Get real about super balances
LET me tell you about the worst speech I’ve ever given in my life. It happened five years ago when a friend asked if I’d speak about retirement at a lunch for his men’s group. “They’re lots of fun,” he said with a smile.
As I drove up to the gates, I realised this was no ordinary bunch of blokes: it was an exclusive private club in a wealthy suburb of Melbourne.
Specifically, 200 slightly sozzled old guys.
I started on safe ground, talking about the state of the sharemarket.
Then I let one slip through to the keeper, explaining my Donald Bradman Strategy:
“If you own your own home, get the aged pension, and you’re willing to do a bit of paid work, you could comfortably retire on as little as $250,000”, I said, matter-of-factly. Talk about leg before wicket … “BULLDUST!” yelled one angry multi-millionaire.
“That’s less than I paid for my yacht!” blasted another.
The crowd erupted, and basically bounced me off stage. Howzat?!
Clearly I’d hit a nerve. After all, the number one question every preretiree wants to know is this:
“How much do I need in super to retire on?”
And until now there’s only been one number that everybody quotes: the Association of Superannuation Funds of Australia standard: $545,000 for a single and $640,000 for a couple to have a comfortable retirement. There are two problems with this. First, it’s out of reach for most people: the ABS says that the median super balance on retirement is $250,000 for men and $200,000 for women. So for an average working Aussie, why bother trying?
Second, the people who calculate the ASFA figure are … the super fund lobby. It’s a bit like asking old Dr Kellogg, “What’s the most important meal of the day?” (Breakfast, of course!)
Yet, for years, theirs was the only retirement figure available.
Until now.
A group called Super Consumers Australia (a partner of CHOICE) has done the research and come up with their own figures – and given me a sneak peek.
Not only are their figures much more attainable, they’re based on ABS research on what Aussie retirees actually spend.
So what’s their number for a comfortable retirement in these inflation-stressed times?
It’s $334,000 for a single and $450,000 for a couple in a middleincome household, again assuming they don’t pay rent or a mortgage.
(This is, admittedly, a little higher than my Don Bradman figure, but that’s mainly because I encourage retirees to keep working at least a day a fortnight to supplement their income.)
Either way, for far too long the super industry has played to the millionaires in the members’ stand. What these figures do is give the average Aussie a fighting chance at scoring 100 (not out!).
Tread Your Own Path!
HELP, MY DAUGHTER IS BLACKMAILING ME
Dear Scott,
My adult daughter, her partner and one-year-old son are renting in a regional area and cannot afford a home loan deposit. I have offered to have them live with me rent free for six months while they save. But they want me to take it a step further and go guarantor for them. I did consider it but, as a single parent with three teens at home and a mortgage already, I’m not comfortable with the risk. The problem is they are insistent that it is their only way of owning a home and that I am the only person who can help them. They have told me it will be my fault if they are homeless. I feel like they are blackmailing me. What would you do, Barefoot? Valerie
Hi Valerie,
I’m with you. Know this: parents all over the country are having this conversation with their kids.
It’s frustrating, because you might really want to do it. However, as they say on the plane, you need to fit your own oxygen mask before helping others. Besides, six months’ free rent is a bloody generous offer already!
If you feel your daughter is emotionally blackmailing you now, can you imagine what she’d do if prices continue to fall and she finds herself in a financial pickle?
Remember, as a single woman with three kids, statistically you are at the highest risk of being homeless.
LOST IN SPACE
Hey Scott,
I am a new investor swept up in a crazy world of shares and crypto (and insane house prices). I put $5000 in the sharemarket using the Spaceship app, and then the market crashed! Now, whenever I look at my portfolio I feel queasy and want to pull it all out. Is Spaceship worth the hype, or have I thrown away my savings? And is my gut feeling to pull it out and invest in an ETF right, or should I hold on through this “bear market”?
Alison
Hi Alison,
Let’s you and I jump in the DeLorean and go back in time.
This time last year you were probably suffering major FOMO hearing your friends boasting about how much fast money they were making betting on Dogecoin, hot stocks and NFT-ape jpegs.
So you looked at all the investing apps and chose the one that had delivered the highest short-term returns, Spaceship. The reason it shot the lights out was because it was investing in red-hot growth stocks that investors seemingly couldn’t get enough of.
And then … investors changed their minds, sending growth stocks
They want me to take it a step further and go guarantor for them … They have told me it will be my fault if they are homeless. I feel like they are blackmailing me.
deep into the red. This year Apple is down 18 per cent, as is Amazon (-35, Tesla (-40, Facebook’s Meta (-53), and Netflix (-70).
This explains why Spaceship’s flagship portfolio is down 35 per cent.
Yet what you want to know is: where does it go next?
Honestly, I have no idea. I totally suck at market forecasts (as does every other human). And that’s why I don’t forecast. Instead, I invest in index funds that own shares in business across a range of industries. They really are set-and-forget investments, and when you combine them with low fees on many of these apps they’re great.
YOU HAVE ZERO CREDIBILITY, BAREFOOT
Scott,
Both my sons (age 13 and 15) have read your books and are practising the “Buckets” strategy. They are slowly, slowly building their wealth to financial independence using earnings from weekend chores, parttime jobs and compound interest. However, I now question your credibility and moral compass. Your misguided publication of your cringeworthy response to the unbelievable letter claiming “my hardworking 13year-old has saved $200,000” has left me flabbergasted. Was this a joke? What 13-year-old saves $200,000? Hardworking? Probably. Lucky and the beneficiary of an inheritance or family trust fund? Definitely. This is a slap in the face to every Aussie battler. Sadly, Scott, you have lost a reader here.
Glenn
Hi Glenn,
Congratulations, you have won my reader “spray of the year” award!
So the kid in question did make the $200,000 on their own … they’re actually in the entertainment business. (However, at the parents’ request I’m not being any more specific than that.)
Yet the real issue here isn’t with the kid, it’s with you.
It sounds like you have a lot of hang-ups about wealth. Now, Glenn, your concrete is set and you’re unlikely to change. But you don’t want your sons to inherit your anger-envy. After all, it’s totally unproductive.
Fact is, they’re going to meet wealthy people who’ve gotten money from their family. That’s life. Not everyone is equal. Not even you. (Just try comparing your salary to an average Indonesian’s.) But your sons can control one thing: the amount of effort they put in.