WEBVTT - How much should you have in super…seriously! 0:00:06.519 --> 0:00:09.920 Hello, and welcome to The Australian's Money Puzzle podcast. I'm 0:00:10.000 --> 0:00:12.440 James Kirby, the editor at The Australian. 0:00:12.680 --> 0:00:22.239 Welcome aboard everybody, you know. 0:00:22.440 --> 0:00:25.480 I think the most common question I get asked, and 0:00:25.520 --> 0:00:31.360 that gets asked across the broad world of investment, certainly 0:00:31.400 --> 0:00:35.120 in Australia, certainly at this time, is how much should 0:00:35.120 --> 0:00:39.440 I have in super? Now? What is the answer to that? 0:00:39.680 --> 0:00:41.720 A lot of that depends on who you are, what 0:00:41.840 --> 0:00:43.880 age you are. The short answer is, by the way, 0:00:44.040 --> 0:00:47.000 you don't need anything. Okay, you can get twenty six 0:00:47.080 --> 0:00:50.080 thousand a year from the government in the age pension 0:00:50.400 --> 0:00:53.479 if you know super whatsoever. Zero That is not going 0:00:53.560 --> 0:00:55.760 to be enough for most people most of the time. 0:00:55.880 --> 0:00:56.400 I know that. 0:00:57.120 --> 0:00:59.680 And then you say, well, what did the experts say? 0:01:00.720 --> 0:01:05.760 The ASPA, the Association of Superinnovation Funds, says for a 0:01:05.760 --> 0:01:08.319 modest retirement, a person should have one hundred thousand dollars 0:01:08.760 --> 0:01:12.440 for a comfortable retirement. A person a person being a 0:01:12.640 --> 0:01:15.520 single individual. And I'll talk about when we talk about 0:01:15.600 --> 0:01:18.679 numbers throughout this show today. On this issue, we're talking 0:01:18.680 --> 0:01:21.319 about a single individual, okay, before it gets complicated with 0:01:21.400 --> 0:01:22.160 couples and everything. 0:01:22.240 --> 0:01:22.440 Else. 0:01:22.480 --> 0:01:27.160 So single individual comfortable retirement five hundred and ninety five 0:01:27.280 --> 0:01:30.440 thousand dollars. Okay, so that's what you're supposed to have 0:01:30.480 --> 0:01:34.320 at sixty seven. There's a lot of issues around this number. 0:01:35.040 --> 0:01:38.200 People genuinely want to know the answer. They want a 0:01:38.280 --> 0:01:40.840 simple answer. There is no simple answer. They want a 0:01:40.920 --> 0:01:42.480 quick answer. There isn't a quick answer. 0:01:42.520 --> 0:01:42.759 Reader. 0:01:43.720 --> 0:01:45.840 Perhaps the best answer is you know as much as 0:01:45.880 --> 0:01:49.280 you possibly can, and when you get to one point 0:01:49.400 --> 0:01:51.320 nine million, and you can start to worry. When you 0:01:51.320 --> 0:01:53.040 get to one point nine million, you can start thinking 0:01:53.040 --> 0:01:55.040 about how how you'll get around the fact that you 0:01:55.120 --> 0:01:57.800 might have to pay tax from that point on. I 0:01:57.840 --> 0:02:00.800 read a terrific piece of work, and I read on 0:02:00.840 --> 0:02:03.720 this issue all the time, but I read a fresh 0:02:03.760 --> 0:02:08.639 thinking on this issue from Ashley Owen from Owen Analytics. 0:02:08.639 --> 0:02:11.840 He's well known in the investment space as an investment manager. 0:02:11.880 --> 0:02:15.840 Over the years, he's on various committees. He's on the 0:02:15.880 --> 0:02:18.880 Third Link Investment Committee, which you would know of course, 0:02:18.880 --> 0:02:22.560 that's the fund that funnels money to charity. Very admirable 0:02:23.040 --> 0:02:26.799 exercise going there, and I thought it'd be really good 0:02:26.800 --> 0:02:29.960 to have on the show on this subject and to 0:02:30.040 --> 0:02:33.079 answer some questions as well, how. 0:02:32.960 --> 0:02:33.600 Are you Ashley? 0:02:34.240 --> 0:02:35.720 Fantastic? Doing well? 0:02:35.960 --> 0:02:38.400 Very good to have you on the show. I have 0:02:38.480 --> 0:02:41.880 a theory that we could run a piece in the Australian. 0:02:42.520 --> 0:02:45.440 I don't know what the ultimate elasticity of this piece, 0:02:45.480 --> 0:02:47.919 but I can tell you every single time we run 0:02:48.000 --> 0:02:50.320 a piece which says how much did you have in Super? 