AI is wrong about your retirement modelling (and 4 other June 30 traps)

本站添加: 2026-05-28

[00:00:00]I've had scores of times where someone has come and [music] said, "Hey, I've let AI do my modeling and it's wrong."

[00:00:04]Please, please, please double check, triple check the numbers. Don't [music] underestimate AI's propensity to get these numbers wrong. And especially if you're relying on them and saying, "Happy days. We're good." That can create a lot of problems downstream. I'm hearing a lot of investors asking the same question. Where can I find reliable income in this market without taking equity market risk? That's where Term Plus comes in. It's designed to maintain a steady buffer over the RBA cash rate, providing regular distributions and somewhat of a cushion and diversification on your passive income.

[00:00:35]To find out more about Templus, simply search for Turn Plus or head to termplus.com.au where you can find the PDS and TMD. And don't forget to tell them Ras sent you.

[00:00:45]Hello Australia. Welcome back to your retirement podcast. I'm here with fellow friend, superstar, financial adviser, good guy, father Drew Meredith. Hello, Mattach. Good to have you back here.

[00:00:58]>> You can add assistant coach for that as well. It's good to be back as always.

[00:01:01]Exciting.

[00:01:02]>> Trying to stay optimistic despite everything that's happening on the around the world. But uh optimistic and cautiously optimistic, let's call it. Uh things things have been good. Lots happening.

[00:01:13]>> Yeah, very good. Well, mate, life's uh life's good at my end, but how are things for you? Yeah, couldn't uh I can't complain. Um every I mean markets are taking care of themselves. Uh the only thing we got to worry about here in Australia is inflation. I think so. Uh some as somehow and we don't want to talk political but decades of policy have got us to this point where you know they're talking about cutting interest rates in the US. The economy is resilient. There's massive growth coming from, you know, data center buildouts and and the market over there hitting alltime highs and over here we don't have enough fuel or potentially add blue, who knows next to fuel up by cars.

[00:01:51]I've never seen less cars on the street in Melbourne. I don't know. I think I assume that's a petrol price thing.

[00:01:55]>> Um that that's that's the only thing on my mind. Uh that we're just bearing the brunt of 20 years of policy. Not saying it's good or bad policy, but uh and we seem to be some of the worst. I mean, other than the people who obviously live in the Middle East and or in Iran obviously and the soldiers there, but we seem to be one of the most worst economically impacted from that perspective.

[00:02:16]>> Uhhuh. Yeah. Agreed. Um the to add to that though, and to be fair to um I'm I'm happy to be critical about about our uh a number of our policies. You know, I'm pretty opinionated about a bit about a bit of this stuff. Uh having said that um I think one of the big problems too is like the that we just we can't provide enough oil like we're a net importer a significant net importer of Brent crude. Even the US for example they you know they have Brent crude that they can rely on. Um like you think I've been looking more recently at uh other economies and how they've been affected and um the one that stands out to me is New Zealand. New Zealand's even worse than Australia economically speaking at the moment for a whole host of reasons, but one of the biggest ones is that the cost of Brent crude is even higher again because there's even less even fewer tankers going to New Zealand. Um it's hard to get uh Brent crude across New Zealand just because of the the geography of it. It's especially in the South Island for example. I'm not sure if you've been there um and and driven around, but even even in non bloody straight of closure periods, you end up paying $250, $2.70 a liter and it's now about four bucks in New Zealand and having massive impact in the economy.

[00:03:26]So, um it's good time to travel to New Zealand. So, I think it's about 20% off is the currency or dollar 20 or something like that, which is a lot better than it normally is, but um yeah.

[00:03:35]>> Yeah, I never never noticed that. I mean, like different remote areas of Australia, fair enough. And it's probably the same case over there. a lot of it, you know, isn't huge highways in the in the South Island. So, what I found what I find particularly interesting and this is where I start negative and I promise I'll be more positive is that, you know, we just in we increase interest rates like a month ago or two months ago or that, you know, we've already increased interest rates this year with this inflation on the risk of this inflation coming up. But then I looked a bit more at the inflation data this week and something like 21% of the cost of living increase is coming from housing.

