Are you okay?

“Don’t make me stop this car!” I roared at the kids in the back. And then, for possibly the first time ever, I actually followed through.

I stopped the car. The kids froze.

I took a long breath, looked out the window, and noticed a half-boarded-up pizza joint.

“Let's get some pizza”, I said.

Inside, it was empty. No phones ringing. No music. Just a tired woman behind the counter with tattooed-on eyebrows, staring straight through me.

“One family-sized Margherita, please."

We sat at faux-wood tables while I flicked through a Woman’s Day magazine:

From October 1987.

The headlines were perfect:

“Take 2 inches off your hips in 2 weeks.”

“Which makeup colours make you prettier?”

“AIDS HYSTERIA: How much fear makes sense?”

Every second page was an ad for ciggies, or pictures of women in leotards smoking Alpine menthols.

The magazine smelled like the vinyl backseat of our old Ford Falcon. Warm. Faded. Casually sexist.

This week, an ANU study found nearly three in five Australians believe that life was better 50 years ago … and I was holding their evidence.

Okay, so let’s not pretend 1987 was all apricot chicken. HIV/AIDS was coming for everyone. The devil had slipped secret messages into AC/DC songs (if you played them backwards), and kids risked getting square eyes watching too much Scott and Charlene (ask your parents).

Yet flicking through those musty pages I was struck that there was nothing on side hustles, investment properties, or the hand-wringing of how your kids will ever afford a home.

Makes sense.

Back then a house cost about three times the average income. A family home was something you worked towards, and paid off – then set your sights on a shiny new Commodore.

Yet just as that magazine was hitting the printing presses … everything changed.

The share market crashed. 

Interest rates rocketed to 17%. The economy did the Locomotion. Finance hit the front pages, and never left.

And then? Well, then came the biggest borrowing binge in history … and it’s still going strong 40 years on.

Houses now cost a staggering ten times the average income.

Every year we borrow more, we stress more, and we lie awake wondering how our kids will ever afford something as basic as a roof over their heads.

On paper we’re wealthier. But we’ve never been in more debt, or more stressed and depressed.

The pizza came. It was horrific. The kids looked at me. I looked at them, and said: “You get what you get and you don’t get upset.”

They had no choice but to eat what they were served. That’s how life works!

Tread Your Own Path!

Your Questions & Answers

• My Husband’s $100,000 Gambling Debts

• Is HESTA Super Going Broke?

• Welfare Check: Are You Okay, Barefoot? 

My Husband’s $100,000 Gambling Debts

Hi Scott,

Over the last four years I have paid nearly $100,000 dollars of my husband’s gambling debts. He still has $55,000 dollars to pay on a personal loan, and he says he needs $6,000 immediately to tide him over. He refuses to show me evidence of his transactions – I suspect he owes more than he is telling me. My salary goes into the offset account but he keeps his account separate.  If I don’t pay his debts, he stops paying for groceries and stops contributing to the mortgage. I turn 50 this year. I am afraid for my emotional and financial wellbeing, and for that of our son.  However, I don’t have the family or social support to separate immediately. I am trying to get my head around this situation without losing myself.  I need to protect myself and my son financially while I work out what to do. I would really appreciate your help.

Sally

---

Hi Sally,

You must be absolutely exhausted.

Here’s the brutal truth: this isn’t over. It won’t stop until he puts his hand up and gets help. And even then it’s a long, hard road back through the financial wreckage this has caused.

You are dealing with a disease that is designed to take every cent it can get its hands on. I see the damage it causes every day.

My advice?

It’s time to be ruthless. For your son.

Do not pay another dollar towards your husband’s gambling debts.
Do not give him any money. Pay the bills yourself.

As long as you keep covering for him, this will continue.

Then, make two appointments. First, call a financial counsellor (National Debt Helpline: 1800 007 007) and get a plan in place to protect yourself. Second, see a family lawyer so you can understand your options.

Hope is not a strategy. You’ve carried this for four years. That has to stop. And it starts by getting the right people around you. Reach out to me this week, and I’ll help.

Is HESTA Super Going Broke?

Hi Scott,

I’m so mad at my super fund, HESTA, right now. I’m 44 and I’ve been with them for years. I have $250k with them, but I’m ready to jump ship after recent reports that their administrator (Grow Inc) has significant debt. Not to mention the argy-bargy HESTA put a lot of members through when they switched to said administrator last year.

I have no trust in their ability to safeguard and invest my super anymore. But I also found out that Vanguard Super also uses the same administrator, so I’m nervous about moving my funds just to land in the same pot of trouble.  Am I being too hasty? Or has HESTA bollocksed it up enough to warrant a move?

Cheers,

Sash

---

Hi Sash,

Your money in HESTA is safe.

However, I’ll leave it to you to decide whether you want to put up with their half-arsed service (and why Vanguard recently decided to YOLO with Grow).

Could you imagine if CommBank came out and said:

“In an effort to save us a bit of dough, we outsourced our entire customer administration process to a dinky little outfit … and it appears they’ve stuffed things up. So you won’t be able to access your bank accounts for the next seven weeks. Starting now.”

