Smart Retirement - Take 3

Well this option is hardly what you would call smart but I am just informed at a Forum that it is a favourite of "certain" Financial Planners, who have done a Cloud Atlas type deal with the kids to do a "dash for the cash".

The option is for the Pensioner to DrawDown ZERO and just let Super accumulate (ie not take out an ABP that insists on a Min DrawDown).

So after 20 years there is well over $1 million in Super to be divided up between Financial Planner and kids, but the trouble is that the Age Pension is reduced to just 26.43% of the Full amount over 20 years, AND it is all up front ie reducing to half at age 70 and cutting out totally at 75 (ie no income and no health care).

The Pensioner would have an average of about $6,000 pa on which to "live" so would need to do without things like heating and food, so really this "eugenics" or culling is right up the alley of Tony Abbott's Final Solution as Health Minister to this Age Pension problem in 2005 (see below).  So he would probably die off at about 72 with about $400,000 loot to divide up.

It's NOT a plan we would suggest to a Pensioner but those are the maths involved.

TONY ABBOTT: "If you are to see on the front page of the newspaper headlines such as: "50,000 dead", or "50,000 to die", obviously people are going to start thinking the worst. On the other hand, if you work out that that translates to something like a one in 500 risk of succumbing to a flu pandemic, I think you are able to put it into a different kind of perspective."

Smart Retirement - Take 2

OK the post above is a lot to take in so I will start a new post here because I am about to once again explain the Big Grandfather Deception by the govt.

So far we have used the LOPS to show how a Retirement Income of DOUBLE the Age Pension is easily obtainable simply by having accumulated the Employer Contribution since 1990, and we mentioned that this Age Pension Application got snuck in just before Grandfathering came to be on 1 Jan 2015.

So given that the entirety of BigSuper called DOOM & GLOOM on those that came AFTER Grandfather, or those who were Grandfathered but had the temerity to do an Oliver and "ask for more", I am sure you will be saying I am not at retirement age so will I miss all this - boo-hoo?

Well the news is good as we pulled a little trick there and based the above result on NON Grandfather, so here is the sad news for those that bought the hype that "Grandfather is GOOD, STAY with Grandfather".

So for Robin as a bloke, under Grandfathered Rules he would get $57,518 LESS in Age Pension over 20 years.

As if that is not bad enough, for Robin as a gal she would get $75,671 less, so you will be saying OMG OMG how is it possible Germain Greer missed this INEQUITY for 45 years after the small f feminist takeover of 1970?  Simple answer is Germaine and the sisterhood don't use spreadsheets so did not KNOW.

And then none of the "One Year Wonder" Financial Planners do either, or at least if they do, they don't look at 20 years.  So that leaves just the govt and myself that understand the horrible truth.  So one can understand it HAD to be repealed, but NOT accept that it be allowed to linger for another 20 years.

The reason the Grandfathered Test regime (now REPEALED but allowed to linger) has a real Sting in the Tail that jumps in at 75 years or so, works this way.

When you took out an Allocated Pension (changed to Account Based Pension) you were given an Income Test Free Amount which was your total account amount (minus any Lump Sums) divided by your longevity as determined by ABS.  On the surface that looked fair as you were essentially getting about 5% FREE, SO if you DrewDown the Minimum of 5% ALL of your income was Test Free.

BUT as you get older the Minimum Percentage goes up, ie to 9% at age 85, but the Test Free amount stays the same. So by 85 4% is NOT Income Test Free but is FULL INCOME under Income Test, so DOWN comes the Age Pension.

The bottom line is this is costing the Pensioners that can be INDUCED by SPIN to stay "Grandfathered" about $10 billion pa, or to put it the other way if ALL those existing Pensioners "swept" their ABPs and took out a new deal, then the govt would LOSE $10 billion pa for about 20 more years.  That is 25% of the present total Age Pension budget and enough to BREAK the budget if that Sword of Damocles comes SPINNING down (pun intended) on the feast.

Smart Retirement

There is of course a cutoff point for Super Amount that will also allow you to get a FULL Age Pension, so this post examines how that might be achieved using the case of a person (and we will look at difference between male/female) of 40 years in 1990.

First task is to see how Keating's Compulsory Employer Contribution could fund such Retirement, so we draw up a spreadsheet that starts with a $40,000 salary in 1990 and escalates it at 3% pa.

