58. Is your super working hard enough for you?

So the cool thing about Like they don't have to ask themselves like what the hell is balanced. Because all all the super funds will vary on these things slightly, or you're gonna have to read the PDS because you're not 100% sure. So I think there's something really cool about taking known products. It doesn't have to be ETFs, it could be any kind of known product in market. Because ETFs in a way are like the commodity.

Of diversified investing. There's lots of platforms out there that are like, where a managed fund? Yeah, but now I have to figure out what exactly you're managed. Whereas I just know what VAS is. For me personally, that was kind of a more intriguing thing. That different type of super fund, less about the tax drag element, and just more like I understand what the hell I'm investing in, because I've been investing in it outside of super for five years.

The Aussie Fire podcast is a collaboration between Strong Money Australia and Perla, Australia's favourite boring long-term investing platform. Join our hosts, Dave from Strong Money Australia, and Hayden from Perller as they discuss all things financial independence. At Aussie Fire, we're big fans of sharing experiences and talking about money. However, please note that any advice is general and does not consider your financial situation.

Needs or objectives. Consider whether it's appropriate for you and, if in doubt, speak to a licensed financial advisor.

G'day everyone, welcome back to the Aussie Fire podcast. So, today in this episode, we're gonna be speaking about super, and specifically, we're gonna be talking about what Hayden and myself have done with our super since we started working. So we're going to be digging back into the history of our super, sort of how we approached it from the very beginning all the way through to today, and we're going to be

about how we choose to invest our super and why we've chosen that particular strategy. But before we get into that, Hayden, you were recently telling me something that I think other people might find quite interesting.

And it was somewhat of a phone hack, let's call it. Do you want to share with everyone what you recently did? and the savings let's say that you were able to make. Yeah, for sure. Um I needed a new phone for work because my current phone was getting a little bit old and I noticed on the Telstra website that they were doing a deal with a Pixel 9 Pro where

It was half price, I think down to nine fifty. But they were saying that if you traded in your old phone, you would get a six hundred dollar credit, essentially, towards the, you know, the new phone. So it was like, okay, well that's great. Your nine hundred and fifty dollar phone gets reduced to three fifty, essentially. But what I uh the problem I had was my phone had a crack in it and they basically don't take phones in um that have cracks. They won't trade it in.

So I ended up buying a brand new three hundred dollar phone and trading it in for about two hundred and fifty dollars about an hour later to get the six hundred dollars of credit. Which basically meant that that was like five hundred and fifty dollars saved off the nine hundred and fifty dollar phone. And'cause it's a work phone, it's it's essentially a it's a tax deduction'cause it's a device for work, so that obviously took off another, you know, thirty, forty percent of the value.

Whatever it is. So I ended up getting a like a sixteen hundred dollar rate retail price phone basically for like a couple hundred dollars, two hundred and fifty dollars, which was pretty cool. That's pretty damn good, really. Yeah, it's exciting.

Had you been noticing these credits before and you're like, Okay, next time I need a phone, I'm gonna I'm gonna look at that or did it just happen sort of accidentally? Yeah, I mean, I have friends, we share deals with each other all the time and um we shoot stuff across. I mean I think this stuff happens sometimes'cause I think is from the perspective of Telstra, I imagine that

they think if someone trades in their phone and they get the credit that they're probably gonna stay a Telstra customer. And most people probably are, you know, like a lot of people that particularly will shop with Telstra, will sign up to plans and things like this. And and stay with them, right?'Cause I obviously chose to buy the phone outright, but the phone was obviously way cheaper in a per month cost if you if you signed yourself up to a plan.

So yeah, I mean it that's how it works. I mean, this is true for most businesses, right? There's always a small scary people at the bottom. don't do deals how they they want people to do them. But yeah, no, just random stuff. I suppose when you enter anything that where there's like a credit involved or the company's offering a credit, I think a lot of times people just mentally

factor that into what they can afford to spend either on the phone or the plan itself so they'll end up, you know, spending more than they otherwise would. Do you think that's probably fair to say? Yeah. I mean I I think it's I think it does just depend on on I mean they're loss leading with the credit, right?'Cause they do they'll think they'll make it up.

With the phone credit. Yeah. Or whatever you call it, the phone plan or something like that. Yeah, yeah, exactly, exactly. Or what I mean is people will go for a higher model phone because of the credit that's coming, right? So they'd actually get a more expensive phone than they would otherwise. Assuming they're making more margin on the bigger phones for sure. Yeah. Businesses think of all kinds of all kinds of crazy things.

But enough about my scheming plans, Dave. I mean we were chatting briefly before the podcast and you were telling me about that you had some pretty exciting news that you published a book that no one's reading, right? Yeah, so Uh yeah, I published a book probably a little bit after this podcast comes out, right? Because this podcast is recorded in late November. So I published a new book in mid November. And

It's this one so the first book most people probably have read it or listened to it, they're listening to this, but that was essentially how to get to financial independence. And the second book is essentially what to do once you're, you know, halfway along maybe, maybe three quarters, maybe fully financially independent and you're not really, you know, super sure about what to do next or you're a bit worried about

kind of transitioning away from full time work'cause I've noticed that a lot of people, when they are in a position when they can afford to work less, they find it

fairly scary and they're not exactly sure what a new life looks like'cause they they're not really, you know, in contact with anyone who's actually doing that. And so there's a lot of different anxieties and things that come up there. So it's it's essentially about Giving people like a blueprint of what it looks like to step away from work or even even reduce work when you can afford to, figure out kind of what lifestyle you want, things like that.