They’d be taco meat by Tuesday.

Well, that’s effectively what HESTA said (and did) last year!

My view?

Super funds have got their outsourcing completely arsed about:

They spend thousands of millions each year flying around the world first class trying (and failing) to pick winning investments. (This despite the fact that the evidence is unequivocal: they should outsource their investment decisions to a low-cost index, and return those thousands of millions of dollars to our accounts).

Yet they have outsourced the very thing that their customers need: reliable, safe and seamless access to their money! This explains why rolling over your super fund is harder than getting a council permit to build a shed.

It’s a total disgrace.

Welfare Check: Are You Okay, Barefoot?

Hey Scott, just wanted to check in. Haven't seen any newsletters or articles in the Herald Sun lately. RUOK? Missing your wise words.

Deb

Hi Deb,

Thank you for checking in ... and to the many readers who wrote asking the same thing.

I can confirm I am okay!

I've been writing this column for 23 years. When my first son was born, I asked my editors if I could take school holidays off to spend time with him. They reluctantly said yes.

Twelve years on, I'm still holding that boundary. In fact, it's even more important to me today. After all, I only have six more years with him at home.

That's wealth to me.

Thank you for reading.

Scott.

Shiver Me Timbers

Hi Scott, 

I have a friend who offered to manage my superannuation for me. So I transferred all $173,000 from Australian Super to his SMSF. Long story short, he started trading with an overseas firm (Swipe Capital) and it was a scam. It’s all gone, plus around $50,000 of my savings I put in too. I’m really angry with my ‘friend’ who I thought knew what he was doing but traded with an unregulated company overseas. All my Google searches about this company say the same thing: ‘red flag’ or ‘scam alert’. Where do I stand in regard to the $223,000 I’ve lost – can the government do anything, or is it gone forever?

Lincoln

Lincoln,

Your super was with the equivalent of a Sydney ferry, large, boring, and packed with the public – and your mate stowed you both on board a pirate ship, with Captain Feathersword at the wheel. Shiver me timbers!  

Your mate walked you off the plank, but you do need to take some responsibility here, mate. You handed control of your super to a friend, and that’s where you got peg-legged. Aghh!

You could speak to a lawyer about whether your friend breached his duties as a trustee. But if he’s been looted too, then chasing him may cost more than you’ll ever recover. So by all means report it to ASIC and SCAMwatch, but do it knowing there’s a very good chance the money is gone.

They’ve stolen your money. Don’t let them take everything else with it. People who get scammed lose more than money. They lose their confidence, their peace of mind, and sometimes their will to keep going. Call IDCARE on 1800 595 160. Talk to someone who gets it.

Guard your mental health like treasure.

The Iran War is Killing My Retirement

Hi Scott,

I am very stressed about the Iran war, and the impact it will have on my superannuation. I am 61, still working, and looking to retire in the next four years. Therefore I check my Australiansuper balance if not daily, every second day! I spent the last 60 years not giving a cuckoo about the share market, and now it keeps me up at night. Experts are suggesting that this is the start of something much bigger. I am thinking of moving my super to cash until this blows over. It would help me sleep at night.

Yasmine

Hi Yasmine,

You wrote: "I spent the last 60 years not giving a cuckoo about the share market."

That might actually be the smartest investing strategy I've ever heard.

Because when retirement is four years away, every wobble in the market suddenly feels personal. It's like waking up an hour before your alarm. Every creak in the house suddenly sounds like a burglar.

On Monday, as I was sipping my coffee, I read this headline:

"More than $100 billion was wiped off the ASX in less than an hour in a horror morning for Australian investors."

I actually love these headlines, because they are just so… thirsty.

Let's decode it:

"$100 billion wiped off" (seems like a lot)

"in less than an hour" (seems quick)

So was it a horror morning for Australian investors?

Nah.

Another way of writing that headline is:

"Sharemarket down to levels not seen since… Christmas."

Even accounting for Iran and the $100 billion wipe out, over the last year  the sharemarket has delivered a 14% return, when you factor in dividends (which you should).

Ho! Ho! Ho!

So I have some advice for you to get more sleep.

First, stop checking your super balance every week. It's like planting an apple tree … and then checking on it each morning and wondering whether you should pull it out and replant it somewhere sunnier in your garden.

Second, build up a cash buffer within your super fund. Money you can live off when you retire. Book in to see a financial adviser at AustralianSuper. 

Something like three years of living expenses is a good number.

Sleep well.

Have You Checked Your Super Lately?

Hi Scott,

I read your column about Mary (“I’m Still Standing”), who lost the majority of her lifetime super savings through the First Guardian Master Fund collapse.

I’m the government-appointed CEO of the Compensation Scheme of Last Resort.

Around 12,000 people were impacted by Shield and First Guardian, but only 2,000 have lodged complaints with the Australian Financial Complaints Authority (AFCA). What happened to the other 10,000? 

If you received dodgy advice, you may be eligible for compensation. Lodge a complaint with AFCA. And encourage everyone to check their super balance now! Love your work. Keep giving the bad guys a hard time.