0:02:50.520 --> 0:02:53.680 It rates very very well. It seems this is endless 0:02:53.720 --> 0:02:57.040 appetite for that. Tell me what you thought of my 0:02:57.760 --> 0:03:01.160 preamble there when I was saying there's no answer, there's 0:03:01.240 --> 0:03:02.160 no warn answer? 0:03:02.560 --> 0:03:04.880 Is that the case? How much should you happen super? 0:03:05.280 --> 0:03:08.120 It's the number one question that everyone always asks. You 0:03:08.280 --> 0:03:11.280 raise some good points and Australia is one of the 0:03:11.400 --> 0:03:13.720 luckiest countries in the world. And we've got this index 0:03:13.840 --> 0:03:16.200 Pension for Life. Bever in mind that two thirds, sixty 0:03:16.200 --> 0:03:19.120 four percent of Australians of pensionable age are on the 0:03:19.120 --> 0:03:23.000 age pension. So despite thirty two or three years of 0:03:23.040 --> 0:03:27.000 compulsory super post ninety ninety one and it's now eleven 0:03:27.000 --> 0:03:29.079 percent and going up to eleven and a half percent 0:03:29.200 --> 0:03:33.800 this year, thirty years of that and it's a good start. 0:03:34.200 --> 0:03:38.040 So sixty four percent of Australians of pensionable age over 0:03:38.080 --> 0:03:41.040 sixty seven years old on the Australian. 0:03:40.560 --> 0:03:42.480 Government pension to some degree. 0:03:42.640 --> 0:03:44.920 About half of those are on the full pension, and 0:03:45.000 --> 0:03:47.600 about half of the or a third of retirees or 0:03:47.640 --> 0:03:49.760 on the full pension, about a third of retirees or 0:03:49.800 --> 0:03:51.839 on a part pension. Bear in mind, you can still 0:03:51.840 --> 0:03:54.600 earn sixty three thousand dollars and get a pension in Australia. 0:03:54.640 --> 0:03:56.640 Well a couple can earn one hundred and six thousand dollars, 0:03:56.640 --> 0:03:59.960 so it's quite generous. Only so two thirds of Australia 0:04:00.160 --> 0:04:03.520 are on the public payroll. They've got their handout. You 0:04:03.560 --> 0:04:05.880 and I are paying for it all. Now they can say, 0:04:05.920 --> 0:04:07.440 of course they've paid tax all their life and they've 0:04:07.440 --> 0:04:09.480 earned it. So we're not going to get into those arguments. 0:04:09.560 --> 0:04:12.760 But basically, after thirty years of compulsory super in Australia, 0:04:13.200 --> 0:04:15.760 best system in the world, biggest system in the world 0:04:16.120 --> 0:04:17.720 if you look at them, just looking at the ACTS 0:04:17.800 --> 0:04:22.320 site now, the average or the median retirement balance superbalance 0:04:22.360 --> 0:04:25.360 for a sixty five year old in Australia today is 0:04:25.400 --> 0:04:27.920 about two hundred and one thousand dollars for females and 0:04:27.960 --> 0:04:31.240 about two hundred and eleven thousand dollars for males. Most 0:04:31.279 --> 0:04:33.719 people use that to payoff debt and go on the benson. 0:04:34.560 --> 0:04:37.640 So it's been an interesting exercise, but it has been 0:04:38.040 --> 0:04:40.720 not a failure. But it hasn't built the wealth that 0:04:41.279 --> 0:04:42.800 it's got three and a half trillion dollars, which is 0:04:42.800 --> 0:04:44.159 a lot of wealth, but most of that's at the 0:04:44.160 --> 0:04:47.120 big end of town. The average balance is one and 0:04:47.120 --> 0:04:49.040 a half million, but the median balance is only two 0:04:49.080 --> 0:04:51.320 hundred thousand, which means most of the money is in 0:04:51.360 --> 0:04:53.840 the lumpy end of the multi millionaires and billionaires who 0:04:53.880 --> 0:04:57.320 just use it for a tax dodge. Ordinary Australians have 0:04:57.360 --> 0:04:59.480 a couple hundred thousand dollars when they retire at sixty 0:04:59.520 --> 0:05:01.719 sixty five years old, which is the medium balance and 0:05:01.839 --> 0:05:04.480 super today most of the music to pay off debt 0:05:04.640 --> 