And then essentially how to get over all those mental hurdles and actually enjoy your freedom and also let yourself enjoy your money as well and the wealth that you've built'cause that can be a bit of a worry for someone as well and people feel a little bit uh scared about that after saving and investing for a long period of time. Do you think it'll be as successful as your first book?

It's very hard to say'cause I think it naturally applies to less people because if you think about the people that are coming into like the FIEM movement or financial independence. Like the first book is essentially like all of the beginning sort of principles and foundations of how to do it. But then only obviously a smaller percentage of those people will get to financial independence'cause some people will give up or it'll take a long time.

or the rest of it. So I think it'll naturally apply to less people, but it could also equally apply to people like founders or business owners who are like exiting a business and they find themselves who are in their 30s or 40s with a fair chunk of money and then they're not really sure

what to do in that situation'cause it is fairly unusual or they find themselves with an inheritance and and in a situation where they don't necessarily have to work and they're they're way before traditional retirement age. So it probably could apply to a lot of people outside the fire movement, but

In this little community, I do think it'll uh naturally be probably read by less people, um unless those people are genuinely curious because it's coming up in the next five years or so of their life and their wanting to know a bit more about what to do. Would you write this book if you didn't get paid for it? Yes. Because I have no idea like'cause I don't know of a book that exists specifically for this purpose for this audience.

for this kind of age group, so I have no idea what to base it on. So I have to spend well, I spent essentially almost two years writing the book and I have no idea how it's gonna do, right? So it's kind of one of those things where I happily accept that this just might not be popular or it might not uh be profitable or something because I had to spend time and money to produce the book. So I really don't know. But I am happy with

how it come out. And I think there's some very valuable messages in there that should help people. So that's all I can do. That the rest is up to everyone else. So whether they enjoy it or not and then share it and whatever with with their friends and people who might, you know, get value from it. So I just go into it accepting that. I have no control over the outcome and that's okay, I'm fine with that.

Well that's awesome. Love that. Good good luck, I guess uh when this podcast comes out if People wanna buy Dave's book or read about it on the internet from a pirated version, I'm sure that there's uh I'm sure that there's ways to consume it.

Yeah, most people are probably gonna end up listening to it and they're listening to audio right now. So most people end up I think with books these days it's fairly common to use like your Spotify your monthly allowance for your Spotify hours, your credits there, or your audible credit. So it kind of feels free to a lot of people, so I think that

that drives quite a few listens, which is which is good. So however people want to listen to it or get it, that's that's fine. But um enough about that, mate. Let's get on with today's episode. And it's all about super, right? So let's go back to the very beginning. And tell me when did you first start earning super? Did you get your first sort of job that paid super when you were still a like in your mid-teens, or was it not until a fair bit later? Like when was your first super experience?

I think I was nineteen. I think I was at university. I think I did a lot of cash jobs in high school or frankly I did a lot of sole trading. I taught myself how to program and I was making three hundred dollars here, five hundred dollars there. When I say here or there, I mean like that happened six months apart, you know, like I wasn't swimming in the trash.

I was making like a grand or a grand and a half a year basically doing sole trading work as a as a software developer. So yeah, I didn't really come across super at all. I was I was invoicing people and and trying to well, you know, get this money coming in. Oh yeah, it wasn't until uni when I got an actual proper like casual job.

And then a super account got opened and yeah, I don't think I've really looked at it for probably two or three years at least. I wasn't really interested in in it at all, right? As a lot of young people are. What about you? Uh yeah. So I started earning super. My first job was at Big W when I was about I think I was I'd just turned fifteen or something like that. So I'd been earning super since then. And from memory, Big W's default super was with REST.

So I had a rest fund from the beginning. I think it was and th they obviously put you in like a rest balanced fund, I think it was. And then from there I worked there for a few years and then I came to Perth and I got my first full time job and that was Uh labouring in a factory and that super fund that they put me into was I think it was C Bus.

Was like the the building industry fund essentially. But I was paying very little attention to it and I knew I had a r I had so I had two super funds, right? I did what most people do, whereas you just go to your new workplace and you just get whatever fund they give you, you're like, Okay, that's fine, I have no idea what's going on.

Um, so that was my kind of initial experiences with super and which funds I had at the start. Okay. That's interesting. Did you um did you also get signed up for life insurance like me and not realize it for a few years? Yeah,'cause you just get I think it's default to get I don't actually I don't know if you get life insurance and the permanent disability insurance. I'm not sure if they do that by default under the same umbrella from memory.

Um, I'm not sure if you remember that either. It's been a very long time since I've opened a new sort of industry superfund or anything like that. So I don't actually remember. I but I ended up once I started taking more interest in finance and money in general. Then I looked into super and then I'm like, okay, well the first thing I should do is probably combine these funds into one.