Then we use an average of 5% Employer Contribution, and finally apply an 8% Growth Rate year by year, extending into the Retirement stage.

So for that person (male/female Robin) we get about $225,000 in late 2014 (so as to sneak in before Grandfathering ended on 1 Jan 2015).  As you see all the figures were conservative so the total might be more like $300,000, but $225,000 is enough, to start to eat into the Age Pension especially as we give Robin $25,000 in other assets eg a car etc, and say he/she is a homeowner.

So that gets rid of the "Accumulation Stage" and we are at Square One of off to see Centrelink and to see what sort of "LIFESTYLE OPTIONS" one has with this small amount of Super BUT all of it from Robin's employer.

Now read on:

Unfortunately (as Murray Report tells us) "94% of Retirees convert their Super into an Account Based Pension, and the majority use the Minimum DrawDown".  So that is what we will do for Robin.

Alas, even at our conservative Growth figure of 8% pa the Capital of the ABP continues to grow and even as the legislated Minimum Drawdown starts to increase over the years, at the end of 20 years the balance is 150%, and remember that Robin started at a point of getting over 90% of the Maximun Age Pension in Year #1, but over 20 years that slips to 79.32%, a total loss of $95,894 over 20 years.

The news is worse with the 2015 Budget changes to Asset Testing and the loss then escalates to $136,584.

So not only is that a huge loss of income but remember it was CAUSED by taking the Minimum DrawDown, so we have the double whammy effect as shown by the Combined Income Stream.

So the Total Income Stream starts at about $31,000 pa in Year #1 and barely makes $38,000 by age 85, just 49% more than for the Full Age Pension alone, BUT this IS what the majority of people do.  The Total over 20 years is $688,768

So let's leave that dumbness behind and get smart.  We ask the LOPS to tell us how much DrawDown to totally exhaust the ABP in 20 years (ie 2 years past Robin's Use-By-Date as a bloke) and it tells us that $22,868 pa is that amount.

We put that amount into the LOPS and all changes for Robin in 2015 (we will look at Grandfather in a moment).  He now gets 97.57% of the Full Age Pension, averaged over 20 years.  That is just $11,339 short of 100% Full Pension for 20 years.

You say yes, but what of the effect of the Hockey amendments 2017?  Well, it is just $91 over 20 years BECAUSE this plan is depleting the capital AWAY from the Hockey jaws.

And for Total Income Stream this profile is looking way better:

We start at about $42,875 pa (equivalent to a taxable income of $50,968) and end up with a steady INCREASE at about $45,000 at 85.  The Total Income is now $930,733 over 20 years, a whopping $242,000 better than the "plan" (NOT) of the self named "financial adviser".

Robin's Total Income Stream over 20 years is now slightly over DOUBLE the Maximum Age pension rate, and all he needed to do was BE in the workforce from 1990 to 2015.  He didn't need to put a cent into Super.  All of that thanks to the long term vision of Paul Keating which should eventually see the end of the Age Pension as a govt concern.

In conclusion, IF you see yourself being able to live in the "lifestyle" you want on a Retirement Income of DOUBLE the Age Pension, then this article says you can do that purely by working 25 years with your employer's Super Contribution ONLY.

Or if you want a better lifestyle you can start to add your own Super to this scenario, but of course the Age Pension will decline, and if you want to know just how much please contact us for an assessment report.

Here are the graphs in more detail for the second Scenario above.

The Three Card Trick - Grandfather, Murray and Hockey

Amid the normal doom and gloom media hype that "we are living too long" the government's plan to REDUCE the Age Pension Bill now becomes perfectly clear.

On 1 Jan 2015 Grandfathering struck the First blow, threatening Pensioners all that doom and gloom if they deserted him, saving some $10 billion pa if the pensioners BELIEVED the hype.

Then the Murray Report did the normal "blame it on the Pensioners" as the Second blow, explaining that 84% of Australians don't give a toss about Retirement Planning, and leave it to "financial advisors" and Super Fund trustees (who Murray described as somewhat lacking).

Then in May 2015 Hockey announced the Third blow via a new "retraction regime" for Asset Testing, said to save less than a billion pa but in fact saving about $5 billion pa.

To explain how smoothly this worked we simply need to update my recent post.  In this recent post I examined the example case provided in the Murray Report, and you can read it here.