[00:04:11]>> [laughter] >> And and this is uh I find this so headline annual inflation is what 3.7 and if you excluded housing it's 2.7 and within the band like so much of it is coming from the increase. So electricity which is part of the cost of housing went up 37%. That's not our fault. Like that's that's bad policy and distribution networks increasing their cost which makes them a good investment.

[00:04:36]Uh new dwelling costs. So the cost of building new houses is going up because all the tradies are working on infrastructure projects. Let's not be I mean I'm probably going to get a fair bit of commentary about this. Rents like rents in a lot of areas go up like crazy. And then holiday accommodation is also going up >> a lot as well. So one of the biggest drivers of inflation is housing which is not going to benefit at all from higher interest rates. This is you know my little my little bug bear where policy gets disconnected. uh and why there's probably I mean not that most most of the retirees you probably talk to don't have mortgages so they probably appreciate higher rates but they also appreciate lower cost of living at the same time. [laughter] So um that's that's my rant for the day. So thanks for giving me the platform to do it.

[00:05:18]>> I think it's a pretty fair rant. This is uh you've got all the foundations of a political party here mate. We just like make Australia great again and we're away. Get some red caps.

[00:05:28][laughter] >> Don't give me a magga. Yeah. Come on.

[00:05:30]Put me down that leg. I I uh I I joke, but I I take your point. And um yeah, you know, in terms of economic policy and what we've had for a long time at federal and state levels, um even before this government, yeah, we've um we've we've been running with the with joyous optimism that everything is going to be okay in the future and we're going to um uh grow our way out of our of our debt. And um that's a you know, that's coming to roots now, which is is quite scary.

[00:05:59]>> Yeah, definitely. And this is uh a bit of plug into your modeling too, isn't it?

[00:06:04]>> Oh, yeah. Yeah. I had marked this down as something to talk about. So, um I was I I've thought I've thought about this.

[00:06:11]I know I'm going to get pushed by you to do it, but I'm not going to name them.

[00:06:14]Uh but what I will say is that uh a few days ago, we had um a prospect come to us and say, "I've done all of my retirement modeling and I'm can comfortably self-fund." And uh and Chady, >> that was a surprise to me. Um, well, I've I've seen I've had scores of times where someone has come and said, "Hey, I've I've let AI do my modeling and it's wrong." Um, including a highlight from uh from maybe three or four months ago where the similar conversation, no, I've modeled it. I'm going to be fine. And and in my mind, I thought that can't be right. This is much tighter than you think it is. I said, "Send through the modeling and it all got sent through."

[00:06:51]And I replied back and said, "So, were you going to pay tax at any point in this model? [laughter] Hey, is there any income tax pay over the next few years?

[00:06:59]Is there Yeah. So, um uh so um that that that happens. You know, there's we've spoken in a previous episode about the use of AI. We're both using it personally and um uh there are some times where you have to um you have to remind the AI like whatever tool you're using to actually do what you instructed it to do. Um but uh but especially with retirement modeling, I recently did some uh or had some retirement modeling provided to me by an industry super fund uh reputed retirement modeling tool.

[00:07:26]Very simple, easy to use, good, that's excellent. Except just some some some big big big miscalculations in terms of the way that the uh the investments had been run and also no provision for age pension at all, which is like a critical provision for a retiree.

[00:07:41]>> You call them call them glaring emissions. [laughter] >> Yes. Yes. I'm happy to call them glaring >> and uh and so uh this is just a reminder less so I think for um you know the industry super funds I've gone back and provided some feedback to say hey like you your team needs to get this right cuz the modeling is not right and it's obviously affecting a lot of people using it um but especially if you are using AI to run financial modeling um cash flow modeling uh please please please double check triple check the numbers It's an incredibly useful tool and even after you double and triple check the numbers. It is still going to take you less time in a lot of cases than if you've done it all manually yourself. Um but uh don't underestimate AI's propensity to um to to get these numbers wrong. And especially if you're relying on them and saying happy days, we're good. Uh that can that can create a lot of problems downstream.

[00:08:35]>> And the interplay is the key here, isn't it? Because you basically have to train the AI how to calculate age pension, how to work out when it'll kick in, how to where you going to fund cash flow, what tax rates will be, how they'll change, what other requirements you'll have, how your income and expenses might change over multiple years in retirement. It's not like most if you just ask AI, it's probably going to do uh X time 5% divided by 25 and that's what that's what your outcome is. uh until you you actually have to train it to get anywhere near the kind of detailed personalized modeling and most most people are able to do that.

