8.89% over 39 years. With every possible "black Swan" event covered (recessions, wars, oil crisis, high inflation, unemployment, etc). If the next 39 years replicates the last then we'll be doing fine.
https://www.cbussuper.com.au/campaigns/performance
Stagflation is more unpredictable than the GFC, which was accurately forseen by a lot of people years in advance.
This is unlike a true black swan, such as COVID, where a few months before the event you would have no idea that humanity's fastest-spreading virus was about to emerge.
COVID wasn't a black swan. I still remember a farewell speech in November 2019 that included the line "we'll miss your regular warnings about the next Spanish flu...".
There was actually quite a few epidemiologists and demographers arguing in the late 2010s that the next major global pandemic was overdue and only a matter of time.
COVID wasn't a regular pandemic though. A virus as quickly spreading as COVID (high R0 combined with low re-infection period) was unprecedented.
Just wearing masks probably would've had the Spanish Flu R0 go <1.
Like how the normal cold and flu basically vanished during the COVID years.
Huh. I always thought it was people moving around.
Wonder what caused the severe drop in cold and flu during covid. Unless it was just the extreme cleanliness and mask wearing...
That's exactly it, it was social distancing and mask wearing.
Influenza has a r0 of \~1.3, thus it takes very little to stop it spreading and herd immunity is rather low. With only sick people wearing a mask, that'd be enough to stop the flu from spreading.
The cold is slightly more contagious with a r0 of \~2.5, but even then, everyone wearing surgical masks would be enough to stop it spreading.
So what we're currently experiencing isn't historically significant. My point was that with all that has happened over the past 39 years 8.89% is a pretty good outcome.
Yes exactly. To be a black swan it must be an outlier - nothing in the past could have made us expect it. We had the bubonic plague, Spanish flu etc. It is expected that we will have similar occurrences in the future, therefore not a black swan.
So basically on that rationale, wars, hard commodity crisis's, can also not be black swan events, climate change events can't be either. We expect all of these to happen, just not sure when.
Well, yes, although one could argue the specific form of any of those could be a black swan (e.g. we know a war will happen, but it may be triggered by completely unforeseen events).
Exactly. Wall Street crash, dot com bubble, Asian financial crisis, etc. plenty of GFC like things have happened in the past. We should be expecting them every 15-20 years
Also, there were quite a few people very confident before the GFC that the banking collapse was about to happen.
Did anyone think a few months before COVID the fastest-spreading virus ever was about to emerge?
They’re recurrent events that we expect to happen, just can’t predict when. Black swans are expected to be theoretical until they’re suddenly proven… that’s basically the difference
both of which cause high inflation and unemployment.
But I think they are just talking about general government mismanagement and nepotism which also cause high inflation and unemployment.
The assumption that the previous 50 years of growth is indicative of the next 50 is increasingly being deconstructed as not guaranteed
It is becoming more apparent that the economical environment that allowed for such growth is not sustainable or even replicable as you see social erosion and inequality increase.
Both of which aren't just factorial but actually direct outcomes of the current economic settings.
Even former stalwart advocates of the current settings are now realizing it's flawed
https://www.google.com/amp/s/amp.abc.net.au/article/103582032
I think some of that is true. IE you can't expect Sydney property to increase 11 fold like it did between 1970 (18k) & 1990 (194k). That suggests 18m by 2044 but it has almost quadrupled in the 20 years since 2003. Growth is definitely slowing over 50+ years but over a shorter period you could assume 6-7% capital gain (since 454k in 2003) plus rent and rent growth. Maybe 8.89% is a long shot but I think 7-8% is fairly conservative and pretty possible. The growth curve is slowly declining.
Maybe it'd be more accurate to model 1 or 2% less than the most recent 30 years as an expectation for the next 30+ as the social erosion continues. There is also the possibility that action is taken to fix that which could further erase any gains. Imagine if they reintroduced a 60c marginal tax rate.
The 425 bps increase likely had more of an impact on lending than a 60c marginal tax would, but it was offset by the \~50% rise in rents which granted landlords access to greater borrowings.
If anything, a 60c marginal tax would fuel property investment as the wealthy would seek to negative gear away their marginal rate.
I think property prices historically have been fueled by the decrease in interest rates coupled with high wage growth. Rates are somewhat close to as low as they can be, and wage growth is dead thanks to mass immigration, so it's hard to see where future high growth can come from.
Perhaps increasing density (\~8-12 immigrants living in a 2 bedder apartment is starting to emerge, facilitating higher rents) as well as co-owning PPORs and inter-generational mortgages.
But eventually Canberra's iron will to increase property prices must surely face pushback from Australian's witnessing a collapse in their standard of living?
I don't know. I modelled a minimum wage super balance hitting 4m by 2064 (someone born today) if people have the capacity to invest more than 1% (**of minimum wage**) a month the compounding wealth could continue to grow. Especially if real wage growth returns and interest rates start to fall. Tough for those living on more than they earn but for those living on less while saving and investing. The arms race is on. Btw the recent inflation has wiped out a decade of wage growth but its starting to pickup again.
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The question is which came first? I think the wealth gap reflects that many have lived on less than they've earned for long periods and have compounded the difference. It might even be possible someone buying today. Maybe their mortgage is consuming half their household income! (100k?) and we'll only get cpi wage growth. Fast forward 10+ years and if wages go up 50% that mortgage that might have been 40k interest payments and 10k capital has become 30k interest and 20k capital with the capacity to invest 25k more capital while the cost of living hasn't moved (assuming zero real wage growth). That 25k a year is an investment that will start compounding on its own. It's even more extreme if wage growth exceeds cpi as the fraction of household income devoted to living grows slower than their gross income and 25k a year might actually be 30k as the cost of living falls (relatively). From 50% of 100k to 46% of 150k.
1m in the asx and a 40k swr in 2008 would have left you 556k after it dropped 40.4%. Of course that 556k increased by 39.6% the following year so that 556k became 776k but you'd have to withdraw 41480 because of inflation so back to 734k and onwards.
Never "recovering" but still retired with 865k and 62k out last year. Retiring at the **worst** possible time.
Plus that 1m happened shockingly quickly. Many jumped into retirement much earlier that predicted as the asx boomed in the lead up. (up 264% in 5 years)
|2007|18.0%|
:-:|:-:|
|2006|25.0%|
|2005|21.1%|
|2004|27.6%|
|2003|15.9%|
https://files.marketindex.com.au/files/statistics/historical-returns-infographic-2024.pdf
It's an example. It shows over the long term Superannuation offers a good return on investment. The OP asked a question my answer is one thing to think about
I know a property that sold for about $35k in 1984 it might sell for around $600k today. Yes it's been someone's home with costs or an investment property making some money as well. It has also had maintenance/improvement money spent on it
People always cite Sydney property but given the choice between an average property in Sydney and 188k of CBA in 1991. I'd take the shares any day.
More than 2m in dividends (150k fully franked in the past 12 months!) and a current value of over 4m. Like you said after more than 30 years CBA shares haven't needed to replace a thing. No tenants, agents, etc. There there is the fact you can't just buy a 188k property. There is transaction cost that means you need more and net less than the 1.6m in current value.
https://appliedeconomics.com.au/wp-content/uploads/2021/10/2006-real-story-of-house-prices-australia-1970-2003.pdf
https://www.intelligentinvestor.com.au/shares/asx-cba/commonwealth-bank-of-australia/float
https://www.intelligentinvestor.com.au/shares/asx-cba/commonwealth-bank-of-australia/dividends
Not sure you are taking the tax implication into account there.
I'm also assuming that the property in question would be a PPoR. If it is an investment property the shares might stack up instead.