So I think I looked at the fees and the the rest one was cheaper than the C bus one, so I switched my C bus fund into rest, I rolled it over. So then I had one font so that was my first super optimization, I guess you could say, switching from from two to one. And then I think Not long after that, I thought, well, I've got a fairly long time horizon, right? So maybe I'll switch it from balanced or whatever that default fund is. It's usually balanced.

Let me switch that to high growth'cause surely that's probably gonna be better over forty years'cause I would have been like I don't know, eighteen at the time. That's gonna be better over forty, forty five years than than balanced, surely. So That was my first strategy change as well. So that was pretty early. With your first super, did you pay much attention to or when was the first time you kinda looked at the fees or you looked at how it's invested and things like that? Was that

Pretty early or did that come later? I I never really looked at the fees'cause working at the university as like a casual staff member. You know, I was doing everything from, you know, teaching, like qualified work, all the way through to Literally one job I had was like an eight hour day, one off casual job where I was just licking envelopes. To shut them, to like mail off to high school kids. So it was a whole range of work but That explains a few things actually. Yeah, yeah.

You spent eight hours a day licking glue. It's it's way less fun than you think. Um well actually I guess it's probably exactly as not fun as you'd expect, but I pretty much wasn't that engaged because you couldn't change your super fund at the university. Like it was always gonna get paid into the to that a certain super fund. And that meant I I wasn't really interested in fees or whatever'cause that was kind of moot.

At first I I got interested in the life insurance'cause I noticed money leaving the account, you know, to cover the premiums. So I turned that off'cause I was like, What the hell would what the hell would the life insurance be for? I'm just like a twenty two year old kid. Later on, probably around about the time I started Perl in twenty eighteen, so I would have been about twenty five then.

That's when I kind of got intrigued, like you did with the balance fund, and I changed it from balance to high growth as well. I think a couple of years later I added in about twenty percent in instead of a hundred percent high growth, I made it like eighty percent high growth and twenty percent emerging market.

I don't know why. It must have just been a Tuesday night where I was feeling a little inspired about the developing world or whatever. Yeah, exactly. Yeah. And I was like, Yeah, let's do that. And uh I just changed it like that and it pretty much stayed that way.

for the next five or six years until twenty twenty five, to be totally honest. Wow. Okay. So that was a fairly consistent strategy then for quite a quite a long time until relatively recently. Yeah, and I think um, you know, with Unisuper as well, they were generally well regarded. So it it was like okay, I'm in a high growth option

the emerging markets was performing about the same, best to leave it alone, right? Like don't go and touch it too many times. So I wasn't too concerned about it. I only really reviewed that approach when I ended up moving my super to Perla, as you'd expect, right? Like it's It's the company I started, so

naturally if we had launched a product in superannuation, I was gonna move my money there. I think I was like one of I think I was the first account in Perl Super because I was testing it, right? Like we building it. So obviously it kind of stayed that way until that change and it was pretty much just high growth the whole way. Did you did you stick with high growth the whole way through or did you start poking around different funds? You strike me as the type of person who

Definitely got more engaged over time. What makes you say that? You have I feel like you slowly like to learn things and eventually have like a strong view on something. So I can't you're not the type of person that like I can imagine being like read about stuff for one day and then changed your fun, but I can picture you being in high growth and then reading and learning and then one day being like this is

This is my new right strategy. Yeah, that's fairly accurate actually as a I suppose a personality assessment. I do things very slowly, but then once I decide something I slowly but surely, Dave. Yeah, yeah, something like that. So

Yeah, my scenario is maybe a little bit more unusual or perhaps a bit more interesting for some people where I was in the high growth rest fund with From probably two thousand and seven, let's say, until two thousand and fifteen. And so what changed in two thousand and fifteen was that was essentially when I started investing in shares. specifically before that was just property.

And as a lot of people do, when they start investing in shares, they think, hey, I can do this. Like I can pick my own stocks. Surely I can figure out what a good company is and what not what a crap company is and make better returns than average. And so I was doing that in my personal account. So I had a personal portfolio where I was picking picking shares as a relative beginner. And

So I thought, well, why don't I just do this with my super as well? Because I can have some control over it if I want. And so I found this. Superfund that was with ING where they were let basically it's like a members choice option, right? Where they let you have control over where your money is invested. into things that are listed on the ASX. And you have to pay generally more fees for that because you've got it's like a higher control account.

And you have to pay brokerage with each of the transactions and all that, which was fine. I thought that's okay. I don't mind paying, you know, slightly higher fees'cause it's kind of fun. I get to

control which companies my money's invested in and it's gonna be like a fun experiment. And if it I suppose if it doesn't really work out that well, it doesn't matter too much because at that point I'm thinking I'm probably not going to be reliant on this money because this was like twenty fifteen where I was

almost or I was yeah, not too far away from being financially independent. So I thought, mm, not that much can go wrong, surely. So I essentially started picking stocks inside my super fund and did that for perhaps I wanna say two years? And then what I essentially learned was and outside my uh super fund as well, in my personal portfolio, I'm like, some some of these stocks are doing really well.

Some aren't doing that well and some are just kind of okay. Like some are crap, some are great, and some are just in the middle. And then I'm like Looking at the market returns. Then I'm looking at things like L I Cs, where there's just a basket of companies and like And I had this account with ShareSight, obviously, where I'm tracking my performance. And then I'm comparing it, I'm like, I'm kind of doing all this.