David Berry, CEO, Compensation Scheme of Last Resort

Hi David,

Your job is to compensate Aussies who have received dodgy financial advice?

Bloody hell, you’d be busier than TAL’s funeral insurance public relations team.

Here’s my best guess on where those 10,000 missing victims are:

They have no idea it happened.

The vast majority of people who got screwed innocently clicked on a Facebook ad offering a free super comparison or review. They were taken to a page that asked for their phone number. Then a smooth-talking spiv convinced them to move their super into a dog-turd super fund. 

Then their money went ‘poof’!

And here’s the thing about super: it’s the one account we never check. It just sits there while we get on with life. Which is exactly what these crooks were counting on.

So let’s give a brother a hand.

There are a couple of million Barefooters reading these words right now.

So I have a favour to ask of you.

If you, or someone you love, ever clicked on a social media ad and switched your super, or if a financial advisor has switched you into a super fund, go here right now to find out if you’re affected:

takeyoursuperback.com/ 

Jeffrey Epstein and Vanguard

Scott,

As a mid-life woman, I have been impacted by predatory behaviour in the workplace and I identify strongly with the women who were treated as prey in Epstein’s network. I am really disturbed to read about the links of this network to Vanguard. Are you able to recommend some alternative low-cost ETFs that are more ethical about how they do business, like Future Group, which holds Future Super?

Matilda

Hi Matilda,

Your question made me sweat like Bill Gates.

Jeffrey Epstein is linked to Vanguard?

I couldn’t believe it. This is one of the most boring companies in finance. Its founder, Jack Bogle, was so tight he kept a penny jar by the photocopier.

He must be rolling in his grave right now.

So I took a deep breath, held my nose and googled.

Nothing.

I asked ChatGPT.

Nothing.

So I called Vanguard and asked them point blank.

“Is it true you have links to Jeffrey Epstein?”

“I don’t think so”, came the confused response. “Have you heard otherwise?”

“Well, I got a tip-off from a reader who’d obviously done some serious research ... though it doesn’t appear to be on the internet, or in any newspapers, or anywhere else that I could find.”

And as I said that, I realised something.

Research isn’t really your thing, is it Matilda?

Because if it were, you would have also googled the ‘ethical’ alternative you recommended to me, Future Super. 

Here’s what I found when I did:

It seems Future Super has its own problems: greenwashing allegations, high fees – and ASIC fined them for misleading marketing in 2023. So your ‘ethical’ alternative has about as much credibility as Elon Musk’s email to Epstein on Christmas morning asking for an invite to one of his parties (google it).

Matilda, the whole Epstein tragedy is about innocent young women giving their trust to people who hadn’t earned it, and didn’t deserve it. Don’t make the same mistake with your money.

I’m Still Standing

Dear Scott,

I’m writing to you because I need a little hope.

I’m 56 years old, single, and the sole supporter of myself. I have worked two to three jobs at a time all of my adult life, always believing that if I worked hard and did the right thing then my superannuation would be there to support me in later years.

Unfortunately, due to the failure of the First Guardian Master Fund, I have lost the majority of my lifetime superannuation savings. I now have approximately $13,000 remaining in super, and I am extremely concerned about my financial wellbeing as I approach retirement age with no partner, no safety net, and no ability to rely on anyone else.

I am not looking for sympathy, I’m looking for practical, realistic advice. I want to know what is still possible at my age. Whether rebuilding some level of super is achievable, what the smartest use of my limited income might be, and how to protect myself from making any further mistakes.

I have always been responsible, hardworking, and willing to do what it takes. I just feel overwhelmed and unsure where to start now, particularly after such a devastating loss late in life. Your work has helped so many Australians feel less ashamed and more empowered about money, and that is why I felt brave enough to reach out. Even a small amount of guidance or direction would mean more than I can properly express.

Mary

Mary,

You are a rolled-gold winner.

You have every reason to play the victim. Your retirement savings are gone. Yet you’re writing to me about hope?

That tells me everything I need to know about you.

However, hope isn’t a strategy.

We attack.

First: I’m putting you in touch with a lawyer already across this issue. If there’s money to be clawed back, we claw it back.

Second: you’ve got roughly ten working years left.

Here’s the rebuild:

Move your super to a low-cost industry fund or Vanguard super index fund. Salary sacrifice like your retirement depends on it. Take advantage of the ‘free money’ co-contribution scheme. Keep fees tiny.

Boring and relentless is where the magic happens.

And understand this: retirement isn’t a cliff. It’s a gradual slope. Part-time work. Flexible income. Super plus the Age Pension. That combination works.

You are not starting from zero.

You are starting with grit, discipline and ten more years of earning power.

That’s enough.

Now go build it.

What’s the Catch?

Hi Scott,

Long time reader, first time writer! After comparing super funds I was contacted by Sue from (FINANCIAL PLANNING FIRM’S NAME DELETED BY BAREFOOT’S LAWYERS) and after answering a lot of questions they’ve suggested I move my $70k Rest super (growth index) to an AMP super where they say they can manage it and improve my return from 9% (500k retirement) to approx 15% (1M+ retirement) due to the larger variety of investing options. The only catch is a one off transfer fee of $3,300 and I’m certain they mentioned another fee of about 1.65% which I believe was recurring. What do you think? 