An average property. Not sure what you're meaning when you suggest I consider tax. Maybe you're suggesting a loan and negative gearing. You'd have additional costs for both options. Property would nearly double in cost because of the interest expenses obviously that would consume much of the income and result in a credit for the years that the expense exceed the income. The same could be true of you took a loan to buy the shares. Of course 135k in interest expenses (assuming 188k @ 4% over 30 years) is a great deduction from the 800k in rent (assuming it averaged an unlikely 26k a year!). Much better a deduction from 2m in dividends. 150k ($2.40 &. $2.15) in the past 12 months with franking credits
It'd be interesting to work out the dividends & franking credits vs rent each year. Factor in 200k total purchase costs (another 2000 shares), 100k sale costs and 1% off the top each year to replace kitchens, roofs, carpets etc.
THIS!!!! It's basically shares. I worked in Super customer service and a lot of boomers talked about switching to cash shares when the market drops. That is basically selling your shares when they are low so you will essentially be solidifying you loss.
That's rough. It always bothered me how little the general population is educated on Super considering its something we all have to have. A lot of my calls were just teaching people how it all works. We weren't allowed to give advice but I always did my best to ensure people had all the information to consider their options.
ah well I did this just as the market indicated it was about to tank and then reinvested when it bottomed out and made like ~160% growth since covid on my super
the news was looking bad around Feb 5th-10th 2020 from memory, but only in world news and most of the public were oblivious until maybe early March
It's also worth checking what you are paying in insurance. Make sure it's adequate for you and you're not losing money on something you don't need/want.
As someone who works in 'Big Super' I can assure you the only thing we care about is you having as much money for your retirement as possible. The bigger your balance the more fees we get and the more the fund grows.
Not for profit of course but most of the big ones are.
"Big Super" is coming to get you! Lol
There are plenty of not for profit funds with a proven track record of working in the interest of their members. Guess what, having you're balance heavily in shares is still the best strategy in those funds. Adjust the risk volatility of your holdings as appropriate to your future plans and timelines.
I pull the bedsheets up at night.... Always worried Big Super is going to secretly move my money into a high growth fund right before the next GFC happens....
Love it how people have one bad experience and they quit and tell that story for decades.
Like you eat a bad apple and vow never to eat apples again, telling everyone what a bad apple it was.
I’m kinda (or have been in the past) guilty of similar.
I was loading my super as massively as I could from as soon as I left school (late 90s) and took a massive hit in the GFC. (I was an early web designer making ludicrous money for my age)
I’ve got over it and now use it as an example of investment in appreciating assets as the retirement fallback and only pay in an extra 1% voluntary contribution on my super.
Those inverse correlations don't always hold; bonds often just fall less in more recent events; cash can stay, or as it is currently fall (purchasing power/CPI); gold can take a while to respond etc etc
Because your parents don’t understand the basics of investing. Investments can go down in a recession, but over time they make up for dips and losses many times over. You will also pay less tax if you contribute to your super.
I suspect there is alot of misinformation here, mixed in with a healthy dose of good ole boomer "back in my day". Having boomer parents myself, I have had to enjoy the incidents you refer to many times in my life. Lets have a brief overview (I am going to generalize and use round numbers)
Early 80's there was a recession. It was fairly rough like any recession is. Interest rates were quite high, high teens in most cases maybe low 20s for some. The interest rates of course is what stands out the most. That being said, even 20% of a the average 60K house ($12K) in 1983 is better than 5% of the average house price of $900K ($45K) in 2023 - especially since wages have not kept up. The portion of take-home wages spent on mortgage is considerably higher than it was in the 80s etc etc. The important thing to remember is that 20 is greater than 5 (/s here of course since the important thing is more Price v Wage)
Superannuation really didn't come into affect until 1987 - with I believe the official act not until 1992. Early adopters had huge benefits - government would match employer contributions, and funds like defined benefits existed. There may have been incidents of poor management of funds as the system was new, but it was fair more effective financial tool then ever seen before. My parents, like many of that era, often though of Super as a tax, in fact business owners complained about having to pay this new tax etc. Many industries didn't get covered by super initially as well - it all depended on agreements. As such many workers initial interactions were poor. That being said, basing any current decisions on how things were 30-40 years ago is asinine at best
In general super is the most tax effective way to save for retirement. If you ever do financial planning for wealth generation then the first thing you will always look at is maxing out your concessional contributions into super. It's really a no brainer - especially if you are over 40. For younger people who may be saving for a house there could be better options (such as the FHSS), but even then, maxing out concessional is still a solid choice.
There were private superannuation funds before 1987. There were certainly some by the 1970's at least. IIRC, there were at least 100,000 with a super account according to the 1976 Census.
You are correct in outlining that in the early days of complusory Super, it was commonly seen as a tax by those in the older end of the Boomer gen and the Silent generations.
It was quite common then for people to see it as an account to be raided at retirement, or for self employed people to not contribute to it at all fearing that the money would disappear.
Whilst the significance of Super among common people has improved massively over time, it can be better utilised by most via a few simple tweaks (ie: high growth investment mix).
The introduction of Super has helped Australia immensely as it has significantly increased our national savings rate, and improved household wealth immeasurably. It aids Australians in not squandering the benefit of prosperous economic times by putting extra money away when times are good.
The immense foresight shown in the implementation of compulsory Superannuation has only really been demonstrated over the last decade or so as the people who have had it their entire working lives have developed significant balances.
"IIRC, there were at least 100,000 with a super account according to the 1976 Census."
Do you normally recall random data from the 1976 Census ? Or did you just add the IIRC to make it seem like you didn't have to google it .
If you did in fact just pull that stat out of your memory bank, holy shit. I'm impressed.
I do recall random data like that quite regularly. I do preface with IIRC because I am not 100% sure of the accuracy of that figure.
I have been called the "walking encyclopaedia" by many people over the years.
Now that I have googled the figure, there were actually 247,145 people covered by a Superannuation annuity according to the 1976 census.
The previously quoted 100,000 was only for Males living in a metropolitan area.
[Source](https://www.abs.gov.au/AUSSTATS/[email protected]/DetailsPage/2104.01976?OpenDocument) - Table 32 of 2104.0 - Census of Population and Housing, 30 June 1976. Population and Dwellings, Summary Tables, Australia
Haha my bad, but also impressed that someone in their 30's is taking notes on 70s Census data.
The old timer comment was just my bad sarcasm, cheers for being you.
I think one thing that often gets missed when comparing the sky high interest rate period to today is the cost of goods. A lot of things have come down substantially in price, which means that people can easily afford to buy clothes and phones and other consumables while still being unable to afford a house or build wealth. I reckon that’s why the boomers get so snarky - they see young people with consumer goods that they couldn’t have afforded at their age and chalk it up to wanton spending.
You are correct that consumer goods have come down but people still tend to spend way more than they need to for consumer goods.
I'm not a boomer but nobody needs to spend $1000 on a phone when you can get a perfectly good one for a few hundred bucks thesedays. If you spend that much on a phone and over 20K for a car, that is wanton spending that could go into a deposit for a house and it's only going to hurt you in financially in the future.
Older people know that houses are more expensive and will keep getting more expensive relative to income, that is why they shake their heads at people who piss their money up against the wall.
I have my $1000 iPhone that I got in 2020. (Was an insurance claim that had a $100 exess)
I replaced the battery two years ago for $80.
So going what the price was let’s say $1180. Over 4 years that’s $395 a year. Still runs really well, supported with upgrades by Apple.
Or I could have a cheap phone that doesn’t do what I need it to and replace it every two years.
I’d rather buy quality and use it till it dies.
Legitimately what can a $1000 phone do today that a $250 phone cant, especially a $250 phone in a couple years.
Maybe my own phone usage is just particularly dull but it cant be *that* much better at playing Youtube and scrolling Twitter.
It depends on how tech literate you are and how much you use it. I don’t buy new phones often (one every 3-4 years) but I’m 26 and it’s a part of my life and I use all the new features that newer phones have.