[00:09:09]>> Yeah. Yeah.

[00:09:11]The inputs are everything, aren't they?

[00:09:13]Garbage in garbage out. That's been true of programs well programming since day dot. It's it's true of AI programming too. So being really careful about your inputs and then also making sure that they are actually included. what I think you said a little while ago you should you I'm not sure it was on a show but you you should look at you should cons use AI like a like a really sharp but youthful intern so like you all right let's let's intern says yep I can do it and they're pretty switched on they probably can do it but um but you don't just take that work and say you know good job Jess or good job Tom or whatever and walk away you know you you have to look over it and say hey team you we we might have missed something here >> tunnel vision like the tunnel vision just come. It's just answering that one question and not thinking about the interplay into other areas unless you go really deep into it.

[00:10:01]>> Yeah. Yeah. 100%. Now, uh let's move across to our boomer briefing. Um we are getting uh eerily close to end of financial year. Uh we're going to roll around again and I well at least from a financial advisory perspective, a lot of you might be listening to this thinking, hang on a second, there's still a little while to go. We're not we're not that close, are we? Well, from a financial advisory perspective, we definitely are because um it it takes time from go to wo from meeting someone all the way through to delivering advice and making sure that we get all that done before June 30. Um and also we just like to be a little bit more prepared than scrambling around on June the 24th or 27th trying to get stuff done. Um and as a result, we're starting to at both of our businesses, we're starting to look at um end of financial year, what are we doing here? How are we going to make sure that we can get all the best tax outcomes for our our members and clients? Um but it is also a time for um to reflect on some absolutely terrible end of financial year outcomes that we have seen and uh we thought we might have a little bit of a laugh by talking about um some of the some of the chaotic end of financial year experiences that we've had before.

[00:11:04]>> I mean I try and go away in the last week of June so I don't have to get involved in this and it forces you to plan a bit earlier but like the biggest mistake is is waiting until June to plant. Like you got to plan you if you're doing end of financial you got to be in March and April and you should be executing in June but you shouldn't be executing at the end. So the biggest thing I see people get get hit by is they wait too long. We think Bay's immediate transfer. Bay is like the oldest it's like the swift system in [laughter] in the US like there's cut offs for super funds that are well before the 30th of June. If it's rollovers, if it's pensions, if it's contributions, if it's new accounts, all these sort of things, you need to be really proactive and, you know, have your strategy ready. If you're doing it yourself, we we've done quite a few, I think two-thirds of ours already, uh, but if you're doing it yourself, you need to be well ahead. I know you can't necessarily confirm perfectly your concessional contributions because you wait on your last paycheck sometimes. Uh, you get a pretty good idea and be ready to execute most of that. Um, that and the and the notice is is probably the biggest. I've seen advisers stuff up the notice as well. So [laughter] [snorts] yeah, you've got the actual name for it, but um the notice of intent to claim form. So you have to lodge it before you lodge the tax return with your super fund before you lodge a tax return for that financial year that you want to claim the tax deduction if you're doing a personal concessional contribution. Uh you also need to lodge it if you're rolling out of that super fund and this is where advisers can get caught out or if you're commencing a pension from the assets in that account as well. this and this is where timing matters and I'm almost uh as soon as you make the contribution do the form you can always amend it later. The last thing you want is there something to be missed you know relation you know anything could happen. They're probably the two biggest ones I see. I got a little bonus one uh once you put yours up.

[00:12:49]>> Yeah. Firstly I'm I'm definitely with you on the notice of intent to claim um the you know timing of course also getting it done earlier. Um, one of the benefits of like the the ATO intentionally has become more flexible.

[00:13:00]But if we go back uh a decade, um, they were so rigid about if you contributed over the cap, it was insane. You know, if you if you went even marginally over the cap, it was just bam, penalties apply whether it was done in a non-consessional way or a concessional way. And especially in the concessional space now, they've they've said, look, if you go over the cap and and for example, we can't use it in carry forward concessional contributions.

[00:13:22]You've got no space there. We'll send you a nice little letter saying, "Hey, what do you want to do? You can either take it, you can take the money into your own pocket and we'll just tax it as taxable income which is as if you had it in the first place or alternatively you can leave it in super but then it would be a non-consessional contribution and then you you know you have tax to pay.