The bottom line says Justin has been convinced during his working life that he needs $400,000 in Super as a bare minimum at 65, but AT 65 that he not USE it for his own benefit but simply Drawdown the MINIMUM amount.  A new idea of the CIPR is touted but that is purely pie-in-the-sky nonsense to cover-up the above seting-up of Justin to rob him of Age Pension.

Our analysis using a SENSIBLE Drawdown gave him DOUBLE the income over 20 years, including $206,000 increase in Age Pension, plus about $40,000 decrease in Fund Fees

Also our information that Justin would be $72,163 WORSE off if he took notice of Big Super to stay with Grandfather allowed him to avoid that trap.

So 5 months down the line since the Grandfather tricks, Hockey has announced the 2017 changes to Asset Testing, so we have factored all of that into the LOPS and can give you an update on Justin.

Had he stayed with the Govt inducement to NOT use his hard earned super, his Age Pension would go from $163,337 over 20 years, down to $32,187, ie a DECREASE of some $130,000.

But if he followed our advice to enjoy retirement he would go from $369,236 to $322,843, a lesser decrease of some $46,000, so he would be some $290,000 better off than had he meekly listened to his "Financial Adviser".

Here is the comparison shown graphically:

The top image shows the effect of being convinced by BigSuper that "you are SAFE with Grandfathering" but alas "the sting is in the tail" and we see the Green Income Triangles eat into the Age Pension to give just 63.12% of the Maximum over 20 years.

The middle image shows that by ESCAPING Grandfathering Justin gets 79.96% of the Maximum.

But that is short lived and from 2017 the Budget 2015 New Rules say even with escaping Grandpa Justin now has the Age Pension reduced to 69.92%, which is not quite as bad as for Grandfathering at 63.12%.

So finally the Double-Whammy is BOTH Grandfather and 2017 New Rules and here is the image.

The Age Pension is now reduced to just 55.69%, some $122,000 reduction.

Notice how skillfully the Govt has combined the New Rules with Grandfather, ie New Rules hit up front from 65 to 75 while Grandfather comes in from 75 to 85.  So remember you can't avoid the New Rules but Grandfather is optional.

Well in fact you CAN avoid the New Rules to some extent if you go easy on accumulating Super during your working life (maybe just take the employer contribution?) and so the Govt is covering that in conjunction with BigSuper, especially SunSuper with extensive advertising and the Pronking of "The R Word".

Budget 2015 Update

The budget of May 2015 has included some substantial changes to the Asset Testing for Age Pensions, to commence in 2017.

We have therefore updated our LOPS to allow us to give you a very accurate figure on just what the changes might mean to you over 20 years, and for the first case off the ranks today the news was a $105,000 DECREASE in Age Pension.

So to get a Report on your own case simply fill in the Form

De-coding Murray Report Example

As we mention the Murray Report is of course "coded" in order to fulfill its role of creating the illusion of activity and concern by the Govt but at the same time not actually CONCLUDING anything that could come back to bite them at election time.

So the closest the Report gets to an example to explain the "Weasel Words" [as Don Watson calls them] is this graph which shows how 3 different CIPRs [please read the Report if you really want to know what this particular Weasel Word might mean] might work by comparison to the strategy used by "most Pensioners" [on the advice of BigSuper] to simply use the Minimum Drawdown of an Account Based Pension [formerly Allocated Pension].

The first thing to note is the Freudian Slip via "excludes Age Pension".  That comment simply reiterates the message that the Terms of Reference of the Report excludes any reference in the Report to Age Pension [which of course makes the whole Report worthless].  So what this meant to say was "the income streams shown do not include any Age Pension to which the Pensioner may also be entitled to".

The SLIP is that the [unspoken] truth is that the Govt WANTS to exclude Pensioners from the Age Pension once they reach the 85 year mark in the graph above, but unless they change the legislation [by another "grandfather trick"?] the Pensioner would get the $25,000 pa shown above as well as about $22,000 pa in Age Pension.  So it is very convenient for Mr Murray that he does not need to inform us of this fact.

To very briefly explain the strategy being touted above, Justin [as we shall call him] has $400,000 in Super at age 65 and the Govt wants him to put aside $100,000 or so of that into an "insurance fund" in case he lives past 85.  Then he fully exhausts the remaining $300,000 by age 85, hence the income stream lines above simply continue on at the same "smooth" level to age 100.

Of course the Report tells us nothing of Justin's details except he is a male of 65 and has $400,000 in Super, so we will assume some facts [eg Justin is a homeowner and his Fund returns 8% pa].  We then do two examples, one similar to the "dotted line" one above for Min Drawdown and one exhausting his Super at age 85 [ALL of it, ie no insurance policy].