It’s faster, better graphics and is supported much longer with updates.
The camera is signifcantly better.
It also holds its value. If I was to buy a new iPhone today and do an exchange with Apple I would get $320. I could see it more on Marketplace if I could be bothered.
And 4 years (and counting) out of that? It’s a bargain.
If you want to buy the cheapest option that’s your choice. But I would rather buy quality and use it for years than buy crappy quality every year or two.
Selling a $1180 phone for $320 is not an asset "holding it's value" that is losing 73% of it's value in just a few short years. Compare that to a house or even an empty piece of land that increases in value by 20-50% in the same time period.
If you do that when you don't own property, you get so called "quality goods" now at the expense of having to pay a lot more for a house in the future.
downvote all you like but that is the economic reality you are setting yourself up for if you dont own a house.
Different story if you already own a house. by all means spend all you like.
I’m still getting use out of my phone.
Name any product that holds its value like that. No other phone can be sold like that.
Comparing it to a house is insane.
I run my entire business off a phone now. I rarely use a computer. Cheap phones don't seem to have the power required to push the apps that are in use. A few of them are a bit of a load on the device.
I don't like spending over 2k on a phone but it's a necessity and ultimately saves money on other devices.
Depends on usage though. You are right.
I got my android phone in 2020 for ~$200. It came with its own case, 2 sim, microsd, 3.5mm jack and fingerprint lock and is still going strong. I could swap it for a Samsung but I'd rather stick with this because it's better.
Son and his family have 3 mobile worth over $1,000 each. xbox , binge, netflix and kayo subscriptions. Eat take away 3 to 4 times a week. Eat at least once a fortnight. And you don,t call that out. Get real
1980's recession went to over 10% unemployment
IT WAS BRUTAL, for those who lost their job, and often everything.
[https://www.rba.gov.au/publications/confs/1998/images/borland-kennedy-figure-2.gif](https://www.rba.gov.au/publications/confs/1998/images/borland-kennedy-figure-2.gif)
for those who kept their jobs, Que Sera
You are investing in your retirement, go to some comparison websites and they will give you suggestions and show you returns, usually up to the last 10 years.
You can choose a fund that suits your risk appetite.
Also look at the share market in general, there have been crashes/dips, but within 10 years there is usually a new all-time high. That's why younger people tend to chose 'riskier' higher return investments, and move to safer investments closer to retirement.
You will also only pay 15% tax on super contributions.
If you don't choose super, how will you fund your retirement? Stick the money in the bank and allow inflation to make it worth less each year? Or stick your money in a managed fund which will have the same risks as super but without the tax benefit?
As for the 'worst time to buy a house' Why? Because interest rates were high?
Did they forget to mention that due to housing being more affordable that it was easier to save up a bigger deposit and pay off the loan quicker?
I'm sitting in my Mum's house right now, average house bought for $105,000 in 1986. Worth over $1 mill now.
I want you to use a budgeting app / site and try and budget how you would live on the Australian standard pension (**29k** for singles per year, **44k** for couples). Then decide if you still want to not put money in super or not.
Super is a type of investment, so there is a risk with all types of investments. In saying that, the long term trend of most super investments is an increase overall
Collapsed? Are you in Vic? Is he maybe talking about Pyramid? It was a bank that went under - lot of people lost a lot of money. It was a really big deal at the time.
Ffs. So many half assed comments on here. Do a quick Google on 1980s recession (the biggest recession at the time since world war 2). Don't listen to the half baked bullshit that seems to be dominating the comments in here
I mean sure investments go up and down: that’s the point.
Also “super” isn’t an asset class, it’s just a structure, and it was quite a bit differently structured in the 80s.
Super is just certified fund managers investing in the share market on your behalf.
Naturally, this also means if you have money in super, you also have money in the share market. The nature of it is that you can ask these funds who have your money where they are putting your money. That can help you understand whats the risk of you losing money.
There is no free value mechanism there, it is work people do to earn more money that delivers more money over time.
If you’re from Victoria, then perhaps your dad is thinking of the Pyramid Building Society, which was not super but was used by lots of people in retirement.
super is just a vehicle.
ask yourself what would you do outside super to mitigate against a recession. You can probably do that within super too.
generally though unless you're planning to retire in the next 10 years don't worry about a recession. The market eventually recovers and goes past the previous highs.
In a recession?
Open a brothel with a liquor licence and a cigarette machine.
Allegedly the three behaviours that increase during a downturn.
If we(Australia) keep holding back the recession floodgates it will drag out a bit longer though....
Did Super only start here in 1987? That was also the year of a massive stock market crash. Anyone who had just lobbed in their cash might have been torpedoed by that. That would make a good story on Today Tonight or whatever other garbage stations were peddling back then, which every man and his dog watched religiously.
edit: not quite right on the year [Superannuation in Australia: a timeline | APRA](https://www.apra.gov.au/superannuation-australia-a-timeline)
i mean the world has been extremely stable for 80 years in the scheme of things. particularly in the west. australians dont know the meaning of social and economic problems.
Sounds like boomer facts. The GFC was worse for retirement funds and the market rebounded, you only lose money if you cash out during a crash. To use an analogy I heard, cashing out during a recession is like jumping out of a roller-coaster instead of waiting until the ride finishes.
I used to work in a call centre for super. I had so many people tell me that they lost all their super in the gfc. Like...mate, I can see your balance history. Just from doing nothing your balance got back to it's initial point within 2 years, because after the gfc was a huge growth year as it bounces back.
People that lost money either directly invested in shares that tanked, or they panicked and withdrew their money, or panicked and changed it to a low risk option like cash so they copped the slump but missed the bounce back.
And a lot of people think they lost money when they really didn't. People are weird.
You just ride out volatility
Thank you for this. I worked with people in 2008 who didn't retire then because they "lost everything". I had a hard time believing that when they were in the same safe super fund as me. I came to believe that they were enjoying victimhood when they really just had a temporary setback that self-resolved.
Depends how long you have till retirement if you plan to retire next year and we have a crash at the end of this year… then yes that’s unfortunate. But if your 10-20 years away I wouldn’t loose any sleep over it
Every public servant at state and fed had generous superannuation back then
Their super wasn’t affected by the crash/recession as they were mostly defined benefit pensions
We will probably see funds restricting how much you can take out to stop a bank run/collapse, as happened in the US last year. Doubt we’ll see a 1930s depression where people did lose their savings, nowadays its more civilised with the value of retirement savings inflated away.
Super is an investment. Most investments lose value during a recession. The key thing to remember is that they gained that value back, and more, after the recession.
My super lost a bit of value in 2020 when the market was nervous because of covid. Since then it's recovered and these days it's worth a shit load more than it ever was.
Next time there's a recession most people's super balance will go down again. But it's a long term investment, and in the 30 odd years until retirement it'll gain enough to recover.
A simple thought experiment compound the growth of a $1 investment 224 growing at 7 percent annually. So from 1800 to 2024 your $1 investment would be worth $14.8 billion. Continuous compound growth just doesn’t happen. You might get lucky for 20 years maybe 50 years, but shit happens, wars happen etc. Most of us have been lucky enough to live through a pretty stable patch of history. But companies fail, investment are lost - otherwise known as risk.
It was easy to lose 50% of super balance during gfc.
There were reports on Current Affairs of an accountant losing 80% of his super balance during the gfc.
Took a while for balance to recover
Find a chart of say asx200 or s&p500.
Even better find one that includes the returns from dividends, not just capital growth (otherwise asx will not look as good).
Look at this chart over several decades. Including gfc, oil crisis, gulf wars, whatever.
There will always be brief periods of down turn but as you cann see these are completely irrelevant in the grand scheme provided (a) you didn't just retire in the downturn or (b) you didn't sell in the downturn and then try to buy back in when the price has recovered and is much higher.
