Opening a super account

I am currently 18 and working part-time while studying. I don't have a super account yet and I don't earn anywhere near enough to qualify for employer contributions to super.

I have a lump sum to invest. Is it worth opening a super account and making regular contributions?

 

You will need to wait almost 50 years to access your money if you do!

 

Buffett,

I imagine you are at, or below, the 15% tax threshold. It would make little sense to use super currently. It may be better to drip money into the market.

If you have a lump sum, it may pay to wait on signals from Europe.




Johny.

 

I have no problem with waiting!

Thanks Johny. So would it be better to open a super account when I'm above the 15% tax rate?

If I am not going to open a super account, I was thinking of investing the money into a Vanguard diversified index fund or a Vanguard shares ETF sometime within the next month or so.

 

Hi BuffettTheDog

If you are considering opening a super account, another option is to consider a First Home Saver Account, which offers a tax-effective way of saving for your first home through a combination of government contributions and low taxes.

An article from the Age has more information: http://theage.domain.com.au/first-home-buyers/first-home-deposit-within-reach-20110622-1ge5z.html

Cheers

 

Thanks Andrew Newman. My bad, I forgot to mention I already had a ME Bank First Home Saver Account. I have $5,500 set aside to deposit into it before the end of the current financial year so I can receive the maximum government contribution.

The 'lump sum' I was referring to in my original post was on top of that $5,500.

 

Hi BuffettTheDog

I would reiterate that any funds contributed to super can't be accessed until a condition of release is met, which is typically retirement from age 60.

Cheers

 

And that is at the moment. Who knows what the rules will be like in 42 years time!

 

Thanks for the reminder. I remember reading something by Paul Clitheroe recently saying that it is perhaps a better idea for someone at my age to save up for a home deposit rather than contribute to super since super rules are constantly being fiddled with.

In that case, I'm thinking it would be more appropriate to open a super account once my earnings (and my tax rate) is higher. That still leaves the issue of my lump sum (although that is probably more relevant for another thread). At this stage, I was thinking of investing it into an index fund or ETF.

 

You are very lucky to have your lump sum. Make sure you keep it.

There is a lot of uncertainty at the moment. It is mostly caused by poor leadership. (witness the US debt threshold debacle and the squabling European politicians).

Both Europe and the US will put downwards pressure on the Australian market. Which is good for you. Good luck on your buy in point. Perhaps split your lump sum into 12 month parcels and average in.

We live in interesting times.



Johny.

 

Yes, think of it this way. If you were to put money into super that would mean less for a home deposit which would mean a higher loan and higher interest paid for 30 years - non deductible interest.

 

Thanks for the advice. Regarding your 12-month-parcel suggestion, are you talking about a managed fund?

That's a very good point! I hadn't thought about it in terms of non-deductible interest.

 

Thanks for the advice. Regarding your 12-month-parcel suggestion, are you talking about a managed fund?


A lot of managed funds have entry fees, after which new money can be added fee free. Shares or ETFs need brokerage payed each and every time. (There are some brokerage free platforms in the US.)

If you see the market trending down, then it is better to average in. If you see the market rising, it is better to buy in one lump.

Also, it depends on the size of your lump sum. Brokerage costs, of four ETFs, over 2 years( 96 payments) would be crazy if you had less than $50K. In that case, index managed funds would be cheaper.



Johny.

 

If I could average into shares or ETFs and not have to consider the impact of brokerage fees, I'd be at the beach rather than posting on a forum!

An indexed managed fund sounds good. I might do a bit more research to see which type is most suitable (conservative, balanced, growth, high growth, etc.) given I'm not entirely sure when I intend to put a deposit on a home.

 

BuffettTheDog,

Here is a list of index funds in Australia Some of the funds are the same, but are licensed to different companies. A few of the funds may be closed.

It is up to you to do the research. I have always been impressed by Vanguard. They were the underdog who came out on top. Vanguard index funds beat 2/3's of active managed funds, and their management costs are 75% lower.


Australian equities:

