Removing The Mystique Of Jargon
The Age
Sunday May 28, 1995
SERVICE providers are coming at the superannuation issue from all angles and have most of the population terrified that they will never be able to afford to retire.
To their credit, however, most of the institutions offering ways to invest in superannuation have produced easy-to-read booklets aimed at removing the mystique enveloping what should be a simple concept.
MLC, for instance, has just released a valuable publication, Superannuation Explained Tax Facts and Other Important Issues, which deals with many problems individuals are reluctant to talk about.
Last week, Rothschild Australia released a novel version of ``how much you will need". It's a retirement savings calculator that makes it easy to see how much you will need to save from a certain age to a pre-determined retirement date.
What makes this different from other calculators is that Rothschild breaks down its estimated savings regimes into diversified superannuation products, bank term deposits, fixed-interest unit trusts, diversified unit trusts, property unit trusts and shares.
It also says, categorically, what the chances are of getting a negative return from any of these investment areas. For instance, Rothschild reckons there?is a one-in-10 chance of a negative return from diversified superannuation products and a one-in-30 chance if you invest in fixed-interest unit trusts.
The concept works like this: If a 40-year-old wants to retire at age 60 and has enough savings to earn $30,000 a year in retirement, what must he or she save now?
If the investor saves via a diversified super plan, $236 a month must be saved; in a bank term deposit $807 a month; a fixed interest unit trust $749; a diversified unit trust $491; a property unit trust $511; and just $327 a month is needed if invested in shares.
But these figures are based on a number of assumptions. For instance, Rothschild assumes that the gross return on the superannuation product will be 13 per cent, that bank term deposits will earn 9.5 per cent, the fixed-interest trust 11 per cent, the diversified trust 13 per cent, property trusts 12.5 per cent and shares 15.5 per cent.
The figures are also based on 5 per cent inflation, and taxable earnings taxed at 15 per cent for superannuation and at 48.5 per cent for all other investments.
© 1995 The Age