And if anything, I'm like slightly behind. And then I'm like, What's the what's the point of this? I'm like researching the companies, I'm reading the reports, I'm doing all this stuff, and then I'm like, Wait, there's people who do this for a living and I can get these funds for a low fee if it was like a a a certain LAC or I can get an index signed, which is just the biggest basket you can get for a very low fee as well. And then I basically don't have to do anything.

So I'm s I started thinking, well, this isn't really working out like I hoped. Maybe I'll just take a more hands-off approach and let other people do it or just buy the whole basket and then I don't have to worry about it, right? It's gonna save me a whole bunch of time. So at that point,

And I think that was roughly twenty seventeen, could have been twenty eighteen. I switched from the ING members' choice to what was then called Sun Super, which is now effectively Australian Retirement Trust, because they kind of merged with another fund and and re rebranded themselves. So that's what I did then. And at that point I changed the strategy from uh stock picking and essentially went with

the Sun Super Funds and I just chose international indexed shares. Cause in my personal portfolio at the time, it was basically all in uh all Aussie shares'cause I was focused on uh dividend income at the time to to live off. So I thought, well let me kind of balance that and have all international in my super fund. So that was That was what I did. That's really interesting, a journey. And when you say international, like maybe this is before before you thought about ETFs a lot.

But what happened was once I started getting exposed to ETFs and I was choosing investment options within my super fund. I would often think of them in my head as particular ETFs. Like I would think, Oh, what is international index? And I'd be like, That's kinda like VGS, I guess. Or you know Aussie shares as like VAS. Did did you do that kind of equivalency with ETFs in your head as well?

Yeah, I did,'cause at at that exact time I was also learning about index funds and things and I'm like, Okay, well that yeah, exactly. I'm like okay, well that's if it's international shares, that's gonna be the same as BGS because that's international shares index. Did you use that to compare performance at all? Like did you look at that and say, Oh, you know, VAS is performing eleven percent perennium and uh

specific superfunds performance of their Australian shares is ten point five percent. I wonder wonder what the difference is. No, I didn't get down that r first I didn't get down that rabbit hole. initially where you can look at performance discrepancies. It was mostly a choice uh based on strategy at the time, like I said, of just diversifying a bit more. Like, hey, let me just have international

shares in my super and the lowest cost and most diversified option is international index. So let me just pick that. That kind of makes the most sense to me as I was learning more about broad diversification and low costs and things like that.

Um so that was around that sort of time frame as well. Yeah, cool. That's really interesting. And I guess Had you started to develop a want for super funds just to let you buy ETFs out of curiosity. I only asked this'cause I obviously like I've launched a product that does a similar thing and we've talked to customers about it before, but

Was that a desire you felt, being like, I just wish I could put money into VAS or VGS directly in my superfund? That's a good question. I would say no, because I essentially thought that they were exactly the same thing. So I thought

Well, that's so that thought essentially never entered my head'cause I'm thought, well, what's the same thing, right? I'm getting an international index fund here, or I could just buy it in my personal name, or if they gave me the option to invest in VGS, I thought, well, that's the same, right? So we just unpack that a little bit, I suppose.

I suppose that desire to buy ETFs in my super came a bit later when I learned about the the tax treatment of super and that then prompted me to eventually end up switching my super to Perla for a couple of reasons. So I wrote I actually wrote an article about this if someone wants to see the full sort of breakdown and the numbers and things like that behind it. Before you dig into that too, I think it's worth I mean we seem to have enough listeners now that

I wanna just quickly share, like obviously Dave uses Perla Super now and obviously I I started this company called Perla and obviously we're on a podcast that's sponsored by Perla. So there's obviously that like shill like vibe. Yes. That you know comes up.

I think it's I think it's worth flagging like when we were designing Pearl Super, we talked to lots of different people. Dave's obviously someone who has a lot of authority in the community. He writes books, people listen to him, that means we think Dave knows some stuff.

So when we're thinking about what a Perlis Super product is, we talk to Dave and be like, do you like this? Do you not like this? And he probably weighs into, you know, if I had to guess, ten percent of the decision making we can control. Just him personally and a couple of other fairly important people do as well.

Um once we launched Palo Super, like Dave was pretty upfront too and uh being like I'm not interested in moving my funds over at this point because there's still these problems I have with it. Or you know, I I haven't quite found the comfort I want in it. And I think that's worth raising because it's not a case of like Dave uses Perl Supercause people pay him to. It's actually a case of like we kinda build something that we want Dave to like.

'Cause we think Dave does things that other people do, or vice versa. Um and then also Dave doesn't really do stuff if he's not happy. And he's pretty vocal about that,'cause he's a you know, self funded retiree, so he doesn't really give a damn about what companies think. And even last night I got a quite a quite a heated message from him about something to do with the art.