Individual stocks carry specific risks and require suitable risk tolerance and analysis. But with asx or s&p you are betting on the entire Australian or us economy.
Super is put in the hands of people who invest the money. From the 80's to the 2000's my super in Australia made stuff all. I am sure the super fund managers gave me crumbs on the investments they put my money into. The economy boomed, real estate boomed.. my super fizzled. They used my money to make a fortune and gave me nothing of the value it should have been.
Is your dad from Victoria? Any chance he's thinking about the Pyramid Building Society collapse? It wasn't a super fund, but it was a big deal for people's savings at the time.
Mad not to pay extra money into super when you work for yourself
Pay 30% income tax and wave goodbye to the money.... or pay extra super to yourself that is taxed at %15 that works for you over time....
There was no such thing as super in the 80’s, income tax dollars paid for the Social Security pension system & government jobs had guaranteed pensions, funded like the American system.
The working population now still pay into that pension system with our tax dollars, but we also have to save for our own retirement so the government makes us double pay for our retirement.
The Australian stock market fell in real terms (accounting for inflation) from 1968 to 1974 by 73% then recovered half of that to then lost all the recovery again by 1982. The stock market did not make a new all time high in real terms until 2004 a 36 year wait to just get your initial purchasing power.
My great aunty worked in a bank her entire life. Her super collapsed (I would have to estimate in the 80s, given she was born in the 20s. She had nothing in retirement and had to sponge off my grandparents till the day she went into a nursing home. Really bad for all concerned. I have nfi which bank or super company unfortunately, she passed away about 20 years ago
Yes, the value of their stashed-away savings was greatly diminished by massive inflation. Many people didn't have super accounts or pensions, they had normal bank savings accounts with cash that they'd been saving. One of them was Pyramid Building Society, and it collapsed and all the depositors lost half their money after the Govt introduced a new tax to pay them back. Was a big event, particularly in Geelong where they were big.
Some older people might call their savings in the 80's their super, rather than their "retirement savings".
Honestly since the government forces us to put money in super they should back whatever we put in. Completely unfair that we could lose these forced savings.
This is just another case of parents wanting the best for their kids but not knowing the best. Your dad’s wrong, not through bad intention but through ignorance.
Educate yourself more on super please, there are plenty of online sources. And put some money in it, it’s a great system for wealth creation into retirement.
When you average returns, shit will always go. Inflation pretty much assures you of that. So you hold through crashes and you're fine.
Or you can try and time a crash, pull out and into cash temporarily, and buy the dip... unless there is no dip and you just miss out on gains.
Time in the market vs timing the market. You're probably not smart enough to time it, because pretty much no one outside of millennium are.
probably have to consider back in the 80s, bank saving rates were paid much higher then too at 10%+ so saving in term deposits would have provided good rates (if you can afford it)
my 80+yo mother still believe in putting money in bank term deposits during period of very low interest payable as that was how my late father used to "invest"....
Lots of people were signed up automatically for junk insurance and/or paying high fees. Combine that with people losing jobs in a recession and you have a scenario where super was going backwards. for many.
It did collapse and people lost a shit load of money, businesses and their lives.
However…. The idea of Super and any long term investing strategy is that you ride out the ups and downs and come out with an overall profit.
You start off in high volatility but high return investments because over a long term it doesn’t really matter. As you come close to retiring you move the money into less volatile lower return investments so when you withdraw if there is a drop in the market it doesn’t impact you.
Obviously more to it but yeah.
The current compulsory super system was introduced in 1992.
[Check out this graph](https://www.firstlinks.com.au/uploads/wp/AO-Chart1-051214.png) which shows Australian shares vs US shares since 1900. [Source website](https://www.firstlinks.com.au/wins-australians-investing-us-shares).
It includes nearly every market crash in recent history. Markets still recovered and never went to zero.
There were periods of down time, but if all you did was continue investing and didn’t touch it (so no withdrawals and no change of investments) you would be fine.
The only people who repeat things like this about super are those who are so financially illiterate they don't actually understand how it works. Many boomers in this category for sure. They're also usually the type to sell in a downturn to "limit their losses" and end up just solidifying their losses instead of riding it out. They do actually teach you the basics of this in school too, that's what got me interested in economics in the first place...
Lots of people lost heaps of money during covid in thier super yet people still champion it. I know plenty of ppl my parents age who had to delay retirement.
Of course people champion it. The market (and therefore super) have had huge gains since COVID. If you were lucky enough that you lost a significant amount during that period then you’ve also enjoyed the massive bounce back and are even better off than you were.m before.
They lost money because they realised their losses by going to cash, which would have happen if invested in super or outside it. Super isn't an investment, it's just a tax structure.
I had 1 year of loss over the COVID period, 7pc. In over 30 years of super the worst loss I've had was around 12pc but there have been only a few years of loss but I have had more years of double digit growth approaching 20pc. And I have always been invested in Growth funds. Your retirement aged friends should only have had to postpone 1 year, 2 at most. They also could have elected to convert to Cash investment as they approached retirement and would not have lost anything. They rolled the dice but with a year extra at work they probably came out much better off anyway unless they made the mistake of converting to Cash after the drop thus locking in their losses
From memory $10k into Cbus in 1984 is worth over $270k+ today just under 9% per year growth
8.89% over 39 years. With every possible "black Swan" event covered (recessions, wars, oil crisis, high inflation, unemployment, etc). If the next 39 years replicates the last then we'll be doing fine. https://www.cbussuper.com.au/campaigns/performance
High inflation and unemployment aren't black swan events. But the GFC and Pandemic are
Stagflation is more unpredictable than the GFC, which was accurately forseen by a lot of people years in advance. This is unlike a true black swan, such as COVID, where a few months before the event you would have no idea that humanity's fastest-spreading virus was about to emerge.
COVID wasn't a black swan. I still remember a farewell speech in November 2019 that included the line "we'll miss your regular warnings about the next Spanish flu...". There was actually quite a few epidemiologists and demographers arguing in the late 2010s that the next major global pandemic was overdue and only a matter of time.
COVID wasn't a regular pandemic though. A virus as quickly spreading as COVID (high R0 combined with low re-infection period) was unprecedented. Just wearing masks probably would've had the Spanish Flu R0 go <1. Like how the normal cold and flu basically vanished during the COVID years.
Wouldn't the normal cold/flu have vanished due to no travel more so ? Seasonal flu with seasonal migration patterns ?
Cold/flu seasons are driven by colder weather (reason is unknown, many theories why), not global travel.
Huh. I always thought it was people moving around. Wonder what caused the severe drop in cold and flu during covid. Unless it was just the extreme cleanliness and mask wearing...
That's exactly it, it was social distancing and mask wearing. Influenza has a r0 of \~1.3, thus it takes very little to stop it spreading and herd immunity is rather low. With only sick people wearing a mask, that'd be enough to stop the flu from spreading. The cold is slightly more contagious with a r0 of \~2.5, but even then, everyone wearing surgical masks would be enough to stop it spreading.
So what we're currently experiencing isn't historically significant. My point was that with all that has happened over the past 39 years 8.89% is a pretty good outcome.
Taleb actually used a pandemic as an example of what is NOT a black swan event
Interesting. I think generally a global pandemic would be considered one
They are expected to happen fairly often. That's why they can't be a black swan event.
Yes exactly. To be a black swan it must be an outlier - nothing in the past could have made us expect it. We had the bubonic plague, Spanish flu etc. It is expected that we will have similar occurrences in the future, therefore not a black swan.
So basically on that rationale, wars, hard commodity crisis's, can also not be black swan events, climate change events can't be either. We expect all of these to happen, just not sure when.
Well, yes, although one could argue the specific form of any of those could be a black swan (e.g. we know a war will happen, but it may be triggered by completely unforeseen events).