[00:13:38]It's super fair and it's taken a big chunk of the worry out um of trying to get you know to the dollar what was at the time 25,000 and is now growing and you know is 30,000 for this financial year. that notice of intent to claim form. You you make a great point about rollovers or setting up a pension fund.

[00:13:56]Um I have seen this many times in in my career where you have someone who puts in the full contribution on June the 30 self-employed person for example. They put it in they say happy days it's in and then they set up a pension or they roll money from all of it to another super fund. Well, the the super fund that uh received the contribution, they need to register that as a concessional contribution and take the tax out because of course 30,000 goes into the fund, but 15% tax typically will apply.

[00:14:26]Um, so they need to take that tax out and register as concessional before the money rolls away because once it rolls out, you can't roll it back in and then get it done afterward. It is finished.

[00:14:36]So, I'll add one more little layer to that that I've seen uh trap a few people in a really painful way. And that's when you got really high insurance premiums.

[00:14:44]And it's made even worse when perhaps you've got a low super balance. Like for example, you might have a let's imagine you've got a self-managed superanuation fund and then you've also got a small industry super fund that you just let bubble along for, you know, for contributions or whatever. Let's then add to that that you've got insurance premiums that are worth say 10k for the year and they're being charged out of super like big premiums. In that scenario, I've seen uh someone make a $25,000 contribution up to the cap and say, "Yeah, it's all good. I don't need to lodge or do anything until later in my tax return. So, I'll wait. Um, but the $10,000 premium is taken out in August or September, October or November, whenever, but just before the notice of intent to claim is submitted.

[00:15:22]In that scenario, let's say for simplicity that the balance in the new financial year after the contribution was $100,000. If 10,000 is taken away, that's a rollover. And that means that you can no longer claim the $25,000. You can only claim 90% of that. And the number keeps going down. So, as a house rule, it is just best to submit those notice of intent claims as quickly as possible. You can always vary them in the future if you want, but just submit for the maximum and have it done to minimize the erosion that can happen through a combination of pension payments, rollovers, fees, um insurance premiums, and so on. Just just get it done.

[00:15:58]>> Yeah. And one little extra one that I I forget about or I used to forget about all the time is that uh when property if it's investment property or or mainly investment property in some of these exchange of your contracts not on settlement date is actually the tax date for transactions like that. We all assume it's on settlement date cuz that's when we get the money but uh so you can get caught out if you don't make your big concessional contributions before 30 June in the year that you've contracted if settlements later on. Uh and there's a lot of action in property at the moment. So >> yeah, well said. You're thinking, you're talking before about settlement dates and it and you getting your money in.

[00:16:32]Most superanuation funds have a have a deadline. You know, they they've got in the habit of announcing to the world that we have to receive contributions by 2 p.m. or be paid payments by 2 p.m. on uh whatever date it is before the 30th.

[00:16:46]And I've noticed intelligently super funds have moved that forward to just give lots and lots of fat. So it might be a case that the last payment has to be made like the last payment that we can guarantee receipt of is on the 24th of June. You say bloody hell that's >> 15 a 15th of April.

[00:17:02]>> Yeah that's right. It's such a long time but catering for the the the out of a 10,000 payments there's going to be five that say well where is the money and they want to try to work it out before the 30th of June. Um, but it just reminds me of a time when I was uh very very early in uh in my career and um was doing all of the um the stuff in an advisory practice including making TE's and I um I it was the 30th of June, the 30th of June, all Bay payments, all electronic payments, they were all done um with those deadlines are well pasted and we were trying to get some get a contribution into Colonial First State and the only way to do it circumstantially was to drive to a client's home in Seafford, get a check, cut, which he had to organize that morning, get a check, and then drive it to I think it was Colonial First Aid in Hawthorne. I think they were in Hawthorne. And I just remember standing there, you had to be you had to give it to them by close of business on the 30th. As long as they had the check in their hands, they considered that payment, which has changed now. I don't know how they did that back then, by the way, but that's a separate separate thing. They said, "If we've got the check by the time we close the doors on the 30th, we can process the payment and it'll go this financial year." And it was just um I was standing there in this line of advisers and [laughter] and I remember looking around and just thinking to myself like there was so much pressure and tension and worry like that no one was at ease because these were like the last.