As much as Dave gets heated. So I think that's just worth flagging, um, because obviously otherwise I'm just thinking about if I was listening to you have a conversation now about why you moved to Pellus Super, it would just feel very like, Yeah, yeah, yeah. So continue. Otherwise. Yeah, no, it's true. It's it's good to point that out. But uh yeah, I'm not gonna put my money somewhere where I'm not genuinely happy and where I wouldn't do it anyway for valid reasons, which otherwise it's just

like stupid obviously, isn't it? It doesn't make sense. I'm not gonna like I'm gonna put my own personal investment decisions before I put any like relationship that I have or don't have with a company. That just doesn't like that make that's what makes the most sense to me. So If we unpack the

why I wanted so I've essentially wanted to have a more more control over my super again. And the reason for that is partly for tax reasons, because I suppose let's just unpack it. Super is essentially taxed a bit differently to how your normal ETFs in your personal name are taxed. And so everyone will think yeah, well super's better because you get tax that fifteen percent instead of thirty seven or or forty five or thirty or something like that.

And that's true, but the catch to that is it's taxed at fifteen percent, but not on the income of your fund. It's actually taxed at fifteen percent on the entire return of your fund. So to account for future capital gains tax. And people moving out of the fund later in life, like retirees who are able to sell down tax-free and things like that.

Your super fund essentially, I think we might have covered this before, but your super fund essentially harvests away some of the capital gains each year from your super returns. So instead of the return being like, say ten percent for a year, it will end up being like nine percent, where the super fund has essentially harvested away ten or fifteen percent of the returns.'Cause they do pay, I think it's ten percent long term capital gains.

tax rate and super instead of 15% on the income. So there is some, you know, slight discrepancy there. And you can find this because when you look at the returns, which you mentioned earlier, Hayden, of super funds that break down the returns from their accumulation accounts. And from their retiree or their pension or whatever they call them. R retire- I think they call them mostly pension accounts. Pension accounts or

accumulation accounts. And so you if you look at the returns on both of those for exactly the same strategy within the fund, you'll find that the returns differ by quite a bit each year, like often by about one percent per annum. And the reason for that is the tax that I'm mentioning, that the tax that gets essentially harvested away. And that's just the nature of how the funds operate. They're trying to um set aside funds for future future capital gains, liabilities as such.

But if I could just unpack that as again a bit of a novice with this, it's like obviously, you know, Dave's trying to say it's like, okay, well, you lose performance every year because you're essentially paying the tax of old people is like one really reductive way to think about it. But the flip side is when when you become when, you know, Dave in that fund becomes an old person.

he's not going to pay as much tax either because all the young people are gonna offset that for him. Right. Like the circle of life continues. But I'm imagining, Dave, that, you know, the feeling you have with that is like It's like that simple idea of, you know, if you were trying to invest

and you got charged ten percent on the way in and ten percent on the way out, that's generally gonna be worse than getting charged zero percent on the way in and twenty percent on the way out, broadly speaking, because you want as much principle in there compounding from the start, right? Like so it's not that you're like there's a way to avoid tax. It's it's like the way they just tax stuff is more front loaded.

and there's a there's a feeling you have that that hurts over the longer term'cause I've got less that Growing every year and compounding, right? Is that fair? Yeah, that's pretty much true. I think just to add to that, it's not necessarily Only retirees that benefit from that. It's essentially anyone who changes their strategy in their super at any time for any reason. Yeah, because if you go from balance to high growth, they've got to sell stuff and that incurs capital.

gains tax a lot of the time. Yeah, exactly. So this is why you can switch strategies every week if you want to and not incur any tax, because the tax has already been harvested away. If that makes sense. If you've noticed if anyone's done this at home, you'll notice that there's no like tax that gets taken away.

So yeah, that's worth so it's worth mentioning that. Um so that was bugging you, basically. Yeah, so I thought, well that's like less than ideal. So one of the options that you can utilize to work around that is if you have a self managed super fund. Um where you have full control over what you're investing in and you you essentially want a scenario where your account is taxed.

individually instead of as a brig, broad group as like a super fund, right? Because they basically pool all the money together. They're called pooled funds and then they'll tax that whole fund, regardless of whether you've transacted or not, whether you've sold or not, you're still getting that capital gains tax harvested away. So essentially you just want to be treated

Your super account treated individually, that would be ideal. And the way you could do that is with a self-managed super fund or with one of these like members' choice. type options that I mentioned earlier where uh I started out picking stocks and if I sold a stock and I'd made a profit, then I would pay capital gains tax. Or when I got a dividend come in, they would take away money for income tax.

So that was getting treated individually on that account. It didn't matter what everyone else was doing inside that super fund or what stocks they owned or whatever, my account was separate to everyone else. So I liked that treatment. That is As you said, that's kind of ideal for long-term compounding because if you don't want to sell and you have like a 30-year strategy or more.

Then there's none of that, you know, little amounts harvested away all the time. You can compound for longer. And then essentially when you get to retirement phase, You can enter retirement phase, which is tax free, and then you never have to pay that capital gains tax because you've never sold. So that's like the ideal solution and you can do that in a few different ways. And so one of the ways that you can do that is with the is with the members' choice accounts.

And that's essentially what I think Australian supers got it.

Uh there's a couple of others that have it. Perla has it now and so I switched to Perla, but the tax actually wasn't the main reason, even though it was the initial prompt for me looking at switching accounts again. It was essentially because on the Perla Super options I noticed that there was geared ETFs that were allowed to be invested in and I thought

Actually that's kind of interesting because this money's money that I'm not gonna touch for the next, say, thirty years. I'm not gonna be selling it. I can add to it if I want to to kind of improve the outcome over the long term. And it's not money that I'm gonna like or it's not funds that I'm gonna like panic sell because I can't access it anyway. So that would there would be no point in selling, like no advantage to selling. So I thought that's kind of interesting.

