by Alan Thornhill
Close to retirement?
Frustrated and angry with your super fund?
Thinking of cashing out your super?
The share market crash last September hit Australia’s super funds very hard.
And many people, who are about to retire, have had a rude shock when they looked at their prospective payouts.
But, as we all know, acting in anger can lead to bad decisions.
And there are two things many people are overlooking right now.
The first is the income superannuation funds earn, from dividends, rent and other sources.
The second is likely capital growth.
Investment consultant Russell Dew says that, broadly speaking, that income is something like 6 per cent a year, for balanced funds and, perhaps 8 per cent a year for a typical growth fund.
Fees might take 1 per cent of that.
So if you have, say, $100,000 in your balanced fund super pot, you would lose a prospective income of $5,000 a year, or some $96 a week, by cashing out your super.
If you are in a growth fund, you would be saying “no” to an income of $7,000 a year, or almost $135 a week, with that decision.
These are not huge amounts, but they would help with the grocery bills.
And there are those likely capital gains to consider as well.
The share market crash, which hit your payout so hard, is already passing.
The market is already up by some 10 per cent from its low point – and likely to go higher – as the global economic crisis passes.
Cool, rational thought is particularly valuable in a crisis.
And those who cash out in haste might well repent at leisure.
Get some good advice. Be prepared to pay for it.
Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.
Wednesday December 4
The Federal government and the Greens have reached a deal, under which the cap on Commonwealth debt will be abolished
The Dow Jones index fell 94.15 points to 15,914.60
NSW Energy Minister Chris Hartcher quits after ICAC issues search warrant against him.
Economy grows by 0.6% (seasonally adjusted) in the September quarter 2013:ABS
The Federal Government may be on the brink of striking a deal with the Greens to scrap Australia’s debt ceiling altogether in exchange for greater transparency over Government spending.
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