But here we differ dramatically from the Murray Report method [same as BigSuper] in that our LOPS shows EVERYTHING, including Age Pension, and if you avail yourself of our service, our Report to you will be based on your EXACT circumstances.

LOPS is of course a satirical jab at the Govt propensity for acronyms in their Weasel Words [eg the latest one of CIPRs] and simply stands for Little Ozzie Pensioner System [ie for the Little Ozzie Battler, that classic Australian entity].

In the top figure Justin is taking the advice of his BigSuper adviser and Drawing down the minimum amount and as you can see is living frugally on just $20,000 pa to start, the very time when his health still allows him to do the Grey Nomad tour around Australia, but alas he is short on funds.  If he lives to 95 he will be getting $70,000 but that will be of no use in a nursing home.

In the lower figure Justin takes Our Advice [using the LOPS at ozpensions.info] and will get DOUBLE that at $40,653 [the amount the LOPS calculated to exhaust his Super at age 85], so he can now afford to take as many trips as he wants till the wheels fall off his caravan or himself.

And because the Fund Fees are based on the account balance, he saves $37,017 on fees over the 20 years.

But you are already thinking that his large Drawdown of $40,000 pa must surely reduce his Age Pension and prior to 1 Jan 2015 you might be right, but Justin comes AFTER the evil curse of Grandfathering.

A comparison of the two "C. Testing for Aged Pension" figures above shows that it is Justin's Assets [ie NOT his deemed income] that determines his level of Age Pension and simply by gradually EXHAUSTING the capital he goes from 35.37% to 80.14% over 20 years, an increase of $206,657.

Then if we compare the two "D. Combined Income Stream" graphs we see Justin has gone from a 20 year income with an average of about $40,000 pa to one of about $60,000 pa, a total increase of $413,755.  His Year #1 income is a tax free $53,134 and the LOPS tells Justin that that is equivalent to a taxable income of $63,193.

But you say that IF he lives past 85 he will be back to just the Age Pension.  That is so but if you refer back to the brand new "solution" by the Govt at the top of the page, that was ALL he was going to get past 85 ["excluding" any Age Pension, however you may wish to interpret that Freudian Slip].

Finally it would be "intellectually dishonest" not to look at the Grandfathering situation, so here it is:

The result is that Justin would be worse off by $72,163 over 20 years if he had started his retirement prior to 1 Jan 2015 and remained convinced by BigSuper that he should REMAIN with Grandfather Rules [rather than sweep his product for a new one].

So we see yet another example to demonstrate just WHY the "Grandfather Amendments" were introduced in such a clandestine manner, and then "spun" by BigSuper as "Grandfather is GOOD, New Rule is BAD".

Ongoing Personal Security Update

It is some 10 weeks since I tabled my Ministerial with Canberra about the Grandfather Fraud and things are happening, though "unofficially".

Obviously the Abbott Goons do not have the sway with Google they may have expected to delete my posts, so I will continue to use Blogger to secure my safety.

The first "strange happening" was that I had a new customer who was a little old lady who was being screwed by Big Super and was much in need of help.

Our Report to her "went astray" and then the little old lady herself "went astray".  Now given her stated state of "very tired" having to keep working at 67, it may be possible she is in hospital or died, BUT when that is coupled with an Australia Post item neither reaching its target in 2 weeks or being returned to sender, we are looking at a serious situation.

The second "strange happening", right on top of the Abbott announcement of using the excuse of "kiddie porn" to cause our ISP to "rat on us", I GOT one of these attempts to "do a Rolf Harris" on me.

The person who contacted me "out of the blue" was Randy, a "damaged by Family Court" man who fled America to live in the Philippines in 2001.  I was presented with a purported "travel site" [which the Abbott Goons know is of interest to me] but it simply loaded a swag of what the Goons call "kiddie porn" onto my computer.

Here is the site and you can see that Randy is very fond of young Filipino kids, but that does not make him a pedophile in a "normal society" like the Philippines where Randy is doing one hell of a lot of good for these poor folk from his meager Pension.

But as we know, in an Australian or American trumped up "court situation", simply having these photos on your computer is enough to have you put away for life.

SO I deleted all reference to Randy from my computer, meaning I now await the next attack by the Abbott Goons.