Let me look at what the options are on the ETF. that were on offer. I'm like, okay, that they look they look all right. I would actually choose those if I wanted gearing. So I kind of put a bunch of these together because there was like three or four or five. I had to work within the limits. The stupid limits of what you have on the Per Lab mate for safety. And I was able to make a gear portfolio essentially that.

I think it's like 98% geared because there's like a two percent cash amount that needs to be held. So that's essentially where my super has ended up now. And I'm pretty happy with that as a long term strategy. So I wrote a full article explaining why

why that is, the numbers behind it, the thinking behind it, the long term strategy and the the potential payoff that I expect to get from it. And also carefully highlighting that it's definitely not for everyone. It's only for people that meet like Three or four or five important criteria, which I kind of just mentioned.

But yeah, maybe we'll put the article in the show notes'cause then it's it's if someone is wanting to know a bit more about the thinking behind it'cause they think I sound a bit crazy, then the article will explain exactly like all of that. Sort of underpinning behind it.

So two things on that quickly. Firstly, for the listeners who are maybe for the first time hearing about geared ETFs, we did an episode on geared ETFs in episode thirty eight where we talked about them and then in episode forty nine we talked about them in relation to super.

Um secondly, this is a case where Dave is trying to be very nice sounding to the Perl of Superfund, but we didn't actually have these geared ETFs there when we launched and Dave told us in no uncertain terms that he's not interested in it. Um, unless there was geared ETFs because he didn't see a reason to move for him his personal circumstances without that, which I think is a better story than a truer story. Uh Dave's Dave's very polite. Um

And I think that makes a lot of sense, Dave, that the kind of gearingness would intrigue you, you know, as well as some of the tax drag elements. And I think just uh to replay that again. So it's like if I look at Perlis Super and I compare it to another super fun, yeah, you're not having to pay rebalancing tax or old people selling out things tax. By the downside, so to speak,

is that let's say, you know, you've built up a massive amount of, you know, IV V S P five hundred, and it's two million dollars and now it's time to retire. And this thing is low dividends, so you gotta start selling it down. just like you would if it was outside a super, as you sell that down, you will at you know, your super fund will have to withhold tax.

That fifteen percent or whatever it is, and then like take that away. But the theory, of course, being that that's okay because the amount of money even after the fifteen percent you're taxed in theory would be larger than if you'd kind of taken that tax drag hit along the way. That's the that's the, you know, the theory as far as I understand Dave's approach with stuff. I'm probably like not as meticulous as Dave. I don't lose sleep over that. I think he's right.

But it's it's quite heady for me. I actually have this thing. I I do a lot of talking about super and One of my favorite things about now investing in supercause I now invest in ETFs in super, right? Whereas a year ago I was just invested in, you know, high high growth or whatever it was.

Um one of my favorite things about ETFs is and I describe it in the webinar as, you know, if anyone's ever been overseas, I know Dave's been to Thailand, we've both been to Thailand, and you go into a grocery store in Thailand, there's just all this kind of stuff on the shelf and you don't know what any of it is. And it's like to make sense of what it is, you have to read it. Yeah. Everything's interesting. You're like, hmm, what's this? Yeah. You gotta like

see what the ingredients are, understand the value proposition of this. And what I like about the idea of ETFs and Super, and obviously I'm biased'cause we built the product for it, but is that you like you know what an ETF is. I tell people it's like if you shopped at Woolworths your whole life, it's really easy to shop at Kohl's because it's the same Gorilla Pasta. It's the same Mount Franklin water. So the cool thing about having ETFs and a super fund is that

when I've been chatting to customers who sign up to it, like they don't they don't have to ask themselves like what the hell is balanced. And not just what the hell is balanced, but what the hell do you think balanced is super fun.

You know, and what's your strategy and'cause all all the super funds will vary on these things slightly or you're gonna have to read the PDS because you're not a hundred percent sure. So I think there's something really cool about taking known products. It doesn't have to be ETFs, it could be any kind of known product in market. Cause ETF's in a way of like the commoditization of diversified investing. There's lots of platforms out there that are like, We're a managed fund.

But some people are just like, Yeah, but now I have to figure out what exactly you're managing. Whereas I just know what VAS is, this kind of concentration on on products like, you know, Vanguard and BetaShares ETF. So

For me personally, that was that was kind of a more intriguing thing that, you know, got me interested in that different type of super fund, less about the tax drag element and just more like I understand what the hell I'm investing in because I've been investing in it outside of super for five years. Ah, so would you say it's more of the absolute Transparency and control maybe, because you know that exact ETF?

Because you invest in that exact ETF in your personal account. Is that the the appeal? Yeah, and it's it's kinda cool too and and I understand this now because I'm obviously a user of super as a consumer, but I'm also like someone who has a company with a super fund. And it's really cool having a com a super fun company, I guess, because th like our one, because they they users pick the ETFs. So there's no investment management fees and stuff.