0:05:07.280 and then go on to pension. So you're right in 0:05:07.320 --> 0:05:09.960 saying how much you need the enter zero because if 0:05:10.000 --> 0:05:11.800 you happen to rely on the public pension for life, 0:05:11.839 --> 0:05:14.440 then you don't need anything. It's index for life. There's 0:05:14.440 --> 0:05:17.159 a public problems with that. First one, for example, is 0:05:17.160 --> 0:05:18.960 I've got a ninety six year old mother who's been 0:05:19.000 --> 0:05:21.400 in four nursing homes and two hospices in the last 0:05:21.480 --> 0:05:24.400 year and a half. That's costing about one hundred and 0:05:24.440 --> 0:05:27.640 fifty thousand dollars after tax, and insurance covers nothing. So 0:05:27.640 --> 0:05:30.000 one hundred and fifty thousand dollars you've got to find 0:05:30.080 --> 0:05:32.440 from somewhere after tax, and that could go on for 0:05:32.560 --> 0:05:36.080 years and years and years, so pincuer doesn't cover that. Yes, 0:05:36.080 --> 0:05:37.560 you can tell your house and do other things, but 0:05:37.600 --> 0:05:39.839 that upset to other people and you got other family members. 0:05:39.880 --> 0:05:42.520 So it's okay to say, yes, the pension's there, but 0:05:42.880 --> 0:05:44.520 you and I know you don't want to rely on 0:05:44.520 --> 0:05:46.080 the pension. I want to rely on the welfare of 0:05:46.120 --> 0:05:48.920 taxpayers future taxpayers for the next twenty thirty years of 0:05:48.920 --> 0:05:52.479 your life. The next point is that you make very well. 0:05:52.560 --> 0:05:57.000 Is that ASPHA, which is the Australian's Supernuation industry body, 0:05:57.200 --> 0:05:58.960 which produces a lot of numbers and a lot of 0:05:58.960 --> 0:06:01.760 people use it. If you go on to the website 0:06:01.800 --> 0:06:05.160 of any industry fund from Australian super so you know 0:06:05.440 --> 0:06:09.200 Hester and SeaBus, they all use the same numbers and 0:06:09.240 --> 0:06:13.880 they talk about the comfortable retirement lifestyle, which is about 0:06:13.880 --> 0:06:17.560 sixty four thousand dollars a year, and that requires six 0:06:17.640 --> 0:06:20.400 hundred and forty thousand dollars, so ten. So to say, 0:06:20.920 --> 0:06:23.440 if your spending budget is sixty four thousand dollars a year, 0:06:23.480 --> 0:06:25.440 which is and they describe exactly how many times you 0:06:25.520 --> 0:06:27.200 go out to what restaurants and how many times you 0:06:27.240 --> 0:06:30.440 travel late, I itemize that if that is your comfortable 0:06:30.480 --> 0:06:33.400 lifestyle of sixty four thousand dollars as a starting point, 0:06:33.680 --> 0:06:35.919 then they say you need about ten times that I 0:06:36.040 --> 0:06:38.719 eat six hundred and forty thousand dollars to live a 0:06:38.720 --> 0:06:42.120 comfortable lifestyle to have enough capital to afford their comfortable lifestyle. 0:06:43.440 --> 0:06:45.719 So that's not a bad starting point. And every super 0:06:45.760 --> 0:06:48.320 fund in Australia, all the banks and the amps, they 0:06:48.360 --> 0:06:50.919 all use exactly the same calculators, which a couple of 0:06:50.960 --> 0:06:52.680 things go on in there. First of all, if you 0:06:52.760 --> 0:06:56.880 look at that sixty four thousand dollars comfortable lifestyle, I 0:06:56.920 --> 0:06:59.040 wouldn't last two weeks on that, and a lot of 0:06:59.040 --> 0:07:01.680 people would not be had if you actually listen out 0:07:01.680 --> 0:07:04.760 then items it's actually it's a pretty poor lifestyle. So 0:07:04.839 --> 0:07:06.839 sixty four thousand dollars sounds a lot, but it actually 0:07:06.839 --> 0:07:09.680 doesn't go fast, so it's a good starting point for conversations. 0:07:10.000 --> 0:07:12.560 Okay, yes, The first step. 0:07:12.280 --> 0:07:15.480 I always ask people is what is your spending budget? 