[00:18:28]>> There are advisers there that like you were lining up behind someone who had 48 checks to present for clients and you thought like what happen if you had a car accident on the way here or a medical emergency or one of those sorts of things. So um yeah anyway do it early guys. Don't don't >> do it in April. That's why we do it in April. [laughter] >> Yeah. Very very good.

[00:18:47]>> This podcast is proudly brought to you by Pear, the official brokerage platform of Rasque. With Pear, you can effortlessly automate your money.

[00:18:56]Whether you're investing in ETFs or shares from Australia or the US stock market, whether you're a grandparent or setting up a kids account or your own account, you can do all of that with full automation on pear.com. If you want to learn more, head to pearllor.com/rasque.

[00:19:14]And of course, before you invest in anything, be sure to read the legal documents like the PDS and FSG. Thanks for watching this RAS podcast. Thanks for watching this episode of the podcast. A common question that we get at RAS is, "How do I need to be prepared if I want to see a financial adviser?"

[00:19:30]There's a few things that stand out that may really help you if you want to get the best from an advisory relationship.

[00:19:35]The first is to come prepared. It's really valuable if you can arrive at that meeting with a good sense as to what you want to achieve from an advisory relationship. Now, there's lots of different financial adviserss out there that operate very differently. And if you don't have a good sense as to what you want to achieve, it can be kind of easy to get pulled into their advice philosophy and their approach, it can be hard to define what is the best advice relationship for me. So, whether it's you or you and your partner having a good conversation to say, what do we actually want to get out of this? that will really really help you to know that you're in the right place when you sit down with your adviser. The second one is to be open-minded. You may very well work out that there is one or two specific things that we're looking to address with our financial life, but a really good financial adviser is going to be thorough. They're not just going to look at those things. They're going to be as exhaustive they as they can be about your entire financial life and make sure that everything is lined up and set set up the way that it should be. So when you go into that process, please be open-minded that the very the highest value that you might get is not necessarily solving those one or two acute things that you wanted. The last thing is to be curious. If you are watching this podcast, it's probably because you are watching or listening, it's probably because you want to learn more about your finances. You want to level up when it comes to your education. And if you're going to meet meet with a financial adviser, it may be your first opportunity to transition that general knowledge that you've developed about your finances into your own situation and how it applies to you.

[00:21:06]So be curious. It makes sense for you to try to understand as well as possible how do all these things work for me?

[00:21:12]Because at the end of the day, it's your financial journey and it's your money and all of the advice should be helping to serve your unique situation. Now, if you want to learn more about how to get the most from your advisory relationship, you can either scan here and that will take you to a guide that gives you a heap more information.

[00:21:31]Alternatively, if you scroll down below, there is a link to a Northeast Wealth page that we put together not too long ago, and that similarly outlines the key things that you should be doing in order to get the very most from the relationship. Thanks again for watching this episode of the podcast. I'm James O'Reilly from Northeast Wealth. We hope you enjoy it. Um I would like to have a little chat as in this Boomer briefing about meeting a condition of release in super. Um we've spoken a number of times about meeting conditions of release and why they're so valuable. Amongst other things they give you unfeted access to your superanuation which from a cash flow perspective can be uh can be brilliant. Um but the other advantage of course is the the tax benefits. Um accumulation funds pay 15% tax if you can meet a condition of release that allows you to like a full condition of release. Uh the most common one is uh or the the the one that I see utilized intelligently utilized the best is being over age 60 and then ceasing gainful employment. In that scenario, you uh you you can move your uh tax from 15% down to zero within your super fund, which essentially, keep it simple, kind of gives you like a 1% uplift every year on earnings. It's a huge huge benefit. Uh and there is another great opportunity that's presenting itself now. It comes up every now and then and that is for specifically to work at the census. The census is a they are now advertising roles. The you see the ads we're paying between 30 bucks an hour and 60 bucks an hour or whatever. The hourly rate is irrelevant. What is what is important is that this is a role with that is a temporary role. It's going to start and after not too long that project's going to be done and once it's done then your role will come to an end. And the reason why it is because the legislation is, as we've talked about before, it is not ceasing your current role after age 60 or retiring after 60. Ceasing your main role, it is just ceasing gainful employment.