Barry

Barry,

No. No. No.

Barry, just … no.

We are not doing this. Not on my watch.  You haven’t been reading me for this many years to get screwed by some cocker spaniel cold caller.

They are lying to you.

The catch isn’t just the $3,300 one off fee. That’s gerbil feed in the scheme of things. 

The real snatch is that they are TRIPLING your annual fees. That will end up costing you hundreds of thousands of dollars over your working life.

From your super account to Sue’s savings account.

Barry, stick with your low cost industry fund.

If you want to boost your returns, cut your fees. You could consider moving your current investment option to high growth index funds.

Don’t take the call, make the call: to your super fund.

Scott

Don’t Make Me Google

Hi Scott,

I was recently contacted by an investment company called Caprion Group, which operates in the UK, Australia and New Zealand. Caprion’s account manager is encouraging me to invest $20,000, claiming they only risk 1% per trade and that most trades are profitable. I’m unsure whether this is legitimate or wise. I’m a retired woman living on a government pension, with HESTA as my super fund. With recent market volatility, my super has dropped significantly. On top of that, I’ve just discovered HESTA has frozen all transactions until early June, with no clear explanation.  Should I leave my super where it is, and can you tell me if Caprion Group is trustworthy?

Jenny

Hi Jenny,

Your question reminds me of a discussion I had with my son just this morning.

“Hurry up! We’ve got to go to your game. Why don’t you have your footy guernsey on?”

“I can’t find it”, he whined.

“Have you looked in your cupboard?” I asked.

“Yeah …”, he said unconvincingly.

I gave him my ‘dad’ stare.

“Oh … kay, I’ll have another look”, he humpfed.

A minute later he came back with it on.

Now, to your question.

First, I googled “Caprion Group + Scam”.

The very first listing was the ASIC MoneySmart website under their ‘investment scam alert’ list.  

Their advice? “If it’s on the list, don’t take the risk.” 

Jenny, Caprion was on the list.

Next, I googled “HESTA frozen transactions”, and hundreds of articles appeared.

The first article read: “Members of HESTA will be unable to access most services until June, as the superannuation fund undertakes a planned outage to change its administration provider.”

Jenny, as a member of HESTA there’s no need to worry (you’ve only lost access for a while, not your money.) However, if I were the CEO of HESTA, I’d be very worried. The fact that one of the biggest super funds in the country could screw this up so badly is totally unacceptable.

Scott

Should I Switch to Vanguard Super?

Hi Scott,

A while back you wrote about Vanguard Super’s upcoming entry onto the Australian scene. I was hoping you could share your thoughts on their performance so far. All the comparison websites are unable to give more than one year’s worth of data, but that one year is looking pretty impressive, and combined with the low fees it’s hard to ignore. Is this enough information to confidently make the switch?

Linda

Hi Linda,

I’ll be honest, when Vanguard Super launched back in November 2022, I considered switching. After all, I was sure the revolution had arrived: finally someone was going to kick down the door of the $30-billion-a-year super fee racket!

Unfortunately, it’s been less ‘bust the door down’ and more a polite ‘tappity tap tap’: “Oh, excuse me … mind if we join in?”

You see, the truth is that most big funds – AustralianSuper, Hostplus, Cbus, etc – are still partying like it’s 1999: one-size-fits-all aggressive portfolios, bloated fees, and active management that’s basically professional dart-throwing which ultimately leads to much lower returns than index funds over the long term.

The big funds ignore this, because admitting it would mean firing most of their investment manager mates, cancelling the ‘research’ trips to Switzerland, and actually competing on fees. And where’s the fun in that?!

Yet here’s where Vanguard falls down: the fees. It charges 0.58%.

Low? Sure.

Lowest? Not even close.

Ironically, you can get cheaper index options from the same big funds that Vanguard set out to disrupt. 

But I’ll let you into a secret: most of the big funds don’t promote their index offerings. Instead, they make you go digging through their investment menus like you’re ordering off the secret Macca’s menu. My guess is they only added them to stop their smart investors jumping ship to Vanguard.

So, yes, I like Vanguard. I own their ETFs. But I haven’t switched my super, because I can get the same index exposure, for less, from the dinosaurs they were meant to replace.

Scott

Should I Go to Cash?

Hi Scott,
 
Love your emails!
 
I’m sure you'll get a million questions to this effect, but what should we do with our super based on Warren Buffett’s indicator? Do we move our super investments to more conservative options (cash, etc)?
 
Hayley
 
Hi Hayley
 
I can’t tell you what you should do, but I can tell you what I’m doing:
 
Nothing.
 
Here’s the problem with converting to cash ahead of a crash:
 
You have to be right twice.
 
As in, you not only have to pick the right time to sell your shares and move to cash … but you have to pick the right time to buy in again, just before the market recovers.

And, as my wife will tell you, I’m rarely right once … let alone twice!
 
When you look at the long-term track record of the markets, things have turned out exceedingly well if you follow another piece of advice from Buffett:
 
“The trick is, when there is nothing to do, do nothing.”
 