And that's I mean, I sound like I'm trying to sell it, but I'm really just trying to explain it. That's really cool because we're like totally not in the the market of like having to decide what the right fee is to manage a balanced portfolio. We're just like

Not our problem. That's your problem, you know? And like having to manage a strategy for someone. You're just like, Okay, well, there's an admin fee and you can pick up the more or less. Like our businesses to allow people to buy ETFs and super. But again, I I don't wanna keep rambling about that'cause it will just sound like I'm trying to sell it. But this isn't really related to I guess ETFs are not ETFs in super, but during the process of going from like a major super fund

to an ETF based super fund. One thing I did start to think more about as you were kind of talking about was the tax differences in super. Because we've kind of talked about this in previous episodes, Dave, where, you know, growth versus income investing and stuff like this. And it only occurred to me really this year that I'd been gravitating away from ASX equities and ASX ETFs because of the higher marginal tax rate that I have these days.

Whereas I think super's really interesting and I kind of wish I thought about this more before I started investing or you know, put the money in initially, is hey, maybe VAS is less scary than IBV when it comes to super proportionally. 'Cause one of them's not suddenly getting, you know, a thirty seven, forty five percent marginal tax bracket, it's just getting the fifteen percent. So I I think there's definitely an element where it's like anyone who's been influenced

by tax rates and tax losses based on income versus uh growth ETFs, that gap is reduced in super, as far as I understand it at least. And I I wish I I think I'd thought of that before I started picking the ETFs. um in my last you know, in my current super fun. Alright, so just before we get into because I actually want to know what

ETFs you've chosen and I'll share what I've chosen because I don't think we've actually shared that with each other, so that'll be interesting to unpack and why we've chosen those specifically. But before that I feel like I should say something negative now about Pearl Sleeper'cause you've been good,'cause I've got another one coming too. So let's both do a negative.

The admin fee is too high. You need to get that down. You need to cap it at like a a certain balance. And that would help a lot. Because it is fairly expensive. And it almost it almost becomes It becomes cheaper at some point to get a self-managed superfund, which it shouldn't really, because that's way more complex and way more sort of regulatory hoops for the individual to jump through on that. So the fee needs to come down or it needs to be capped.

Yeah, and then we'll get on to so what's your negative and then we'll get on to the the specific ETFs'cause I think that'll be more interesting. Let me share two negatives, but let me also talk about your negative,'cause I think your negative's not that bad. Well, let me elaborate. So The c the current at the time we're recording this in November of twenty twenty five, the the admin fee for Pell Super we published it as point four three eight, I think, percent.

And I hate saying things recorder because I'm always like, was it 0.39%? I think it's 0.38%. Point, sorry. Oh my goodness. 0.438% currently. Check the PDS is the correct answer to any questions about fees. And that is a higher fee than a a typical super fund'cause a lot of super funds have a cap. So basically you pay a percentage fee until you hit like an upper limit and then the a dollar amount doesn't go up, even if your super fund balance gets bigger.

BellaSupers percentage fee is actually not that high. It's just there's no cap. So for very small balances, it's actually like not crazy. It's pretty reasonable. But for large balances and including my balance, my personal balance of like a couple hundred grand, uh, it's quite high compared to some other super funds. Now, to some extent that's made up by the fact that if you've chosen pretty cheap ETFs,

the overall fee isn't as high, but like a customer's not joining a super fund with ETFs to then be like, Oh, that's fine. I'll just like cancel out my savings. that I made in a higher admin. Yeah, exactly. Yeah, yeah, yeah, yeah, yeah. The the high admin fee though is is n a nearly solved topic. Um it's not something I sort out myself. It's something that

you know, my co founder sorts out and I'm I'm C C'd in a ton of emails and it's it's imminently being solved. Um it's something that we couldn't launch with for a whole bunch of boring, legalistic, business oriented, commercial kind of reasons. But that that one's being imminently solved because from day one we've been like this is a problem that you know, it's gonna be a problem for people and like I don't like it. Like I don't get s I don't get I don't get Pearl Super for free.

It still comes out of my retirement, right? But I actually think the two genuine problems that would affect people that aren't going to be solved imminently. One is insurance. You know, we because of the nature of that fund, because it's not a pooled fund like you talked about, it's actually a little bit more difficult to get insurance sorted. And that one we are working through because the fund doesn't have insurance with it.

But it's a bit of a slower process to solve that problem. So we know that, you know, for people who like life insurance is a big part of their super fun choice. They're not going to be interested in the product, and fair enough, you know. Um, that makes sense. The second problem, which isn't really a problem, but you mentioned earlier about oh, people can change their investment options really willy nilly in a normal super fund.

In these kinds of non pulled super funds like Perl of Super, I think the downside is that there is a penalty for learning in that type of superfund, if that makes sense. You have too much control. You can tinker. We'll talk about it in a moment when we talk about what's in our portfolio. But basically, I chose some ETFs in my super fund and then they went up. And then I've been thinking about changing it. Naughty naughty.