[00:23:23]>> Yeah.

[00:23:23]>> And so if you are working full-time, whether you're employed, self-employed, and you say, "Well, I'm not going anywhere. I'm not leaving my job." Okay.

[00:23:30]But what you could consider doing if you've got the bandwidth is taking a part-time or just a a casual role at Census to get this work completed. Stay there for the month and a half, two months of the project and then finish.

[00:23:43]You'll get your letter confirming that you've left Census, submit that to the super fund, wham bam, condition of release, full access to super, tax up, all of those things.

[00:23:51]>> And all you have to do is hand over a few envelopes for a month. Is that right? And collect them. I I don't want to water down the great work that census do, but I like to imagine that it's been the work's pretty straightforward >> and could save hundreds of thousands. It could save tens of thousands of dollars.

[00:24:04]I mean, that's a good one. You you always got these little tidbits, little loopholes that you search in the corporations act and they're super into, you know, the CIS act for.

[00:24:12]>> Yeah. Yeah. And and look, if I can add to this, too, because I've got a couple of live examples of massive value from people meeting conditions of release.

[00:24:21]Um, one of them, uh, which we've talked, again, these strategies are things that we've talked about before in in other episodes. The first one, um, was utilizing cash out and recontribution.

[00:24:31]So, we've got someone who is, for simplicity, uh, might have 250, $300,000. Um, their beneficiaries, if they ever pass, the beneficiaries are going to be their adult kids, which means that most of the time tax is going to be paid. But if you meet a condition of release, then in most cases, what you'll be able to do is withdraw that full super balance into your bank account and then recontribute it back taxree on the way out, taxree on the way back in. But you change the the taxable components in the super fund so that if your beneficiaries were to ever get paid the money, instead of paying getting paid for simplicity about 50k in tax, they're going to pay zero. So a huge uh benefit available. Um similarly taking money out as a lump sum and then utilizing your um your catchup concessional contribution cap. You might not have made contributions up to the limit every year for the last 5 years.

[00:25:22]And if you haven't, then accessing your super and pulling out for simplicity $100,000. Putting all of that back in and claiming a tax deduction has an amazing and immediate tax impact for you. And the magic has happened because you could access your access your super with taxfree withdrawals via that condition of release. So um yeah this is uh this this is absolutely huge.

[00:25:44]>> It's all too often forgotten about I think the fact that you can have multiple jobs or you go go even meeting a [snorts] works test. You've got the potential to meet a works test after 67 in this case. Well if you you've already met a condition of release which could open those contributions if you're selling an investment property later on.

[00:25:59]And this is that kind of interplay that I don't think chat can pull out quite easily without some very detailed information on the backstory.

[00:26:07]>> Yeah. When it does, we're in trouble, mate.

[00:26:09]>> Yeah.

[00:26:09]>> Yeah. [laughter] Based on the modeling that I've seen recently, I think we've got a little while to go.

[00:26:13]>> For sure.

[00:26:14]>> Yeah. Uh all right, let's uh let's move on. Uh we've got a couple of great listener questions um that I'm going to uh I'm going to ping your way, mate. The first one is from Shaky60s. Um Oh, yeah.

[00:26:24]Good day. Uh the question is I'm interested to know how secure are annuities with super and also accountbased pensions. I think the assets are mine held in a trust so that can't be lost if the manager went under.

[00:26:38]We'll have to come back to that. Is that correct? Is it the same with annuities?

[00:26:42]Um uh let's let's hit that point. What are you what are you [laughter] >> there's more to the question but I'm I'm sorry to say we're not going to be get to it.

[00:26:53]>> Yeah. I think the for for superenuation your superenuation's not protected if the performance is poor like your your superanuation is in Australia we work on a defined contribution which uh which means your you take on the longevity risk you're not getting a defined benefit pension you don't know what your pension's going to be every year so if your super is poorly invested there's no guarantee to fix that up it's basically based on market movements um but obviously any type of fraud that's why your trustee or the the trust sits above that uh an annuity very different. So annuities are regulated by APPA as an insurance type product and they are effectively guaranteed and secure uh against a massive pool of assets that they that that group like a bank has to hold to secure all the deposits and investments that people have made into it. So they're significantly more mure mure more more secure than investing in shares. uh but they naturally have their own drawbacks and and issues. So what is an an annuity is basically you purchase a future income stream and in some cases have access to the capital that that you're putting into that product. Uh and basically you pass in the risk that you pass away sooner or later to the annuity company. You pass away sooner in some cases they keep the money pass away later they have to keep paying you out up to the date depending on the type of annuity of course.