And that’s good enough for me!

-Scott.

Is My Super Genocidal?

Own up, Barefoot, you support the war machine. I have often wondered why my super investments in a fund like Australian Ethical have not grown as much as others. It’s because people like you (who I respect) tell them to invest in the fund that will make the most money, rather than the fund that will be best for us as people on this planet. Vanguard enables genocide, mate. Find a well-performing alternate super fund that doesn’t decimate entire populations.
 
Sandra
 
Hi Sandra,
 
I presume you are referencing a report from 2017 where activist investors wanted Vanguard (and other index funds) to dump their shares in PetroChina, Asia’s largest oil and gas provider, because of accusations of genocide.
 
Vanguard’s MSCI Index International Shares fund contains 1,439 companies (Apple, Nike, Netflix, etc), yet as of today it does not own shares in PetroChina.But it does raise a good point: an index fund simply owns the largest businesses  – it doesn’t put an ethical lens on them.
 
It’s the investment equivalent of a sausage: when you’re at Bunnings on the weekend you don’t ask if the snags are beef, pork or sawdust, right? (“You get what you get and you don’t get upset”, say my kids, who love a bit of sawdust on a Saturday.)
 
So the solution is ethical investing, right?
Well, that’s like buying an expensive free-range chipotle instead of the humble snag … but you still need to know what goes into it.
 
Case in point:
 
AustralianSuper’s ‘Socially Aware’ investment option was found to have money invested in the coal, oil and gas industries, and to own shares involved in nuclear weapons.
 
Mercer claimed its ethical fund didn’t invest in booze or gambling companies, though it was holding shares in Heineken and Crown Resorts.
 
Thankfully the regulator is trying to enforce the claims made by fund managers: last month Vanguard copped a record multimillion-dollar fine for misleading investors about the green cred of its own ethical funds.
 
Enjoy the sausage sizzle!

Scott.

I don’t want this to happen to you

The stock market is flirting with all-time-record highs …
 
… and that’s my cue to cock my leg and pee all over your portfolio.
 
You see, I still have PTSD from the GFC, when retirees would write to me in tears as they watched their super balance crater. They had no idea how much risk they were taking in their super fund ... until it was too late.
 
I don’t want that to happen to you.
 
Here’s the problem: while the best-performing super funds label their default flagship funds as ‘balanced’ options, the reality is that they’re often quite unbalanced. They have a large portion of their funds devoted to shares and other growth investments … which juices their returns and helps them win awards.
 
In other words, if your super fund is consistently one of the top performers, it’s likely they’re taking more risks than the funds they’re competing against.
 
Now, taking on more risk is great for an 18-year-old dish pig with 50 years of work ahead of him, but it’s potentially disastrous for a 63-year-old executive chef who’s about to light the flame on his last flambé.
 
Bottom line: Australia’s biggest super funds use an aggressive ‘one-size-fits-all’ strategy which might not work if you’re nearing retirement.
 
Yet there is an alternative. They’re called ‘target-date funds’ (or ‘lifestyle funds,’ same thing), and they’re becoming more popular, with a large amount of funds offering one.
 
Here’s the gist:
 
You pick a target date fund based on your age, and it automatically adjusts your investments as you approach retirement. So, when you’re younger, it invests heavily into growth investments like shares (because you have plenty of time to ride out the ups and downs). As you age, it gradually shifts you into more conservative stuff, like cash and fixed interest.
These funds are a great hands-off option, especially if they’re built with ultra-low-cost index funds.
 
My advice?
 
Call your super fund and speak to one of their financial advisors (your first appointment should be fee-free and obligation-free). Ask them to review the asset mix you’re invested in, and have them compare it to the asset mix of an index target-date super fund for your age. Then ask them what they’d recommend, and why.
 
Tread Your Own Path!

Best Returning Super Funds

Hey Scott,
 
I was reading about the best performing super funds, which were Mine Super, Colonial FirstChoice, and IOOF – all of which earned over 10% and easily beat my super fund (AustralianSuper). Have you looked at these super funds in detail, and would you consider switching if you were me?
 
Russell
 
Hi Russell
 
I view annual super fund returns tables like I do a tacky beauty pageant:
 
Fake tans. Fake nails. And the winning fund managers strutting around in evening dresses, posing for investors. Pass me the vomit bag!
 
The truth is that you do not want to be in the latest ‘hot’ fund.
 
Why?
 
Because statistics show that the lucky fund this year is just as likely to be next year’s dog.

Standard and Poor’s looked at the top-performing share fund managers two years ago and found that only 2% of them remained top performers today.
 
That explains why, over the past five years, 95% of Aussie share fund managers have underperformed an equivalent index fund ETF, after fees.
 
That’s why I think we should rejig the current super fund table – and instead rank them on fees. Any super fund charging its members over 1% should be made to get in a bikini and parade down Martin Place.
 
Scott.

What you’re about to read is going to get me into trouble

What you’re about to read is going to get me into trouble.  
 