Vanguard Wholesale - Austn Shares Index Fund Neutral VAN0002AU
Skandia GIS - Barclays Austn Equity Index Fund Unknown ASK0087AU
Vanguard - Index Australian Shares Fund Neutral VAN0010AU
State Street Global - Austn Index Equities Trust Neutral SST0004AU
Vanguard Wholesale - 100 Austn Shares Index Fund Neutral VAN0104AU
EQT Tax Enhanced Index Fund Neutral ETL0102AU
Skandia OIS - Barclays Austn Equity Index Fund Unknown ASK0235AU
AMP Capital Investors-Australian Share Index Fund Neutral AMP0281AU
Macquarie True Index - Australian Shares Fund Neutral MAQ0288AU
Skandia GWS - Barclays Australian Equity Index Fd Unknown ASK0200AU
AMP Capital Investors Enhanced Index Share Fund Neutral AMP0271AU
ANZ Australian Share Index Fund Unknown ANZ0145AU
Barclays Managed Inv - Australian Equity Index Neutral BGL0034AU
Macquarie True Index - Australian Equities Fund Neutral MAQ0210AU
AMP FLI - AMP Australian Share Enhanced Index Unspecified AMP0828AU
AMP Capital Investors-Enhanced Index Share Fd-C A Neutral AMP0257AU
ANZ Index Fund - Australian Equities Index Fund Unknown ANZ0148AU
Col FS FirstChoice Inv - CFS Index Austn Share GARP FSF0233AU
Barclays Australian Equity Index Fund Neutral BGL0005AU
Lumley All Ordinaries Index Trust Unspecified na
Capita Market Leaders Index Trust Unspecified na
AMP Inv Sol - AMP Australian Share Index Fund Neutral AMP0393AU na
ING - Industrial Shares Index Fund Neutral BBL0001AU na
ING - Resource Shares Index Fund Neutral BBL0002AU na
ING - Small Company Shares Index Fund Neutral BBL0003AU na
ING - Socially Responsible Shares Index Fund Unknown BBL0101AU na
Barclays PIF - Australian Equity Index Fund Neutral BGL0039AU na
INVESCO Wholesale - Indexed Australian Share Fund Neutral CNA0003AU na
Legal & General - Aust Equity Indexed Fund Unspecified LGL0014AU na
Macquarie - Enhanced Index Trust Neutral MAQ0719AU na
MLC MasterKey Unit Trust - Share Index Fund Unknown MLC0014AU na
SBC Brinson - Australian Share Index Fund Unspecified SBC0804AU na
Thornton Protected Aust Leaders Index Fd Unspecified THO0011AU na
Westpac - Aust Major Companies Index Fnd Unspecified WFS0802AU na



International equities:

Skandia OIS - Barclays Hedged World Equity Index Unspecified ASK0245AU
Vanguard - Index Hedged International Share Fund Unspecified VAN0107AU
Skandia GIS - Barclays Hedged World Equity Index Unknown ASK0006AU
Skandia GWS - Barclays Hedged World Equity Index Unknown ASK0047AU
Vanguard Wholesale - Intl Shares Index (Hedged) Neutral VAN0105AU
Perpetual WFI Vanguard Intl Share Index Neutral PER0195AU
AMP Capital Investors-Intl Share Index Fund Neutral AMP0275AU
Merrill Lynch - Ws Hedged Gl Eqty Enhanced Index D Neutral MAL0148AU
ANZ Index Fund - International Equities Index Fund Neutral ANZ0146AU
Col FS FirstChoice Inv - CFS Index Global Share GARP FSF0243AU
Merrill Lynch - Ws Global Equity Enhanced Index D Neutral MAL0124AU
EQT International Index Fund Neutral ETL0107AU
Barclays International Equity Index Fund Neutral BGL0106AU
State Street Global - Intl Equities Index Trust Neutral SST0013AU
Barclays Hedged World Ex-Australia Equity Index Fd Neutral BGL0044AU
SBC - International Share Index Trust Unspecified na
Macquarie - World Index Fund Unspecified na
Westpac PPSI - County Overseas Index Trust Neutral na
Colonial IS - Vanguard International Shares Index Unknown na
AMP Inv Sol - AMP International Share Index Fund Neutral AMP0406AU na
ING - Dow Jones Global Titans Index Fund Neutral BBL0102AU na
INVESCO Wholesale - Indexed Intl Share Fund Growth CNA0814AU na
Deutsche - Enhanced Index Global Equity Fund Neutral MGL0131AU na
UBS Brinson - International Share Index Fund Unspecified SBC0805AU na
Thornton Protected US Index Fund Unspecified THO0012AU na
Vanguard Wholesale - Intl Shares Index Fund Neutral VAN0003AU na
Vanguard Wholesale - Emerging Mkts Shares Index Unknown VAN0005AU na
Vanguard - Index International Shares Fund Neutral VAN0011AU na




Cheers,
Johny.

 

Thanks! I'll start a new thread if I have any more questions.

 

Super Co-contributions Scheme

A preliminary check indicates that I may just be able to qualify for the government's superannuation co-contributions scheme.

I meet all requirements easily, except this one: "receive at least 10% of your assessable income from employment or self-employment activities", although a quick check showed that I may just scrape through. (University scholarship and Youth Allowance are what made this requirement a close call.)

Taking into account fees that a superannuation fund would charge, would there be any merit in opening a superannuation account to participate in this scheme?

 

Hi BuffettTheDog

You may wish to consider your goals for the future (short, medium and long term) and then think about which strategies will help you get there.

For example, there are many super strategies available but are they the best for your current situation and long term goals?

Cheers