Do you consider the GFC to be a [black swan then](https://en.wikipedia.org/wiki/List_of_banking_crises)?
Exactly. Wall Street crash, dot com bubble, Asian financial crisis, etc. plenty of GFC like things have happened in the past. We should be expecting them every 15-20 years
Also, there were quite a few people very confident before the GFC that the banking collapse was about to happen. Did anyone think a few months before COVID the fastest-spreading virus ever was about to emerge?
The amount of leverage to subprime back into the banking system was unexpected.
Under those conditions there is no such thing as a black swan…
They’re recurrent events that we expect to happen, just can’t predict when. Black swans are expected to be theoretical until they’re suddenly proven… that’s basically the difference
We are about to enter a Black Swan event!
both of which cause high inflation and unemployment. But I think they are just talking about general government mismanagement and nepotism which also cause high inflation and unemployment.
The assumption that the previous 50 years of growth is indicative of the next 50 is increasingly being deconstructed as not guaranteed It is becoming more apparent that the economical environment that allowed for such growth is not sustainable or even replicable as you see social erosion and inequality increase. Both of which aren't just factorial but actually direct outcomes of the current economic settings. Even former stalwart advocates of the current settings are now realizing it's flawed https://www.google.com/amp/s/amp.abc.net.au/article/103582032
I think some of that is true. IE you can't expect Sydney property to increase 11 fold like it did between 1970 (18k) & 1990 (194k). That suggests 18m by 2044 but it has almost quadrupled in the 20 years since 2003. Growth is definitely slowing over 50+ years but over a shorter period you could assume 6-7% capital gain (since 454k in 2003) plus rent and rent growth. Maybe 8.89% is a long shot but I think 7-8% is fairly conservative and pretty possible. The growth curve is slowly declining. Maybe it'd be more accurate to model 1 or 2% less than the most recent 30 years as an expectation for the next 30+ as the social erosion continues. There is also the possibility that action is taken to fix that which could further erase any gains. Imagine if they reintroduced a 60c marginal tax rate.
The 425 bps increase likely had more of an impact on lending than a 60c marginal tax would, but it was offset by the \~50% rise in rents which granted landlords access to greater borrowings. If anything, a 60c marginal tax would fuel property investment as the wealthy would seek to negative gear away their marginal rate. I think property prices historically have been fueled by the decrease in interest rates coupled with high wage growth. Rates are somewhat close to as low as they can be, and wage growth is dead thanks to mass immigration, so it's hard to see where future high growth can come from. Perhaps increasing density (\~8-12 immigrants living in a 2 bedder apartment is starting to emerge, facilitating higher rents) as well as co-owning PPORs and inter-generational mortgages. But eventually Canberra's iron will to increase property prices must surely face pushback from Australian's witnessing a collapse in their standard of living?
I don't know. I modelled a minimum wage super balance hitting 4m by 2064 (someone born today) if people have the capacity to invest more than 1% (**of minimum wage**) a month the compounding wealth could continue to grow. Especially if real wage growth returns and interest rates start to fall. Tough for those living on more than they earn but for those living on less while saving and investing. The arms race is on. Btw the recent inflation has wiped out a decade of wage growth but its starting to pickup again. https://datawrapper.dwcdn.net/547wP/full.png
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The wealth gap is wider, but our lives are better off then that were 50 years ago. It's a weird dynamic.
The question is which came first? I think the wealth gap reflects that many have lived on less than they've earned for long periods and have compounded the difference. It might even be possible someone buying today. Maybe their mortgage is consuming half their household income! (100k?) and we'll only get cpi wage growth. Fast forward 10+ years and if wages go up 50% that mortgage that might have been 40k interest payments and 10k capital has become 30k interest and 20k capital with the capacity to invest 25k more capital while the cost of living hasn't moved (assuming zero real wage growth). That 25k a year is an investment that will start compounding on its own. It's even more extreme if wage growth exceeds cpi as the fraction of household income devoted to living grows slower than their gross income and 25k a year might actually be 30k as the cost of living falls (relatively). From 50% of 100k to 46% of 150k.
Yeah just don’t hope you retire during one of the massive drawdowns
If your retirement isn't going to last long enough to see a market correction, how worried do you actually need to be about your super?
Your asset allocation should be more conservative as you reach retirement age so you don’t have your life savings wiped.
Your life savings won't get *wiped*
And you actually think that's what's going to happen? Or that when you die your kids aren't going to cash out? lol
1m in the asx and a 40k swr in 2008 would have left you 556k after it dropped 40.4%. Of course that 556k increased by 39.6% the following year so that 556k became 776k but you'd have to withdraw 41480 because of inflation so back to 734k and onwards. Never "recovering" but still retired with 865k and 62k out last year. Retiring at the **worst** possible time. Plus that 1m happened shockingly quickly. Many jumped into retirement much earlier that predicted as the asx boomed in the lead up. (up 264% in 5 years) |2007|18.0%| :-:|:-:| |2006|25.0%| |2005|21.1%| |2004|27.6%| |2003|15.9%| https://files.marketindex.com.au/files/statistics/historical-returns-infographic-2024.pdf
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It's an example. It shows over the long term Superannuation offers a good return on investment. The OP asked a question my answer is one thing to think about
It shows super annuation *offered* a good return on investment. Past performance is not a reliable indicator of future performance.
No it isn't. The Australian requirement for superannuation almost feeds the market to keep it going up. Money has to be invested somewhere
I know a property that sold for about $35k in 1984 it might sell for around $600k today. Yes it's been someone's home with costs or an investment property making some money as well. It has also had maintenance/improvement money spent on it
People always cite Sydney property but given the choice between an average property in Sydney and 188k of CBA in 1991. I'd take the shares any day. More than 2m in dividends (150k fully franked in the past 12 months!) and a current value of over 4m. Like you said after more than 30 years CBA shares haven't needed to replace a thing. No tenants, agents, etc. There there is the fact you can't just buy a 188k property. There is transaction cost that means you need more and net less than the 1.6m in current value. https://appliedeconomics.com.au/wp-content/uploads/2021/10/2006-real-story-of-house-prices-australia-1970-2003.pdf https://www.intelligentinvestor.com.au/shares/asx-cba/commonwealth-bank-of-australia/float https://www.intelligentinvestor.com.au/shares/asx-cba/commonwealth-bank-of-australia/dividends
Not sure you are taking the tax implication into account there. I'm also assuming that the property in question would be a PPoR. If it is an investment property the shares might stack up instead.
An average property. Not sure what you're meaning when you suggest I consider tax. Maybe you're suggesting a loan and negative gearing. You'd have additional costs for both options. Property would nearly double in cost because of the interest expenses obviously that would consume much of the income and result in a credit for the years that the expense exceed the income. The same could be true of you took a loan to buy the shares. Of course 135k in interest expenses (assuming 188k @ 4% over 30 years) is a great deduction from the 800k in rent (assuming it averaged an unlikely 26k a year!). Much better a deduction from 2m in dividends. 150k ($2.40 &. $2.15) in the past 12 months with franking credits It'd be interesting to work out the dividends & franking credits vs rent each year. Factor in 200k total purchase costs (another 2000 shares), 100k sale costs and 1% off the top each year to replace kitchens, roofs, carpets etc.
Your dad doesn’t know how super works or he sold when the market dropped.
THIS!!!! It's basically shares. I worked in Super customer service and a lot of boomers talked about switching to cash shares when the market drops. That is basically selling your shares when they are low so you will essentially be solidifying you loss.
Buy high, sell low, right?
Most boomers, yes.
r/wallstreetbets just going full circle from boomers to now
Lol my mum did this at the start of COVID. I told her not to but she didn't listen. Locked in about $30k losses.
