mad_ugleigh
New member
Hi everyone,
I've read some posts from passiveinvestingaustralia.com and I found this one particularly interesting https://passiveinvestingaustralia.com/how-much-to-save-inside-vs-outside-super/ , it basically explains how much you should save inside and outside super. This combined with a recent Excel model from Aussie Firebug - which calculates what to invest in which asset type - led me to investigate further the inner workings of this and try and recreate my model for this use case.
A bit of background of myself, 35M, migrated to Australia a few years ago, hoping to become a citizen soon, with a passion for F.I.R.E. and the philosophy behind it (get the biggest pleasure from your expenses, maximise joy with your time on earth).
I'm an analyst by trade, so familiar with numbers, but not necessarily finance, and being an expat, the way super works here is a new concept to me. So please bear with me and correct me if I say something inaccurate.
I tried recreating the spreadsheet shown on that PIA post, but I'm getting different numbers. Could anyone tell me what I'm doing wrong?
For starters, the screenshot shows, an initial super balance of $107,000, a return rate of 5%, and a $23,375 contribution, maximising its contribution ($27,500 pretax, increasing super by $23,375). How is it that the balance on Y01 is not ((107,000+23,375) x 1.05) ^ 1 = $136,864? Unless the contribution is done at the end of the year, in which case it would be 107,000 x 1.05 + 23,375 = $135,725. Instead, it shows $134,923. Why?
A similar thing happens with investments outside super, I get a different EOY balance.
https://preview.redd.it/yhvba96i7n7...bp&s=d17c8fafef83110583c3954f56831eaff906cc86
Another thing the post says is that it takes 15% off super contributions because super is taxed at 15% (please disregard the tax benefits and ATO returns I'm not focusing on that in this post), making the $27,500 concessional contributions for $23,375 which is fair, I get it.
But what about investments outside super, if you are tapping into those, selling them realises CGT - even at 50% -, paying interest at your marginal tax rate (likely higher than 15%). Shouldn't then the target balance be higher than $500,000 (the post explains that the example needs 50k p.a. for ten years, hence $ 500,000). To give an example, if you go and sell 50k of shares, you would get less than that amount due to tax implications, and therefore the target should be X% higher than $500,000. Is that not correct?
TLDR:
I've read some posts from passiveinvestingaustralia.com and I found this one particularly interesting https://passiveinvestingaustralia.com/how-much-to-save-inside-vs-outside-super/ , it basically explains how much you should save inside and outside super. This combined with a recent Excel model from Aussie Firebug - which calculates what to invest in which asset type - led me to investigate further the inner workings of this and try and recreate my model for this use case.
A bit of background of myself, 35M, migrated to Australia a few years ago, hoping to become a citizen soon, with a passion for F.I.R.E. and the philosophy behind it (get the biggest pleasure from your expenses, maximise joy with your time on earth).
I'm an analyst by trade, so familiar with numbers, but not necessarily finance, and being an expat, the way super works here is a new concept to me. So please bear with me and correct me if I say something inaccurate.
I tried recreating the spreadsheet shown on that PIA post, but I'm getting different numbers. Could anyone tell me what I'm doing wrong?
For starters, the screenshot shows, an initial super balance of $107,000, a return rate of 5%, and a $23,375 contribution, maximising its contribution ($27,500 pretax, increasing super by $23,375). How is it that the balance on Y01 is not ((107,000+23,375) x 1.05) ^ 1 = $136,864? Unless the contribution is done at the end of the year, in which case it would be 107,000 x 1.05 + 23,375 = $135,725. Instead, it shows $134,923. Why?
A similar thing happens with investments outside super, I get a different EOY balance.
https://preview.redd.it/yhvba96i7n7...bp&s=d17c8fafef83110583c3954f56831eaff906cc86
Another thing the post says is that it takes 15% off super contributions because super is taxed at 15% (please disregard the tax benefits and ATO returns I'm not focusing on that in this post), making the $27,500 concessional contributions for $23,375 which is fair, I get it.
But what about investments outside super, if you are tapping into those, selling them realises CGT - even at 50% -, paying interest at your marginal tax rate (likely higher than 15%). Shouldn't then the target balance be higher than $500,000 (the post explains that the example needs 50k p.a. for ten years, hence $ 500,000). To give an example, if you go and sell 50k of shares, you would get less than that amount due to tax implications, and therefore the target should be X% higher than $500,000. Is that not correct?
TLDR:
- How is $134.923 being calculated in row 1?
- Should balances outside super be inflated by tax implications - income tax& CGT - when drawing from them? i.e. In order to draw 50k p.a. of disposable income, one should have slightly more than that, say $605,000 ($500,000 x 1.21 to cover for that 19% marginal tax plus medicare levy)?
- Assuming one is retired at 60 y.o., should one have any consideration when accessing super, or is it simple as getting a yearly deposit in one's australian bank account?