0:07:16.760 --> 0:07:20.080 Most people I asked don't know. So now it's first 0:07:20.120 --> 0:07:22.920 week of July. You've got to wait for your statements 0:07:22.920 --> 0:07:24.720 to come before you start your tax return stuff. It's 0:07:24.760 --> 0:07:26.720 not a bad time to do two things. One is 0:07:26.760 --> 0:07:28.640 to look back at the last year to June, and 0:07:28.680 --> 0:07:32.280 so how is my funds returned? And the second point 0:07:32.400 --> 0:07:34.080 is to say, well, what am I spending or what's 0:07:34.120 --> 0:07:36.600 my spending budget? Has my spending budget gone up? Has 0:07:36.680 --> 0:07:39.680 the increasing power bills and petrol prices? Has that actually 0:07:39.680 --> 0:07:42.960 made mind spending budget go from sixty thousand to seventy thousand? 0:07:43.280 --> 0:07:45.320 And what are my travel plans? So it's not a 0:07:45.360 --> 0:07:47.840 bad time to start your tax work. And while you're 0:07:47.880 --> 0:07:50.760 waiting for that, to start looking at your spending budget. 0:07:50.960 --> 0:07:54.480 Everyone must have a spending budget, so when you talk 0:07:54.520 --> 0:07:58.200 about how much do you need, it comes down to 0:07:58.240 --> 0:08:01.640 a multiple of your spending budget. Some people are happy 0:08:01.680 --> 0:08:03.640 to spend fifty thousand dollars a year. Of course, you've 0:08:03.680 --> 0:08:06.680 got travel and fridge's break and cars need replacing, so 0:08:06.680 --> 0:08:08.360 you've got a budget. All that in so you're spending 0:08:08.480 --> 0:08:11.400 roughly x thousand dollars per year. If you don't have 0:08:11.400 --> 0:08:14.200 a spending budget or an estimator spending budget, that's not 0:08:14.280 --> 0:08:17.400 a bad time to spend a weekend estimating what you 0:08:17.400 --> 0:08:19.400 spent last year. Look at your credit card bills, look 0:08:19.400 --> 0:08:21.280 at your bank statements. Will work out what is your 0:08:21.320 --> 0:08:24.320 spending budget in rough territory? What is it you need 0:08:24.360 --> 0:08:26.520 to do that because that's the starting point for how 0:08:26.600 --> 0:08:28.160 much multiple of that do you need? 0:08:29.160 --> 0:08:31.720 Are you saying whatever that is, you multiply it by ten. 0:08:32.360 --> 0:08:34.319 No, What I'm saying is the first variable is a 0:08:34.360 --> 0:08:39.559 spending budget. The second big variable is how many times 0:08:39.600 --> 0:08:43.160 that do you need? Now the ASPHA and all the 0:08:43.200 --> 0:08:46.000 industry funds, all the banks, all the funbanage, you use 0:08:46.080 --> 0:08:50.200 the same model, which basically says you need a round 0:08:50.280 --> 0:08:52.320 about if you're sixty to sixty five years old and 0:08:52.360 --> 0:08:56.680 ready to retire, then they say you need around ten 0:08:56.880 --> 0:09:01.079 times you're spending budget. Now, there's a lot of assumptions 0:09:01.120 --> 0:09:04.280 in there. The first assumption, which is the key assumption, 0:09:04.400 --> 0:09:07.080 is they all assume you run down new capital to 0:09:07.240 --> 0:09:11.080 zero and then go on the full pension. They all 0:09:11.080 --> 0:09:13.240 make that assumption in their fine print on the back page. 0:09:13.240 --> 0:09:17.280 They all assume that includes the entire pension. That's not 0:09:17.280 --> 0:09:19.959 about assumption because two thirds of Australias do that, So 0:09:20.000 --> 0:09:22.600 that's just describing what happens in real life. But it 0:09:22.640 --> 0:09:25.439 does mean that you realize that you're actually running down 0:09:25.520 --> 0:09:27.959 your capital, and the idea of running into eating into capital, 0:09:28.040 --> 0:09:31.839 running down the capital terrifies a lot of people, including myself. Yes, 0:09:32.120 --> 0:09:34.199 one of the problems is you look at the life 0:09:34.240 --> 0:09:37.520 table and the median life table. For I'm sixty five, 0:09:38.320 --> 0:09:43.679 my Australian government published median life expectancy is eighty five. 0:09:44.760 --> 0:09:49.160 Big problem is that's a median. Half of us are 0:09:49.200 --> 0:09:51.720 going to live longer, yes, and half of us are 0:09:51.720 --> 0:09:54.600 going to live shorter. I mean, everyone's trying to get 0:09:54.640 --> 0:09:58.000 healthy and fit and looking at nutrition, looking at diet 0:09:58.080 --> 0:10:01.680 and exercise why to live longer, But that requires more capital. 