[00:28:18]>> Yeah. like kind of like a a a lifetime term deposit where you in a lot of cases won't have access to the money back but they'll just keep paying you the income all the way through.

[00:28:27]>> Yeah. Exactly.

[00:28:29]>> Yep. Cool. Um so yeah, agreed. U and the only thing I'd add to that the annuities in order to lose your money in the annuities practically you would need that company essentially to collapse which which unfortunately does happen.

[00:28:42]hopefully it's very rare and um over time we have become much more stringent about um the capital required for organizations and and companies to to offer these sorts of products and ensure that they can be capitalally secure for the long term. Importantly though, an annuity is is not covered by the government guarantee. So there is a $250,000 uh guarantee per uh per financial institution. The government the ADI guarantee that was introduced by Wayne Swan in 2009. If a bank like a an Australian authorized deposit taking institution collapses and you lose money, we will guarantee the first 250k of that per institution. An annuity is not an authorized deposit taking institution. It doesn't meet that definition. So uh no, if an if an uh annuity collapsed or the that institution then unfortunately so too would your money the recourse would be available through APA but not through the government.

[00:29:34]>> So one of the biggest groups is Challenger uh Challenger annuities. They also have funds management, but their money put into their annuities is held into what's called, I believe it's called a statutory fund. So, the money invested for that annuity, and they obviously invested to generate the return, is held separate to all their other money. That's why it's more secure.

[00:29:51]>> Mhm. Yeah.

[00:29:53]>> All right, let's uh let's move on. We're going to go to dazed and confused, which I think is a Led Zeppelin reference. If so, well played. Could be anything really. Maybe this person is just actually Yeah. or that maybe they're just actually dazed and confused. Uh uh I'm 72, widowed on my own, own my own home, have 620k in super pension phase, good and qualify for a part age pension.

[00:30:18]>> Sure. Um my son wants me to help him with a house deposit using $150,000.

[00:30:25]I'd like to help, but I'm conscious it may affect pension entitlements and my own long-term security.

[00:30:31]How should retirees think about helping adult children without jeopardizing retirement?

[00:30:36]>> Yeah, I think it's important here to and we we talk about this regularly which is not give up your own lifestyle for the benefit of your children. Uh and it may we may well be that you can survive on the income from the age pension but giving up 25% of your wealth essentially to support your child is noble but not necessarily the best course of action.

[00:30:55]Uh the so the big question here is around gifting for for the age pension and gifting is penalized over certain amounts. So generally you're allowed to do $10,000 per year as a gift and report it as a gift. The the as you know you have to submit uh if you've got the age bench you have to submit your income and assets quite regularly and you have to tell them if it's you know it's gone down where that money's gone. Uh and they always find out. So you can do $10,000 every year. If you go more than I think it's $30,000 over a fiveyear period, then the excess of that, so the excess above the the gifting limits must be included as an asset for the next 5 years anyway. So it's as if you hold those assets. So you're still going to get uh the same pension that you had before. You're not going to get a higher pension for at least another 5 years. So you're giving up capital to not get a subsequent increase, particularly if you're going up to that $150,000 level.

[00:31:46]>> What about thematically? Um I mean we're saying that 150k is probably too much at the moment or it's it's it's a lot for her to be contributing. How should retirees prioritize um contributions to children?

[00:31:59]>> I think prioritize yourself as much as you can first. Uh and then think about other ways you can help your children. I mean in your 70 in your 70s you probably don't want to be locking yourself up into too many different areas. And it probably depends on the financial position of your of your child as well.

[00:32:13]But something like guaranteeing a portion of the mortgage might be a [snorts] less impactful on your own cash flow provides them the support to get that additional uh loan that they need or without potentially without mortgage insurance or whatever it happens to look like. So look at the other options you've got to make that gift to your child um and and be aware that yeah you might not you won't get the full benefit of making that gift from an age pension perspective.

