Smart Investing
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The Chinese calendar says this is the year of the dragon. Less auspicious perhaps but for Australian investors this is shaping up as the year of fixed income.
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By taking a few simple steps, super fund members can both boost their retirement savings and legally minimise tax on their super – for themselves and their beneficiaries.
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Self-managed super funds seem set to remain by far the preferred superannuation choice among higher-balance members – particularly those in retirement.
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This is a question that many investors are, not surprisingly, asking themselves. But what might surprise some investors is that the answer is not as elusive as it may at first seem.
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Changes to the ASX operating rules to allow fixed income Exchange Traded Funds (ETFs) to trade on the Australian market will open a new means for investors to efficiently, conveniently and inexpensively diversify their investment portfolios.
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News & Commentary
Super Debt 09 Aug 10
The idea of spending superannuation lump sums upon retirement to pay off debt accumulated during a fund member’s working life may sound to some people like the perfect solution to a debt problem.
Of course, a person should ideally enter retirement with all of their debts, including home mortgage, paid off.
The harsh reality is that super used to pay debts is no longer available to at least subsidise an age pension – providing retirees with a higher standard of living than would be possible without intact super savings.
This is something that is should be considered whenever accruing more consumer debt with the definite intention of eventually paying it off with super savings upon retirement.
Superannuation law states that a super fund must be maintained for the sole purpose of providing for the members’ retirement. The law does not make any stipulations about how retirees spend their super money.
Smart Investing has highlighted in the past ABS statistics showing that superannuation upon retirement is used by a surprisingly high percentage of retirees for expenditure other than for providing financial support in retirement.
As the ABS figures document, many recent retirees spend their super on paying off their mortgages, paying off other consumer debt, going on holidays, providing financial help for their adult children and buying new cars.
Jeremy Cooper, chair of the Government’s superannuation review, picked up the theme last week of debt and older people in an address before the Financial Services Institute of Australasia.
“There is a use of credit to a much older age that previously we were doing,” Cooper said.
And how is that debt often paid off?
The answer is simple: superannuation lump sums.
* Written by Robin Bowerman, Head of Retail at Vanguard Investments Australia.
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