So I’m going to cut to the chase: to all the marketing managers of the products I’m about to mention, please email my assistant: idontcare@barefootinvestor.com 
 
When I was a kid, I used to try and hide my school report from my parents, hoping they’d simply forget (this was in the days before email, and helicopter parenting).
 
Yet my plan was always foiled by my older sister, who was the dux of her class, and waited in anticipation all year for her brief bath in the parental sunshine.
 
Mole.
 
Well, the Government just released a (long, confusing, boring) report card on your super fund card - it’s called the APRA External Report (www.apra.gov.au), and the worst super funds are hoping that you never read the report.
 
So let’s dig in.
 
OnePath was like my Year 8 report card: a total and utter sh…earing show (as my father would say). OnePath was singled out by the regulator for having no less than 33 dud super funds.
 
Thirty-three!
 
OnePath was joined in veggie maths by BT Funds Management, Colonial First State, Auscol (Mine Super), Perpetual Super, MLC Super – whose report cards revealed “significantly poor performance”.

Some of the funds that were singled out for charging high admin fees include Verve Super (who market to women), Spaceship Super (who target millennials), Student Super (who need a detention), and the ironically named Cruelty Free Super (well, except for their barbaric admin fees).
 
And last but not least, Equity Trustees appear to be really struggling with their pencil grip, after being singled out by the regulator for both high fees and poor returns.
 
Am I being too harsh?
 
I don’t think so.
 
There is currently around $10 billion of our retirement savings sitting in underperforming funds. Many of them are not taking on new customers – because, well, who the hell would actively choose to join them?! However, they’re still more than happy to continue milking their existing customers with high fees and/or poor performance.
 
Why?
 
Because, unlike their customers, the people that run the funds are making seriously good profits!
 
Their only way of keeping this going is to hide their report card, and hope you forget to ask.

Don’t let them.
 
Tread Your Own Path!

*&^%$^* the Labor Government

Hi Scott,

I’m writing on behalf of my mum, who is distressed about the upcoming changes to superannuation. She is a widower who has worked hard all her life, saving like crazy to ensure she had a secure retirement (believing it was her responsibility not to be a burden to society via the pension) and to leave a tidy nest egg for her kids.
 
Mum has been advised by her accountant that she is a smidge over the $3 million cap; once he wraps his head around the changes he will, I’m sure, offer her excellent advice on how to proceed. But here is my question: what the *&^%$^* is the Labor Government thinking about attacking the little nest eggs of ordinary Australians? And what the **&^^% is anyone doing about it? It appears that, despite negative press attention, the changes are going full steam ahead. It’s just not fair! Thanks for listening, Scott, as no-one else seems to be hearing our small voices of protest.
 
Linda
 
Hi Linda
 
I’m sure your mum must feel like she’s being unfairly targeted … and her only ‘crime’ was that she worked hard, saved harder, and made savvy financial decisions! After all, she could have just peed all her money against the wall and retired on the full pension, right?
 
Well, that’s true.
 
Yet what’s also true is that your mother is not “an ordinary Australian” and she does not have a “little nest egg”. She’s got more cheese stuffed in her super than 99.5% of the population!
 
And besides, as you’ve said, she has access to an accountant who will dutifully work out a way to siphon that ‘smidge’ of the tax-affected part of her $3 million balance into another low-tax environment.
 
So she’s going to be absolutely fine.
 
However, what most Australians are really worried about – and what the media have jumped on – is whether this move by the Government is the ‘thin edge of the wedge’.
 
So, is the media right? Is the Government really aiming to come after your super?
 
Bloody oath they are!  
 
Yet that’s hardly breaking news. After all, with each passing year, politicians – on both sides – have made super less attractive. Especially for higher income earners. They’ve deliberately limited the amount you can put in each year and how much you can keep in there, and now they’re upping the taxes.
 
My take?
 
They’ll keep doing it. 
 
Reason being, Australia has a rapidly aging population. Looking after old people is expensive. As are programs like the NDIS. Someone needs to pay for it, and the heavy lifting will come from the wealthiest people in our country. 
 
So to your question: what’s the Labor Government doing attacking the little nest eggs of ordinary Australians? 
 
They’re not.
 
It’s just that the Government isn’t in the business of providing a tax haven for wealthy people.
 
Or helping your mum provide a tax-effective inheritance for you.
 
The Government’s end game is for super to (hopefully one day) take some heat off the age pension.
 
So let’s talk about the “little nest eggs of ordinary Australians”:
 
The median super balance for Aussies aged 60–64 is just $139,056 for women and $180,928 for men … and many of these people will have to use their super to pay off their home loan when they retire!
 
Now that’s tough!

Scott

Help, My Dentist Wants My Super!

Hi Scott,
 
We have been blessed with seven kids, some of whom have unfortunately not been blessed with straight teeth. Blimey, $7,500 for braces is no walk in the park, especially when you start multiplying it by three, four or more! Apparently, in some cases you can gain early access to your super for compassionate reasons. Do straight teeth fall into this category? Otherwise, unless I sell a kidney, there is no way I can come up with the cash. I’m 40 and have about $265,000 in super. Is it worth accessing my super early?