[00:32:38]>> Yeah, I I I totally agree there. I love the guarantor scheme in this concept.

[00:32:42]like if if we're if we're looking at either hand passing over a quarter of your superanuation balance um or alternatively going guarantor um on the on the property as long as it's really well drilled out then I um I think the guarantor scheme can can be a fantastic way to support your kids and assuming everything goes well it actually has very little financial impact on you. Um now of course it's when things go bad that is when it it does. So um we've uh we've facilitated a few guarantor um uh loans not so much by doing the lending part but with either retirees or pre-retire saying my children want to want our support with guarantor so what are the things that we should be thinking about and also the inverse of younger people saying I'd like like my parents open to going guarantor what should we think about um and this we've spoken before about these philosophies they don't change which is that um this that the time to have really rich conversations about about that sort of arrangement is at the beginning um being really exhaustive about like your mom and dad here are my commitments here are all of the things that I'm going to honor whether that's giving you regular updates here's the timeline with which I think we're we're going to go I'm going to be able to remove you as a guarantor here's how all of that's going to pan out if things go bad here's what my intentions are here's what I'll do I commit to these things and then similarly the opposite mom and dad saying or the the inverse mom and dad saying okay well if things go bad here's what we expect of you um in terms of updates and financial position and how quickly you're going to go from uh from having us as a guarantor to removing us.

[00:34:14]Our expectation is it's going to take this long based on your savings and and just being really clear about that. Even right down to kids, what insuranceances do you have? Do you have income protection? Do you have all of those things so that in worst case scenario we're not on the hook and potentially compromising our financial retirement or the comfort and plus all the stress that goes with it. have the tough conversations at the beginning. Um hopefully you won't need any of them, but it is mighty helpful to be able to go back in the future and say, "Well, we actually know what we're going to do in this situation because you made commitments that here's what you would do and we made commitments that perhaps we would help you in this way." Do it all early. Yeah, definitely couldn't have said it better.

[00:34:54]>> All right, let's uh go to the term plus five minute question. Um, as we keep touting, uh, it takes less than 5 minutes to open up an account with term plus, who are a big sponsor of the show.

[00:35:04]So, thank you again for your support, Term Plus. Let's, uh, the question that I've got here, um, uh, if, uh, a client said, I don't trust Super, I want to hold everything in my own name. Is there ever a scenario where you would agree with them?

[00:35:20]>> Uh, not on the premise that they don't trust super. So, superanuation isn't something, it's not a being. [laughter] It's a tax effective entity structure, the most tax effect entity structure for any retiree. But I'd say, you know, if someone's much older, so in their 80s and so closer to their life expectancy, let's just try and keep it, you know, [laughter] as independent as possible. If they're close to their life expectancy, uh, and they don't pay tax in their own name, like the benefit of super is you're not putting it in your marginal tax rate.

[00:35:49]They got a low enough amount. uh they're not paying tax uh and they could potentially they got adult children so they might be taxed if their superenuation was paid to their adult children in those limited cases kind of later on in life then it would it would make sense as as you get closer to that no expiry date for lack of a better word >> yeah expiry date is a brave term um yeah I'm I'm with you exactly the same thing uh that it would be very very limited like super limited cases whereby you would be better off having the money in your own you really have to really stretch the the some silly scenarios to get there. So, um, no, broadly there's not a scenario where I'd agree with them unless there will be unless there was something crazy.

[00:36:33]>> All righty, let's call it, mate. It's been a good chat. Thank you very much for your time. Thank you everyone for listening. It's uh it's a real pleasure to be able to share some financial knowledge with you each and every week.

[00:36:43]Um, as we continue to uh remind you beautiful humans, please keep your questions coming. We really really do love having the opportunity to answer those questions for you and um provide as much uh content as we can and ultimately improve financial literacy as much as possible. So don't be afraid to fling the curly questions at us. Um Drew, thank you mate. Good show and uh I will see you next Thursday. So good to see you. Thanks for watching this episode of the podcast. If you want to hear more from us, you can get daily videos and podcasts on RAS YouTube channel. Or if you want to enroll in a free course on investing, property, business, money, you name it, you can join over 34,000 other students and enroll in a free course on the Ras website. Simply head to www.ras.com.au and follow the prompts. Thanks for watching this Ras podcast.

[00:37:35][music] Hello.