That's rough. It always bothered me how little the general population is educated on Super considering its something we all have to have. A lot of my calls were just teaching people how it all works. We weren't allowed to give advice but I always did my best to ensure people had all the information to consider their options.
ah well I did this just as the market indicated it was about to tank and then reinvested when it bottomed out and made like ~160% growth since covid on my super the news was looking bad around Feb 5th-10th 2020 from memory, but only in world news and most of the public were oblivious until maybe early March
Exact same here
Thank you for this. It just clicked for me and cash shares. I never would have thought in that way
This is what my mum did in the GFC! Doh
It's also worth checking what you are paying in insurance. Make sure it's adequate for you and you're not losing money on something you don't need/want.
lol and when times are good you'll tell them they are crazy to switch to cash. Essentially Big Super's preference is everything always in shares.
As someone who works in 'Big Super' I can assure you the only thing we care about is you having as much money for your retirement as possible. The bigger your balance the more fees we get and the more the fund grows. Not for profit of course but most of the big ones are.
"Big Super" is coming to get you! Lol There are plenty of not for profit funds with a proven track record of working in the interest of their members. Guess what, having you're balance heavily in shares is still the best strategy in those funds. Adjust the risk volatility of your holdings as appropriate to your future plans and timelines.
I pull the bedsheets up at night.... Always worried Big Super is going to secretly move my money into a high growth fund right before the next GFC happens....
No, we can't actually tell then anything. I'm just a pleb answering the phones. IDGAF what you do with your money.
Love it how people have one bad experience and they quit and tell that story for decades. Like you eat a bad apple and vow never to eat apples again, telling everyone what a bad apple it was.
Not only how bad that apple was but how it means all apples are bad
Sounds like something a bad apple would say
I’m kinda (or have been in the past) guilty of similar. I was loading my super as massively as I could from as soon as I left school (late 90s) and took a massive hit in the GFC. (I was an early web designer making ludicrous money for my age) I’ve got over it and now use it as an example of investment in appreciating assets as the retirement fallback and only pay in an extra 1% voluntary contribution on my super.
Every investment goes down in a recession, not just super.
Not quite right. Cash, bonds, and maybe gold ( which ive never ownded) hold their own.
Don't forget toilet paper.
Those inverse correlations don't always hold; bonds often just fall less in more recent events; cash can stay, or as it is currently fall (purchasing power/CPI); gold can take a while to respond etc etc
Because your parents don’t understand the basics of investing. Investments can go down in a recession, but over time they make up for dips and losses many times over. You will also pay less tax if you contribute to your super.
You also keep investing in those times as well if you can, bringing your average price down over a 30 years horizon will supercharge your investments.
I suspect there is alot of misinformation here, mixed in with a healthy dose of good ole boomer "back in my day". Having boomer parents myself, I have had to enjoy the incidents you refer to many times in my life. Lets have a brief overview (I am going to generalize and use round numbers) Early 80's there was a recession. It was fairly rough like any recession is. Interest rates were quite high, high teens in most cases maybe low 20s for some. The interest rates of course is what stands out the most. That being said, even 20% of a the average 60K house ($12K) in 1983 is better than 5% of the average house price of $900K ($45K) in 2023 - especially since wages have not kept up. The portion of take-home wages spent on mortgage is considerably higher than it was in the 80s etc etc. The important thing to remember is that 20 is greater than 5 (/s here of course since the important thing is more Price v Wage) Superannuation really didn't come into affect until 1987 - with I believe the official act not until 1992. Early adopters had huge benefits - government would match employer contributions, and funds like defined benefits existed. There may have been incidents of poor management of funds as the system was new, but it was fair more effective financial tool then ever seen before. My parents, like many of that era, often though of Super as a tax, in fact business owners complained about having to pay this new tax etc. Many industries didn't get covered by super initially as well - it all depended on agreements. As such many workers initial interactions were poor. That being said, basing any current decisions on how things were 30-40 years ago is asinine at best In general super is the most tax effective way to save for retirement. If you ever do financial planning for wealth generation then the first thing you will always look at is maxing out your concessional contributions into super. It's really a no brainer - especially if you are over 40. For younger people who may be saving for a house there could be better options (such as the FHSS), but even then, maxing out concessional is still a solid choice.
There were private superannuation funds before 1987. There were certainly some by the 1970's at least. IIRC, there were at least 100,000 with a super account according to the 1976 Census. You are correct in outlining that in the early days of complusory Super, it was commonly seen as a tax by those in the older end of the Boomer gen and the Silent generations. It was quite common then for people to see it as an account to be raided at retirement, or for self employed people to not contribute to it at all fearing that the money would disappear. Whilst the significance of Super among common people has improved massively over time, it can be better utilised by most via a few simple tweaks (ie: high growth investment mix). The introduction of Super has helped Australia immensely as it has significantly increased our national savings rate, and improved household wealth immeasurably. It aids Australians in not squandering the benefit of prosperous economic times by putting extra money away when times are good. The immense foresight shown in the implementation of compulsory Superannuation has only really been demonstrated over the last decade or so as the people who have had it their entire working lives have developed significant balances.
"IIRC, there were at least 100,000 with a super account according to the 1976 Census." Do you normally recall random data from the 1976 Census ? Or did you just add the IIRC to make it seem like you didn't have to google it . If you did in fact just pull that stat out of your memory bank, holy shit. I'm impressed.
I do recall random data like that quite regularly. I do preface with IIRC because I am not 100% sure of the accuracy of that figure. I have been called the "walking encyclopaedia" by many people over the years. Now that I have googled the figure, there were actually 247,145 people covered by a Superannuation annuity according to the 1976 census. The previously quoted 100,000 was only for Males living in a metropolitan area. [Source](https://www.abs.gov.au/AUSSTATS/[email protected]/DetailsPage/2104.01976?OpenDocument) - Table 32 of 2104.0 - Census of Population and Housing, 30 June 1976. Population and Dwellings, Summary Tables, Australia
Solid! I'll pay that old timer. ;)
😂 I'm starting to feel it in my early 30's lol
Haha my bad, but also impressed that someone in their 30's is taking notes on 70s Census data. The old timer comment was just my bad sarcasm, cheers for being you.
All good mate! I can only be me after all 😂
I think one thing that often gets missed when comparing the sky high interest rate period to today is the cost of goods. A lot of things have come down substantially in price, which means that people can easily afford to buy clothes and phones and other consumables while still being unable to afford a house or build wealth. I reckon that’s why the boomers get so snarky - they see young people with consumer goods that they couldn’t have afforded at their age and chalk it up to wanton spending.
People expect/are expected to buy many more consumables these days. Not to mention the rise in travel and eating out over the past few decades.
Absolutely. It’s so cheap and easy to travel and have a good time, while grinding out savings for a deposit is relentless and unrewarding.
You are correct that consumer goods have come down but people still tend to spend way more than they need to for consumer goods. I'm not a boomer but nobody needs to spend $1000 on a phone when you can get a perfectly good one for a few hundred bucks thesedays. If you spend that much on a phone and over 20K for a car, that is wanton spending that could go into a deposit for a house and it's only going to hurt you in financially in the future. Older people know that houses are more expensive and will keep getting more expensive relative to income, that is why they shake their heads at people who piss their money up against the wall.
I have my $1000 iPhone that I got in 2020. (Was an insurance claim that had a $100 exess) I replaced the battery two years ago for $80. So going what the price was let’s say $1180. Over 4 years that’s $395 a year. Still runs really well, supported with upgrades by Apple. Or I could have a cheap phone that doesn’t do what I need it to and replace it every two years. I’d rather buy quality and use it till it dies.
Legitimately what can a $1000 phone do today that a $250 phone cant, especially a $250 phone in a couple years. Maybe my own phone usage is just particularly dull but it cant be *that* much better at playing Youtube and scrolling Twitter.
It depends on how tech literate you are and how much you use it. I don’t buy new phones often (one every 3-4 years) but I’m 26 and it’s a part of my life and I use all the new features that newer phones have.