0:10:02.200 --> 0:10:04.240 So if you're lucky enough to live longer, you're going 0:10:04.320 --> 0:10:07.040 to be in that half of people who are more 0:10:07.280 --> 0:10:08.920 than the median, and therefore we're going to live to 0:10:08.960 --> 0:10:10.839 more than eighty five years old. My mother's ninety six 0:10:10.880 --> 0:10:14.800 and she's still going So that's the big assumption. It 0:10:14.840 --> 0:10:17.880 assumes you live to your target date on your wrist, 0:10:17.920 --> 0:10:20.079 which in my case is eighty five. If I want 0:10:20.120 --> 0:10:22.000 to live longer than that, I'm going to have more 0:10:22.040 --> 0:10:24.719 captain need more capital to actually fund that. That's a 0:10:24.760 --> 0:10:26.200 big assumption that people get wrong. 0:10:26.640 --> 0:10:30.760 Okay, we'll just take a break there and we'll come back. 0:10:30.880 --> 0:10:32.280 I want to really want to zone in on this. 0:10:32.320 --> 0:10:34.560 It's really really good so far. Thank you very much. 0:10:34.960 --> 0:10:38.560 I had some questions pre prepared for what you're saying 0:10:38.559 --> 0:10:41.240 as sort of challenging even those, so we'll be back at. 0:10:41.160 --> 0:10:41.880 The moment of folks. 0:10:50.200 --> 0:10:53.400 Hello and welcome back to The Australian's Money Positive podcast. 0:10:53.440 --> 0:10:57.200 I'm James Kirby and I'm talking to Ashley Owen, analystics 0:11:00.640 --> 0:11:03.160 own is an investment manager and expert and it serves 0:11:03.160 --> 0:11:06.400 on several investment boards and a particular interest in superannuation 0:11:06.520 --> 0:11:10.400 and some of his recent work really caught my eye 0:11:10.440 --> 0:11:14.800 because on the enduring, endless and endlessly scary question of 0:11:14.840 --> 0:11:17.920 how much do you need in super We get this 0:11:18.000 --> 0:11:19.920 question all the time. We get it on the podcast, 0:11:19.960 --> 0:11:22.080 we get it in the paper of The Australian, and 0:11:22.160 --> 0:11:25.920 I get it socially and so does Ashley. The answer 0:11:26.000 --> 0:11:28.400 is going to be a formula, and to some extent 0:11:28.440 --> 0:11:31.560 that formula will be tailored or customized to you. Some 0:11:31.600 --> 0:11:33.520 of the points actually was making at the start of 0:11:33.559 --> 0:11:36.320 the show in the first part is that these assumptions 0:11:36.360 --> 0:11:40.760 about comfortable retirement amount five hundred and ninety five thousand 0:11:40.800 --> 0:11:44.920 dollars average age, life expectancy eighty five if you were 0:11:44.920 --> 0:11:47.240 in your early sixties right now, for instance, et cetera, 0:11:47.280 --> 0:11:51.040 et cetera. They're all fine, except that you know your 0:11:51.080 --> 0:11:54.240 life might not be average at all. You might live 0:11:54.320 --> 0:11:56.960 to be Ashley is mentioning his mom is I think 0:11:57.000 --> 0:12:00.160 in ninety five, my dad's ninety he had no idea 0:12:00.200 --> 0:12:02.559 he was going to be retired for thirty years and 0:12:03.120 --> 0:12:05.920 his income. We still have to work on that. Every 0:12:05.920 --> 0:12:08.280 time I go back, we sit down and we go 0:12:08.360 --> 0:12:11.199 through his investments and how it's all working. So something 0:12:11.200 --> 0:12:13.040 that goes on a long time. So I want to 0:12:13.040 --> 0:12:15.560 add on this segment. I'm going to try and look 0:12:15.600 --> 0:12:18.679 at the issue of the big questions like how long 0:12:18.679 --> 0:12:24.000 should we assume that we live and though the big 0:12:24.080 --> 0:12:27.280 funds and all the stakeholders in the industry, their assumptions 0:12:27.320 --> 0:12:30.000 assumes that we spend our core capital down to zero. 0:12:30.440 --> 0:12:33.400 A lot of people don't want to do that, and 0:12:33.480 --> 0:12:36.360 maybe they don't have to do it, so let's find out. Actually, 0:12:36.720 --> 0:12:39.200 so tell us, wouldn't it make sense to say, okay, 0:12:39.240 --> 0:12:41.360 I'll assume I live to one hundred and work backwards 0:12:41.360 --> 0:12:43.880 from there. Is that silly or sensible? 