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Some thoughts on late stage super saving

⊰ 2022-07-19 by ShaunO ⊱

Some random thoughts around late stage super investing..

Later life 'super saving' makes sense because you can treat it a bit like a term deposit - i.e. if you're 55+ there's only 5 years until you reach preservation age and notionally have access to it.

So, with that 'in hand', you have the next fact that all post-tax voluntary contributions to super are a full tax deduction therefore yielding income tax savings in the 30-40% range depending on your income. You do pay tax on them 'inside your super' at 15% (which is applied each year when you inform your super fund these contributions are to be declared on your tax). It also applies equally well if you've already retired and can still afford to save - because pre-60 you're paying full income tax on any retirement income, reducing that by super contributions, essentially provides 'free savings' via your super fund, with you receiving a windfall tax refund each FY. It may seem slightly counter-intuitive to keep 'running super' post retirement but 'the numbers' are so obvious you'd be a little mad not to.

In general super returns are going to be 6-9% post tax (tax is taken care of 'inside super') and you are going to be very hard pressed to match that in another form of investment..

However, unlike 'normal super' where you're playing a 'game' with a 20+ year horizon, super investing on a short horizon like 5 years needs more attention. Last year for example 'generic super returns' lost around 4% of capital (the previous year they gained circa 20% to put that in perspective) - so this is 'no free lunch'. By being 'active' my returns were more moderate (circa 18% in 2020/21, losses kept to -1.2% in 2021/22) but this took considerable time, juggling, crystal balling, intuition, and, of course, sheer luck..

The other 'counter' presently is that even at earnings of, say, 6%, real returns (returns-inflation) are effectively 0%. So all this notional effort may yield no more than keeping your super balance in line with inflation..

But, times will turn up again, and markets are the first to 'earn' when that happens. This is about making money make money. Money you have already earned, or preserved, from previous labour needs to have attention paid to it, otherwise the "big nasty wolf", inflation, will gobble it all up 🙂 (and if inflation doesn't - banks, insurance companies, the tax-man, et. al. will have their hand in your pocket incessantly trying to gobble up what's left!)

buggered if I know 😛

P.S. this is not advice.. even if it were - remember advice is usually worth what you paid for it, and in this case that adds up to precisely nothing! 😃

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