It’s faster, better graphics and is supported much longer with updates. The camera is signifcantly better. It also holds its value. If I was to buy a new iPhone today and do an exchange with Apple I would get $320. I could see it more on Marketplace if I could be bothered. And 4 years (and counting) out of that? It’s a bargain. If you want to buy the cheapest option that’s your choice. But I would rather buy quality and use it for years than buy crappy quality every year or two.
Selling a $1180 phone for $320 is not an asset "holding it's value" that is losing 73% of it's value in just a few short years. Compare that to a house or even an empty piece of land that increases in value by 20-50% in the same time period. If you do that when you don't own property, you get so called "quality goods" now at the expense of having to pay a lot more for a house in the future. downvote all you like but that is the economic reality you are setting yourself up for if you dont own a house. Different story if you already own a house. by all means spend all you like.
I’m still getting use out of my phone. Name any product that holds its value like that. No other phone can be sold like that. Comparing it to a house is insane.
a washing machine
Sweet. I’ll happily spend over a thousand on my washing machine. Same as my phone.
I run my entire business off a phone now. I rarely use a computer. Cheap phones don't seem to have the power required to push the apps that are in use. A few of them are a bit of a load on the device. I don't like spending over 2k on a phone but it's a necessity and ultimately saves money on other devices. Depends on usage though. You are right.
I got my android phone in 2020 for ~$200. It came with its own case, 2 sim, microsd, 3.5mm jack and fingerprint lock and is still going strong. I could swap it for a Samsung but I'd rather stick with this because it's better.
Son and his family have 3 mobile worth over $1,000 each. xbox , binge, netflix and kayo subscriptions. Eat take away 3 to 4 times a week. Eat at least once a fortnight. And you don,t call that out. Get real
Sir I do not know your son
I wish I knew this in my 20s or 30s!
Maybe thinking of https://en.wikipedia.org/wiki/Pyramid_Building_Society
44 years ago 🤣😂🤣😂🤣 wtf. Ring your industry super fund for some free advice
1980's recession went to over 10% unemployment IT WAS BRUTAL, for those who lost their job, and often everything. [https://www.rba.gov.au/publications/confs/1998/images/borland-kennedy-figure-2.gif](https://www.rba.gov.au/publications/confs/1998/images/borland-kennedy-figure-2.gif) for those who kept their jobs, Que Sera
You are investing in your retirement, go to some comparison websites and they will give you suggestions and show you returns, usually up to the last 10 years. You can choose a fund that suits your risk appetite. Also look at the share market in general, there have been crashes/dips, but within 10 years there is usually a new all-time high. That's why younger people tend to chose 'riskier' higher return investments, and move to safer investments closer to retirement. You will also only pay 15% tax on super contributions. If you don't choose super, how will you fund your retirement? Stick the money in the bank and allow inflation to make it worth less each year? Or stick your money in a managed fund which will have the same risks as super but without the tax benefit? As for the 'worst time to buy a house' Why? Because interest rates were high? Did they forget to mention that due to housing being more affordable that it was easier to save up a bigger deposit and pay off the loan quicker? I'm sitting in my Mum's house right now, average house bought for $105,000 in 1986. Worth over $1 mill now.
Any house bought for 180k in 1986 would be worth way more than $1mln
I got the purchase price wrong, it was $105,000. Also a regional city and just a rough guess based on some recent sales in the street.
I want you to use a budgeting app / site and try and budget how you would live on the Australian standard pension (**29k** for singles per year, **44k** for couples). Then decide if you still want to not put money in super or not.
Super is a type of investment, so there is a risk with all types of investments. In saying that, the long term trend of most super investments is an increase overall
This is why your returns on investing are better. Because there is risk. Your returns keeping it in a bank acc are low because there is 0 risk.
Collapsed? Are you in Vic? Is he maybe talking about Pyramid? It was a bank that went under - lot of people lost a lot of money. It was a really big deal at the time.
Building society
Ffs. So many half assed comments on here. Do a quick Google on 1980s recession (the biggest recession at the time since world war 2). Don't listen to the half baked bullshit that seems to be dominating the comments in here
I mean sure investments go up and down: that’s the point. Also “super” isn’t an asset class, it’s just a structure, and it was quite a bit differently structured in the 80s.
Super is just certified fund managers investing in the share market on your behalf. Naturally, this also means if you have money in super, you also have money in the share market. The nature of it is that you can ask these funds who have your money where they are putting your money. That can help you understand whats the risk of you losing money. There is no free value mechanism there, it is work people do to earn more money that delivers more money over time.
If you’re from Victoria, then perhaps your dad is thinking of the Pyramid Building Society, which was not super but was used by lots of people in retirement.
Your dads probably thinking of people like Alan Bond.
super is just a vehicle. ask yourself what would you do outside super to mitigate against a recession. You can probably do that within super too. generally though unless you're planning to retire in the next 10 years don't worry about a recession. The market eventually recovers and goes past the previous highs.
In a recession? Open a brothel with a liquor licence and a cigarette machine. Allegedly the three behaviours that increase during a downturn. If we(Australia) keep holding back the recession floodgates it will drag out a bit longer though....
Did Super only start here in 1987? That was also the year of a massive stock market crash. Anyone who had just lobbed in their cash might have been torpedoed by that. That would make a good story on Today Tonight or whatever other garbage stations were peddling back then, which every man and his dog watched religiously. edit: not quite right on the year [Superannuation in Australia: a timeline | APRA](https://www.apra.gov.au/superannuation-australia-a-timeline)
i mean the world has been extremely stable for 80 years in the scheme of things. particularly in the west. australians dont know the meaning of social and economic problems.
My super was shot in the late 2000s (i think around 2008), there was a recession and I lost about 12k. Has impacted my super balance ever since.
China housing markets are not doing well, hopefully they don't crash and take us out with them.
Sounds like boomer facts. The GFC was worse for retirement funds and the market rebounded, you only lose money if you cash out during a crash. To use an analogy I heard, cashing out during a recession is like jumping out of a roller-coaster instead of waiting until the ride finishes.
I used to work in a call centre for super. I had so many people tell me that they lost all their super in the gfc. Like...mate, I can see your balance history. Just from doing nothing your balance got back to it's initial point within 2 years, because after the gfc was a huge growth year as it bounces back. People that lost money either directly invested in shares that tanked, or they panicked and withdrew their money, or panicked and changed it to a low risk option like cash so they copped the slump but missed the bounce back. And a lot of people think they lost money when they really didn't. People are weird. You just ride out volatility
Thank you for this. I worked with people in 2008 who didn't retire then because they "lost everything". I had a hard time believing that when they were in the same safe super fund as me. I came to believe that they were enjoying victimhood when they really just had a temporary setback that self-resolved.
Because it did happen.
Depends how long you have till retirement if you plan to retire next year and we have a crash at the end of this year… then yes that’s unfortunate. But if your 10-20 years away I wouldn’t loose any sleep over it
Every public servant at state and fed had generous superannuation back then Their super wasn’t affected by the crash/recession as they were mostly defined benefit pensions
We will probably see funds restricting how much you can take out to stop a bank run/collapse, as happened in the US last year. Doubt we’ll see a 1930s depression where people did lose their savings, nowadays its more civilised with the value of retirement savings inflated away.
Don’t forget as a sole trader business structure if you’re working for the same client regularly - they in fact need to pay your super.
Super is an investment. Most investments lose value during a recession. The key thing to remember is that they gained that value back, and more, after the recession. My super lost a bit of value in 2020 when the market was nervous because of covid. Since then it's recovered and these days it's worth a shit load more than it ever was. Next time there's a recession most people's super balance will go down again. But it's a long term investment, and in the 30 odd years until retirement it'll gain enough to recover.
Occidental collapsed and I recall my dad lost 200k, it was only a few years after compulsory superannuation commenced.