0:12:44.800 --> 0:12:49.240 It's not silly. The life tables, which these calculations are 0:12:49.280 --> 0:12:53.760 all based on snapshots in time. We also already talked 0:12:53.760 --> 0:12:55.960 about the fact that the meeting is only just the 0:12:55.960 --> 0:12:58.800 middle person half a lit longer and half a live less. 0:12:58.880 --> 0:13:00.800 So you got to a shoe. This is it. This 0:13:00.840 --> 0:13:02.600 is all you've got. You're on this planet once. You 0:13:02.640 --> 0:13:03.960 want to make sure you make the best of it. 0:13:04.040 --> 0:13:05.839 So you've got to plan to be in that second 0:13:05.840 --> 0:13:07.600 half if you want to be, or at least you're 0:13:07.640 --> 0:13:09.320 dependent or your partner's going to be there. So if 0:13:09.320 --> 0:13:11.760 it's not you, it's going to be your partner. So 0:13:12.360 --> 0:13:14.920 the problem is these snapshots in time, and the ABS 0:13:14.960 --> 0:13:19.439 publishes these numbers every year. These snapshots move over time. 0:13:21.000 --> 0:13:26.840 In the average person's lifetime, that curve moves about three 0:13:26.840 --> 0:13:31.640 decades to the right. So, for example, my mother born 0:13:31.679 --> 0:13:34.720 in nineteen twenty eight. I looked at the ABS, and 0:13:35.080 --> 0:13:36.800 beauty of the ABS is you can go and get 0:13:36.800 --> 0:13:39.200 the nineteen twenty eight year book which is published on 0:13:39.240 --> 0:13:41.400 the ABS and look at the life tables on about 0:13:41.480 --> 0:13:43.920 page three hundred. I've got it in my article. You 0:13:44.000 --> 0:13:47.880 look up somebody born in nineteen twenty eight female, Her 0:13:47.920 --> 0:13:53.440 life expectancy was sixty four years old. Today she's ninety 0:13:53.480 --> 0:13:57.360 six and she's still going, so that curve has moved 0:13:57.440 --> 0:14:01.440 three decades in a lifetime. I was born in a 0:14:01.440 --> 0:14:04.200 poor Asian country in the late fifties, and my life 0:14:04.200 --> 0:14:07.199 expectancy at birth was probably about forty or fifty at best. 0:14:07.520 --> 0:14:10.360 I moved to Australia, which is great. Somebody born in 0:14:10.400 --> 0:14:13.200 nine fifty eight in Australia, a male, if you look 0:14:13.200 --> 0:14:15.679 at the yearbook, would have been I think sixty eight 0:14:15.760 --> 0:14:20.840 years old. Currently my life expectancy is eighty five, so 0:14:20.840 --> 0:14:23.480 it's already moved two decades to the right and I'm 0:14:23.520 --> 0:14:25.920 still going. So I could do the same thing with 0:14:25.960 --> 0:14:28.080 any person. The beauty of the ABS is they publish 0:14:28.160 --> 0:14:30.280 yearbooks going back to nineteen oh one. You can look 0:14:30.280 --> 0:14:32.000 at your own year and say when I was born, 0:14:32.080 --> 0:14:34.920 my life expectancy table was X. What is it now? 0:14:35.800 --> 0:14:40.360 The life expectancy tables shift right. I down the old 0:14:40.400 --> 0:14:43.560 age in about three decades during the lifetime. So don't 0:14:43.600 --> 0:14:46.200 base anything on the current snapshot because it's going to 0:14:46.240 --> 0:14:46.640 move right. 