Dennis
 
Hi Dennis,
 
Right now I’ve got my mouth open and I’m saying “aaaah”.
 
The rules for a compassionate release of super are as follows:

• To treat a life-threatening illness or injury, or

• Alleviate acute or chronic pain, or

• Alleviate an acute or chronic mental illness. 

That all seems fair enough, but I don’t know how little Benny’s braces would apply to any of these.
 
However, I spoke to the ATO (which administers the applications) and they told me that last year 9,700 individuals applied for compassionate release of super for dental treatment expenses, and 82% were approved. Out of those approved, 9% were for a dependent child’s dental treatment, which could include braces.
Uh-huh.
 
So what are my thoughts?
 
First, with seven kids you know you’re setting an expensive precedent: if one kid gets a Hollywood smile, they all do, right?
 
Second, each time you dip into your super, you’re killing off the power of compound interest (plus potentially paying tax on the lump sum). In the end, it’s not going to cost you $7,500, it’s going to be something likely $30,000, or even more.  
 
Finally, this question has given me a serious toothache.

Ultimately it’s your decision, but I’d look at every other option than raiding your super. And if you do, steer clear of these groups that have sprung up to help people access their super. Some of them charge as much as $800 to “help” you apply for the compassionate release of super. Yet it’s a basic friggin’ form that anyone can fill out in the time it takes to floss!
 
Keep smiling.

Scott

Vanguard Super?

Hi Scott

I came across an article stating that Vanguard is now in the Superannuation business and will be competing against the likes of Australian Super, HostPlus etc. What is your view on this?

Andrew

Hi Andrew

Yes, this week Vanguard officially launched their super fund offering.

They’re charging 0.58% per annum, which is one of the lowest in the market for standard default funds with balances under $50,000.

There are cheaper superannuation index funds available.

Yet here’s what’s interesting about this:

First, Vanguard has said they’ll look to lower their fees over time as they grow. I’m inclined to believe them, because that’s what they have a history of doing.

Second, this ain’t your bog-average super fund.

Research from SuperRatings found there is a “high risk at retirement” for many of the current top-returning super funds. That’s because most of our biggest super funds throw everyone – young and old – into a one-size-fits-all investment pot.

Instead, Vanguard’s offering is a life cycle fund that invests your super based on your age. In simple terms, they automatically reduce the amount of riskier assets, like shares, in your portfolio as you get older and closer to retirement. In all, they make 36 of these adjustments up to your 83rd birthday (with no switching fees), which is far and away the most comprehensive of any Australian super offering.

So what do I think?

I think this is great news for every Australian – regardless of whether you switch to Vanguard or not.

The super fund industry trousers an outrageous $30 billion a year in fees – money that could and should be going towards our retirement.

Hopefully now that one of the world’s biggest fund managers – with a relentless focus on lowering costs – has set up shop, they’ll keep everyone on their toes.

For disclosure, I invest in some Vanguard index funds.

Scott.

We're overdue for a stock market crash ...

Hi Scott,

We are well overdue for a stock market crash.

They happen, after all, on average every 10 years, and the last one (discounting the Covid-induced flash-crash) was 14 years ago.

And I still have PTSD from the GFC. People on the verge of retirement wrote to me in tears as they watched the value of their super dissolve in front of their eyes. They had no idea how much risk their super fund was taking … until the market crashed.

So now is a very good time to talk about what’s going on with your super fund. And a word of warning: it’s not good news if you’re in one of the large, top-performing funds …

New research from SuperRatings has found there is a “high risk at retirement” for many of the current top-returning super funds.

Huh?!

Aren’t we supposed to pick a super fund with high returns?

So what makes these funds so risky for older workers?

Well, it’s generally because they are invested more aggressively than the funds they’re competing against. That is, after all, how they get to the top of the performance tables: by taking more risks. There is no free lunch in finance, so tattoo this on your arm: “The higher the returns, the higher the risks!” Of course, taking on more risk is fine for a 17-year-old apprentice … but it’s not so sweet for a 64-year-old chef.

Still, that’s how most of our biggest super funds roll: they throw everyone – young and old – into a one-size-fits-all investment pot.

However, there is another type of super fund. It’s called a ‘target date super fund’.

These super funds invest based on your age. In simple terms, they automatically reduce the amount of riskier assets, like shares, in your portfolio as you get older and closer to retirement.

It works like this: our 17-year-old apprentice would start out aggressively invested in shares to build her nest egg, and then throughout her working life the fund would gradually – and automatically – become more conservative to protect her nest egg by beefing up her defensive assets like cash and fixed interest as she nears retirement.

It’s a simple, elegant and almost set-and-forget solution.

I say ‘almost’ because most of the current funds have their target date set at age 65, when you retire. (If I was a cynic I’d say it’s set at that age so you go see a financial planner.)

Enter Vanguard Investments.

Last month they received regulatory approval to launch a super fund. They're still fine tuning things, but later in the year they expect to launch a target date index super fund that will automatically adjust your portfolio all the way through to your 85th birthday.

The older I get, the more I value simplicity in my life – especially when it comes to investing.