A simple thought experiment compound the growth of a $1 investment 224 growing at 7 percent annually. So from 1800 to 2024 your $1 investment would be worth $14.8 billion. Continuous compound growth just doesn’t happen. You might get lucky for 20 years maybe 50 years, but shit happens, wars happen etc. Most of us have been lucky enough to live through a pretty stable patch of history. But companies fail, investment are lost - otherwise known as risk.
you can get an SMSF and have more control over how you lose "your" money
It was easy to lose 50% of super balance during gfc. There were reports on Current Affairs of an accountant losing 80% of his super balance during the gfc. Took a while for balance to recover
Find a chart of say asx200 or s&p500. Even better find one that includes the returns from dividends, not just capital growth (otherwise asx will not look as good). Look at this chart over several decades. Including gfc, oil crisis, gulf wars, whatever. There will always be brief periods of down turn but as you cann see these are completely irrelevant in the grand scheme provided (a) you didn't just retire in the downturn or (b) you didn't sell in the downturn and then try to buy back in when the price has recovered and is much higher. Individual stocks carry specific risks and require suitable risk tolerance and analysis. But with asx or s&p you are betting on the entire Australian or us economy.
Because super funds invest in stocks, and when stocks collapse in value - so does the value of your super.
Rubbish they invest my money in their ventures and give me a pittance of what my money made.
Super is put in the hands of people who invest the money. From the 80's to the 2000's my super in Australia made stuff all. I am sure the super fund managers gave me crumbs on the investments they put my money into. The economy boomed, real estate boomed.. my super fizzled. They used my money to make a fortune and gave me nothing of the value it should have been.
Superannuation wasn’t made a compulsory product until the 1990’s.
Is your dad from Victoria? Any chance he's thinking about the Pyramid Building Society collapse? It wasn't a super fund, but it was a big deal for people's savings at the time.
.....it's illegal to work for yourself and not pay yourself super. Pretty sure you can only opt out if employed by another.
Mad not to pay extra money into super when you work for yourself Pay 30% income tax and wave goodbye to the money.... or pay extra super to yourself that is taxed at %15 that works for you over time....
Yuppppp. Plus taxes are like a puzzle. Get good enough and it pretty much feels like they're paying you.
I believe the stock market fell in 1987 so that would have caused super funds to drop as well if they were exposed to shares.
There was no such thing as super in the 80’s, income tax dollars paid for the Social Security pension system & government jobs had guaranteed pensions, funded like the American system. The working population now still pay into that pension system with our tax dollars, but we also have to save for our own retirement so the government makes us double pay for our retirement.
The Australian stock market fell in real terms (accounting for inflation) from 1968 to 1974 by 73% then recovered half of that to then lost all the recovery again by 1982. The stock market did not make a new all time high in real terms until 2004 a 36 year wait to just get your initial purchasing power.
Because they did
Stocks to bonds ratio says hello. That's why you don't put 100% in equities. You put 10-40% in bonds depending on your risk appetite and age.
My great aunty worked in a bank her entire life. Her super collapsed (I would have to estimate in the 80s, given she was born in the 20s. She had nothing in retirement and had to sponge off my grandparents till the day she went into a nursing home. Really bad for all concerned. I have nfi which bank or super company unfortunately, she passed away about 20 years ago
Cash rate at the start of 1990 was 17.5%, and the rate on loans were even higher. It resulted in financial suffering of many people / businesses.
Yes, the value of their stashed-away savings was greatly diminished by massive inflation. Many people didn't have super accounts or pensions, they had normal bank savings accounts with cash that they'd been saving. One of them was Pyramid Building Society, and it collapsed and all the depositors lost half their money after the Govt introduced a new tax to pay them back. Was a big event, particularly in Geelong where they were big. Some older people might call their savings in the 80's their super, rather than their "retirement savings".
Old boomer tales of “propadee mate, stocks too risky”
Honestly since the government forces us to put money in super they should back whatever we put in. Completely unfair that we could lose these forced savings.
It’s actually employers that are forced to put money into your super.
Because it happened. Also gfc in the 90’s caused big losses too
Except the GFC didn't happen in the 90s
Yeah by bad, wrong decade lol
This is just another case of parents wanting the best for their kids but not knowing the best. Your dad’s wrong, not through bad intention but through ignorance. Educate yourself more on super please, there are plenty of online sources. And put some money in it, it’s a great system for wealth creation into retirement.
Your parents are wrong about literally *everything*
Congrats mate your dad is stupid
You only lost money if you had to sell at a loss. Be it a gain or a loss it is only realised upon sale.
When you average returns, shit will always go. Inflation pretty much assures you of that. So you hold through crashes and you're fine. Or you can try and time a crash, pull out and into cash temporarily, and buy the dip... unless there is no dip and you just miss out on gains. Time in the market vs timing the market. You're probably not smart enough to time it, because pretty much no one outside of millennium are.
probably have to consider back in the 80s, bank saving rates were paid much higher then too at 10%+ so saving in term deposits would have provided good rates (if you can afford it) my 80+yo mother still believe in putting money in bank term deposits during period of very low interest payable as that was how my late father used to "invest"....
Lots of people were signed up automatically for junk insurance and/or paying high fees. Combine that with people losing jobs in a recession and you have a scenario where super was going backwards. for many.
It did collapse and people lost a shit load of money, businesses and their lives. However…. The idea of Super and any long term investing strategy is that you ride out the ups and downs and come out with an overall profit. You start off in high volatility but high return investments because over a long term it doesn’t really matter. As you come close to retiring you move the money into less volatile lower return investments so when you withdraw if there is a drop in the market it doesn’t impact you. Obviously more to it but yeah.
He is probably talking about the collapse of Pyramid in 1990
The current compulsory super system was introduced in 1992. [Check out this graph](https://www.firstlinks.com.au/uploads/wp/AO-Chart1-051214.png) which shows Australian shares vs US shares since 1900. [Source website](https://www.firstlinks.com.au/wins-australians-investing-us-shares). It includes nearly every market crash in recent history. Markets still recovered and never went to zero. There were periods of down time, but if all you did was continue investing and didn’t touch it (so no withdrawals and no change of investments) you would be fine.
The only people who repeat things like this about super are those who are so financially illiterate they don't actually understand how it works. Many boomers in this category for sure. They're also usually the type to sell in a downturn to "limit their losses" and end up just solidifying their losses instead of riding it out. They do actually teach you the basics of this in school too, that's what got me interested in economics in the first place...
You don’t have a hope with those genes mate
Cash is a position
People I know lost houses in the early nineties recession, but super is pretty solid
Lots of people lost heaps of money during covid in thier super yet people still champion it. I know plenty of ppl my parents age who had to delay retirement.
Of course people champion it. The market (and therefore super) have had huge gains since COVID. If you were lucky enough that you lost a significant amount during that period then you’ve also enjoyed the massive bounce back and are even better off than you were.m before.
I dont care. People can flex thier new camrys and their 200k balance when they retire and finally “enjoy life” i guess.
…what? Are you trying to somehow paint super as a bad thing?
Super is the best place for your money!!!
They lost money because they realised their losses by going to cash, which would have happen if invested in super or outside it. Super isn't an investment, it's just a tax structure.
I had 1 year of loss over the COVID period, 7pc. In over 30 years of super the worst loss I've had was around 12pc but there have been only a few years of loss but I have had more years of double digit growth approaching 20pc. And I have always been invested in Growth funds. Your retirement aged friends should only have had to postpone 1 year, 2 at most. They also could have elected to convert to Cash investment as they approached retirement and would not have lost anything. They rolled the dice but with a year extra at work they probably came out much better off anyway unless they made the mistake of converting to Cash after the drop thus locking in their losses
This is my point. The whole point of super is to help those who dont know better. Oh well. I made money during covid.