0:14:47.160 --> 0:14:50.640 Because we're probably under estimating our life expectancy, are we? 0:14:51.480 --> 0:14:54.840 You are? I talked to a lot of clients and 0:14:54.880 --> 0:14:56.840 I have done the many many years, and I always 0:14:56.880 --> 0:15:00.200 insist on looking to the male and female together would 0:15:00.200 --> 0:15:04.160 be Jack and Jill, and I say one of you 0:15:05.120 --> 0:15:07.560 might live to one hundred. I look at Jack and say, 0:15:07.680 --> 0:15:09.640 and it ain't going to be you. It's more like 0:15:09.720 --> 0:15:11.960 you're going to be the female because often the female 0:15:12.000 --> 0:15:15.040 is younger, and often the female life tables are longer anyway, 0:15:15.120 --> 0:15:17.240 So someone's going to live to one hundred if it's 0:15:17.240 --> 0:15:19.800 not you, at your partner. So you don't want to 0:15:19.800 --> 0:15:22.000 get to eighty five, ninety years old and running out 0:15:22.040 --> 0:15:23.960 of money. You can't get back to work, you can't 0:15:24.000 --> 0:15:26.640 earn more. This is it. This is your time on 0:15:26.680 --> 0:15:29.200 the planet. So thank on living to one hundred. If 0:15:29.240 --> 0:15:32.120 you don't, that's good. If you live longer, that's even better. 0:15:32.920 --> 0:15:35.880 Can I ask you then about the core capital, like 0:15:35.960 --> 0:15:38.280 you were saying all those estimates when people go on 0:15:38.320 --> 0:15:43.000 all those calculators, the calculators are I won't say misleading, 0:15:43.440 --> 0:15:47.480 but they're incomplete right because they assume that you run 0:15:47.560 --> 0:15:50.240 down your capital, like you mentioned your mom. If my 0:15:50.440 --> 0:15:54.080 own dad had run down his capital, it would be 0:15:54.080 --> 0:15:56.760 a big trouble. Now big trouble this is he's been 0:15:56.760 --> 0:15:59.840 retired for thirty years solid. So what do you suggest 0:16:00.080 --> 0:16:00.840 on that issue. 0:16:00.920 --> 0:16:04.840 I got an email the other day from a reader 0:16:05.040 --> 0:16:08.760 who says he's eighty and his wife is sixty five. 0:16:09.600 --> 0:16:13.480 They have no dependents, they don't see any charities worth 0:16:13.480 --> 0:16:17.080 getting money too. They've given two houses to his school, 0:16:18.000 --> 0:16:20.120 and this is a live question. And he said, look, 0:16:20.160 --> 0:16:23.240 I want to run down my capital. I'm eighty years old. 0:16:23.560 --> 0:16:25.520 Let's say I'm going to live to one hundred. What's 0:16:25.680 --> 0:16:28.160 my formula to run down the capital to one hundred? 0:16:28.760 --> 0:16:31.920 And I said, first of all, it's not about you. 0:16:31.920 --> 0:16:34.720 Your wife is sixty five. She might have forty years, 0:16:35.280 --> 0:16:37.320 so it's not about you anymore. It's actually about her. 0:16:38.600 --> 0:16:40.720 So if she's sixty five years old, which is a 0:16:40.760 --> 0:16:44.560 live case, and he's planning on her living to one hundred, 0:16:44.600 --> 0:16:47.680 I said, look, the maths is not that accurate. If 0:16:47.720 --> 0:16:50.120 I'm running a portfolio for a forty year time arise 0:16:50.200 --> 0:16:53.800 and to amortize it over forty years, financially, mathematically, that's 0:16:53.840 --> 0:16:55.960 as good as running a perpetual portfolio, which I do 0:16:56.040 --> 0:17:00.240 for charities. Charities are perpetual portfolio. So that basis is 0:17:00.560 --> 0:17:04.560 you assume you retain your capital. In real terms, life 0:17:04.680 --> 0:17:07.760 is too variable to actually calculate the lengths of the 0:17:07.840 --> 0:17:10.840 runway over forty years. So rather than trying to calculate 0:17:10.880 --> 0:17:12.720 the lengths of the runway to land at one hundred, 0:17:13.160 --> 0:17:15.520 assuming a capital is going to last forever, because forty 0:17:15.600 --> 0:17:18.960 years is effectively forever in financial terms. So that comes 0:17:18.960 --> 0:17:21.000 back to my point. You're going to live to one hundred, 0:17:21.160 --> 0:17:22.840 You're going to rely on your capital. You're going to 0:17:22.880 --> 0:17:25.359 make sure that capital keeps growing for inflation and the 0:17:25.400 --> 0:17:27.879 withdrawals off it keep growing for inflation, which means you're 0:17:27.920 --> 0:17:28.920 running it a petual fund. 0:17:29.760 --> 0:17:34.119 Yeah, that's your core point. Then perpetual capital not to 0:17:34.240 --> 0:17:37.879 run down on the