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Retirement Planning Strategy

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Super Contributor
Pension funds not able to short. Sitting ducks. Market needs sitting ducks for good shorts. Great system. No morality but who wants that. Sucker pensioners can go eat cake eh?
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Super Contributor
Skaap your thinking is sound.. currently you can pay 15% of your pretax income into a RA but you pay tax on expiary.... the basic problem hear is compounding...if a lilly doubles in size every day and has taken 19 days to cover half the pool it only needs 1 more day to cover the hole pool.... so with investing if you pay tax on the out amount at the end of the savings period you loose a third to a half of the pool to taxation however if pay the tax upfront and invest in div rich blue chip shares you loose a fraction of the first few days of the lilies growth... ie if you understand anything about compounding pay the tax upfront and buy the blue chip shares...
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Super Contributor
ah, but if you understand anything about taxation, defer tax for as long as possible .And , the tax that you defer, don't landscape the pool, put it into another RA and defer more tax.....But a more valid point would be that COST associated with RA would take away more of the lillies.
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Super Contributor
I can always retly on you for the contrarian and non sensical anwser. show me one person who retired wealthy of the back of an RA!
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Not applicable
Thank you John - finally the kind of response I was looking for. What you are saying, if I understand your point correctly, is that the tax payment on expiry robs you of your big gain to cover the lilly pond. I will have to think it through, because I don't think I have ever met a financial planner or broker who has put such an argument across before.
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Super Contributor
Defer the tax if and only if you believe that the appetite for tax take by government will reduce between now and the dtae on which you expect to be taxed.

If you expect that taxes may increase - do not defer.
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Super Contributor
remember,deferred tax is like leverage, you have more money to put into other investments, like blue chips. but argue the cost aspects rather which will remove more of the lillies from the pond in both RA and stocks. i dont like RA but dont pick stocks for dividend income if you are undercapitilised....do the math and leave emotions out of it
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Not applicable
What? Why is deferred tax like leverage? And why can you not pick blue chips if you are undercapitalized (whatever that means?)?
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Super Contributor
Skaap ...remember the advise you usualy get is paid for or motivated by the commisions and "cost" that will be deducted from your hard earned savings...
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Super Contributor
The solution is easy - Die Young! Wherever government sees the accumulation of funds, they change the law to attack said funds! Just look at the debacle with section 41 at the moment! Government is under pressure to carry an ever-expanding social benefit bill (and meet its own corrupt needs!)
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Not applicable
So true, John, that has always been my argument, you see bad advice given all the time...
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Super Contributor
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Super Contributor
when you start earning your tax rate may be 25% but in the end you hope you are paying at least 40% +(high net worth )so if you deffer the tax you can already see the disadvantage.. second the tax has little effect in the early years on the amount saved but as this compounds you are compounding your tax burden as well... gov is trying to encourage you to save for them as well as for yourself!
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Super Contributor
skaap, leverage because the tax savings frees up cash up to your marginal tax rate.Sure you can buy blue chips if you undercapitilised, but its not gonna make you any dividend income to retire on...see my calculations.
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jo_soap
Contributor
Hi John. Am I missing something here because surely your marginal rate is far lower when you retire than now. So if you defer the tax you will be paying the tax over at a lower marginal rate?
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