I don’t like my returns being eroded by high fees, so I invest my super solely in low-cost index funds.

And I really like the idea of not having to meddle with my super as I get older.

So let’s hope the top-performing funds – who collectively invest for millions of Aussies both young and old – take heed of this new type of offering and build something even better for their members.

Tread Your Own Path!

Disclosure: I invest in some Vanguard index funds but not their super fund (because it doesn’t exist yet!).

So about last week ...

Wow-wee!

Last week’s column – on how much you need to retire – triggered an avalanche of reader responses.

“That’s WAY TOO LOW!”

“Are they eating baked beans in retirement?”

“You need AT LEAST $1 million to do anything half decent in retirement!”

Let’s recap:

Super Consumers analysed the actual spending data of retirees, and concluded that the average home owning Aussie couple in their late 50s needs $402,000 to fund a comfortable retirement. And to be clear, that figure takes into account the rising cost of inflation, medical expenses and aged care costs.

That figure shocked a lot of readers.

‘Why was it so much less than the ‘magical million’ that always gets bandied about?’ they asked.

Well, it’s because that ‘million dollar’ retirement figure has been largely influenced by the super funds lobby ASFA (Association of Superannuation Funds of Australia), who calculate their figure for a comfortable retirement at $640,000 for a couple and $545,000 for a single.

Yet that’s not a realistic figure for the average Aussie.

In fact, according to Super Consumers, that ASFA figure is only achievable for the top 20% of retirees. And that also explains why the government’s independent Productivity Commission advised policymakers to simply ignore it!

However, the media has not ignored it – it has instead entrenched it. And in doing so it’s created a much bigger problem that affects millions of retirees, both wealthy and poor: they spend the little time they have left worrying about money, and hoarding it, instead of enjoying it.

My view?

The million dollar retirement number is a myth. It’s basically like telling a thirty-five year old, “look I’ve crunched the numbers, and if by now you’re not earning $200,000 a year, well I’m sorry but you’re going to live a crap life”.

Bugger off!

As long as you own your own home, you can live a meaningful, purposeful, retirement with much less money. After all, we have the amazingly good fortune to be living in the greatest country on earth, with a strong social safety net based on the aged pension plus subsidised medical and aged care.

And the truth is that whether you’re 35 or 65, once you’ve comfortably covered the basics, having more money won’t necessarily make you any happier.

Case in point, I spoke to a retiree this week who admitted he’d spent the best years of his life working in a job he hated so that he had ‘enough’ money to retire. Now, five years into retirement, he told me the things that really made him happy are: catching up with his daughter, watching the footy with his son, walking along the beach at low tide, and sitting on the porch in the afternoon sun. And none of them cost him a cent.

Tread Your Own Path!

How much do you REALLY need to retire?

Let me tell you about the worst speech I’ve ever given in my life.

It happened five years ago when a friend asked if I’d speak about retirement at a lunch for his men’s group.

“They’re lots of fun”, he said with a smile.

As I drove up to the gates, I realised this was no ordinary bunch of blokes: it was an exclusive private club in a wealthy suburb of Melbourne.

Specifically, two hundred slightly sozzled old guys.

I started on safe ground, talking about the state of the sharemarket.

Then I let one slip through to the keeper, explaining my Donald Bradman Strategy:

“If you own your own home, get the aged pension, and you’re willing to do a bit of paid work, you could comfortably retire on as little as $250,000”, I said matter-of-factly.

Talk about leg before wicket …

“BULLDUST!” yelled one angry multi-millionaire.

“That’s less than I paid for my yacht!” blasted another.

The crowd erupted, and basically bounced me off stage.

Howzat?!

Clearly I’d hit a nerve. After all, the number one question every pre-retiree wants to know is this:

“How much do I need in super to retire on?”

And until now there’s only been one number that everybody quotes: the Association of Superannuation Funds of Australia (ASFA) standard: $545,000 for a single and $640,000 for a couple to have a comfortable retirement.

There are two problems with this.

First, it’s out of reach for most people: the ABS says that the median super balance on retirement is $250,000 for men and $200,000 for women. So for an average working Aussie, why bother trying?

Second, the people who calculate the ASFA figure are … the super fund lobby. It’s a bit like asking old Dr Kellogg, “What’s the most important meal of the day?” (Breakfast, of course!)

Yet for years theirs was the only retirement figure available.

Until now.

A group called Super Consumers Australia (a partner of CHOICE) has done the research and come up with their own figures — and given me a sneak peek.

Not only are their figures much more attainable, they’re based on ABS research on what Aussie retirees actually spend.

So what’s their number for a comfortable retirement in these inflation-stressed times?

The newest figures are $302,000 for a single and $402,000 for a couple in a middle-income household, again assuming they don’t pay rent or a mortgage.

(This is, admittedly, a little higher than my Don Bradman figure, but that’s mainly because I encourage retirees to keep working at least a day a fortnight to supplement their income.)

Either way, for far too long the super industry has played to the millionaires in the members’ stand. What these figures do is give the average Aussie a fighting chance at scoring 100 (not out!).

Tread Your Own Path!

https://www.superconsumers.com.au/retirement-targets