core capital unless, of course, and 0:17:37.960 --> 0:17:41.200 our listeners would know that there are rules in super 0:17:41.240 --> 0:17:43.920 that you actually must take out a certain amount each 0:17:44.000 --> 0:17:48.840 year and compulsory drawdowns but would allow for that. Okay, 0:17:49.200 --> 0:17:51.359 So just it's very hard to do this in I 0:17:51.440 --> 0:17:53.520 think the Shaublin has been really good to do this 0:17:53.600 --> 0:17:56.800 all the same, and it's got some fresh thinking I 0:17:56.840 --> 0:17:59.040 think here on this issue of how much people should 0:17:59.040 --> 0:18:02.520 have in SUPER. The other thing I supposed on a 0:18:02.520 --> 0:18:06.119 practical terms for younger listeners, there was a time you 0:18:06.119 --> 0:18:08.440 could put enormous amount. You could put any amount into 0:18:08.480 --> 0:18:11.679 SUPER and believe it or not, about ten years ago 0:18:11.920 --> 0:18:14.040 you could put in as much as you can put in. Today, 0:18:14.080 --> 0:18:17.199 for instance, it hasn't changed. In fact, it's shrunk and 0:18:17.240 --> 0:18:20.640 only through inflation indexing has it gone back up. What 0:18:20.680 --> 0:18:24.320 do you recommend in terms of contributions? Do you generally 0:18:24.359 --> 0:18:26.760 recommend that people put in the max that they can 0:18:27.240 --> 0:18:28.000 if they can't. 0:18:29.119 --> 0:18:33.240 It's a tax look, and there are tremendous tax advantages. 0:18:34.119 --> 0:18:35.920 As it's turned out, it's a tax loerk for the 0:18:36.000 --> 0:18:38.840 rich and therefore labor as they probably should are taking 0:18:38.920 --> 0:18:41.600 the big end of town. How they're doing it is 0:18:41.800 --> 0:18:45.000 interesting with the new division two nine six tax if 0:18:45.000 --> 0:18:47.679 it gets in and what will happen. But the idea 0:18:47.840 --> 0:18:51.600 is it is very tax advantageous in a lot of ways. 0:18:51.760 --> 0:18:54.280 So you may as well take advantage of that with 0:18:54.359 --> 0:18:57.480 as much money as you can the other side of 0:18:57.480 --> 0:18:59.720 the coin is for young people who are encourage to 0:18:59.720 --> 0:19:01.320 put it as much a way as possible over and 0:19:01.320 --> 0:19:04.160 above the eleven and a half percent is they're trying 0:19:04.160 --> 0:19:06.640 to buy a house. Even buying a house is difficult 0:19:06.720 --> 0:19:09.760 these days, so there's a big move on to divert 0:19:09.800 --> 0:19:13.680 money from Super into buying a house, or even dip 0:19:13.720 --> 0:19:15.600 into SUPER to buy a house. 0:19:16.080 --> 0:19:16.679 Yeah, there is. 0:19:17.920 --> 0:19:20.639 It's a difficult argument to go into and it's different 0:19:20.680 --> 0:19:23.480 for everybody, but I would say, still giving you eleven 0:19:23.520 --> 0:19:26.560 and a half percent going into Super, make sure you 0:19:26.720 --> 0:19:30.200 use that as much as possible. So it's compulsory savings 0:19:30.200 --> 0:19:33.879 for employees. Unfortunately, a good part of the workforce is 0:19:33.920 --> 0:19:36.040 not employees. There's small business and if you look at 0:19:36.080 --> 0:19:39.159 the numbers of Super coming out the other end, I'm guessing, 0:19:39.160 --> 0:19:41.880 but I'm saying most small business people it's the last 0:19:41.880 --> 0:19:44.080 thing on their plate they get to June thirty, there's 0:19:44.160 --> 0:19:46.480 cash leader they've got to find. It's the thing that 0:19:46.520 --> 0:19:49.439 they forget on June thirty. So the people at the 0:19:49.440 --> 0:19:52.040 poor end of the SUPER scale in the median balances 0:19:52.040 --> 0:19:54.720 when they retire a people typically who've been in small 0:19:54.720 --> 0:19:57.439 businesses or self employed for thirty forty years, because it's 0:19:57.520 --> 0:20:01.040 not something that your employee does compulsorily. So the missed 0:20:01.040 --> 0:20:03.919 out yep. So having seen that experience many many times, 0:20:03.920 --> 0:20:05.880