target
Potential for favourable grandfathering arrangements.
Actual tax benefit achievable in current year
Legislative goal is to provide incentive through tax reduction.
One way or another you are probably going to need to provide for your own retirement.
Yeah I definetly agree I'm already getting the vibe that it seems to be a BYO retirement for my generation. I just wonder that if I am going to be depositing soon 12% of my income into super I would rather invest my money elsewhere and control it how I please but with the goal of it being part of my retirement fund.
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