I feel well it's it's a little it's different because now if I was to sell an ETF and buy a different ETF or rebalance it into a different type of portfolio, there is going to be an immediate tax effect that hits. You know, almost defeats the purpose of having an individually taxed account, right? Yeah. I mean basically it's like if you're someone who wants to change your super portfolio yearly. I genuinely don't know I I'd have to think about it mathematically, but like surely it can't be

Surely you'd want to basically um shift your tax burden onto like the broader pool of people in the super fund. Yeah, no, a hundred percent. If you're if you're in a situation where you are someone who for whatever reason, wants to be very tactical and very, I don't know, sort of on the move with your super and your strategy and you do want to essentially tweak it quite

Uh aggressively every two or three years, let's say you move like a large portion to cash or you go to property or you go to high growth, uh balance, whatever, and you're kinda hopping around. And although that's probably not a good idea, let's just say that's what you want to do, then you're gonna be much better off in a in a pooled account where the tax is already kind of harvested away versus the individual account, I would say. Because you you're gonna get the low fees and

worse off for the tax because you were gonna cop the tax if you were taxed individually anyway. Yeah, exactly. So I think they're the they're like the two big the admin fee will be sorted out. I mean this will be released two months from when we're recording it. I'm hoping it'll be sorted out by the time people are listening, but And if not, it'll be shortly after that. But yeah, the life insurance and if you're quite an active super fund portfolio changer are I think the two big like

things to consider that make a product like where we have our super right now for different reasons. Yeah, like maybe not. Maybe it's not for you. Which I think is good by the way. Like I I actually when people don't sign up to any product I make because it's not right for them, I'm just thrilled to be honest, I'm like Makes your life easier, makes my life easier. Um so if you need life insurance, stay the hell away from the stuff I built at the moment. Check back in late twenty-six maybe.

Alright, so let's unpack now what's in our super portfolio since we are investing in ETS. I want to know from you. What's your portfolio look like and why does it look like that? The vast majority of my superannuation is held up in about seventy-five percent IVV and twenty-five percent VAS.

Okay. What's the maximum you're allowed on IVV, by the way? I think it's seventy five percent. Okay, you maxed it out, yeah. Okay. Um I think so. It's around about that. Um I did it once when I I transferred it. Now, I think I regret that a little bit. because I'm feeling a little exposed to the US market at the moment. Ah, okay. Yeah. Maybe when this podcast comes out, like the US AI bubble will have popped and um people will be laughing. But

I I think it's I think again, I'm like, well, hey, if dividends are only taxed at fifteen percent instead of the marginal tax rate, I think VAS is a lot more interesting to me in super. So it was seventy five, twenty five. In hindsight, I think I probably just really would have gone more fifty fifty. personally. And that's a pretty baseless thing. I don't think about these things too much. I don't think I'm very smart with it.

But uh ever since Dave basically started emailing us on like a fortnightly basis, being like, You guys, the super fun sucks without geared ETFs, it got me thinking about geared ETFs. More. So as of I think a couple of months ago, probably when we did the episode on Geared ETFs and Super, I was like, Yeah, this Dave guy seems to be making some sense. So I basically changed the super fund to do I think it

For all new contributions. Uh I think it's about fifty fifty between G H H F, which is geared DHHF. And geared G N D Q Yeah, it's about it's about a two to one ratio. So call it like thirty three percent NDQ and sixty six percent GHHF. Now, to be clear, I think I think like A leveraged NDQ, a leveraged NASDAQ 100 is a marginally irresponsible decision, um, to some degree. It's like quite focused. Volatile. Yeah, but also the thing was because I didn't want to

sell. I didn't want to rebalance the rest of the portfolio. And we don't add money to super that quickly, right? Like we just don't'cause it's a portion of our income. I haven't been too fussed about it'cause if I'm being pretty transparent. I've had this here for months and months now and like I have like five grand in GHHF and like four grand in G N DQ from like contributions that have come in like all year kind of thing. So yeah, it's it's also an element of like

I'm not too fussed how it goes because I'm not I wasn't changing my whole portfolio in that direction. And I mean, it's nice to sit with it for a little while. So basically the short answer is I think I'm pretty fifty-fifty. broadly on Australia, US I think I'm just trying to figure out what my my steady state portfolio is for the long term and whether I want to sell

stuff and I think I want to get more into geared stuff'cause I think Dave was pretty convincing on that. And maybe over time I'll try and shift things across and just take the tax hit. But Largely, I mean, I don't stress about it too much'cause I V V V A S GEAD DH H F or Git N D Q, I mean. It's not like they're not bad options, right? Like a lot of these broad based ETFs are all gonna be fine in in one way, shape or form. Uh but that's pretty much my portfolio as it is currently.

I think as saying that out loud it makes me sound significantly more chaotic and less thought out when it comes to this stuff than I I think in my head I thought I was. But I'd be curious, Dave, to hear maybe your slightly more calculated and calm approach to these things. Yeah, so mine is

'Cause I was able to essentially start fresh with whatever I rolled over from Australian Retirement Trust. So I built the portfolio from scratch and I haven't touched it since. So it's effectively I had to work within the limits of obviously what's allowed in in each ETF, which is like a r I suppose based on a risk rating and things like that. And I wanted to get the portfolio to a hundred percent geared, right? I wanted to have all geared ETFs. So

I would actually prefer to just have one geared ETF and that would be G H H F. But that's not allowed because the limit is I think it's forty percent is the maximum allowed in that one. So I went with forty in that one. And then I used Geared A two hundred, which is just an Aussie index one that's geared a bit, um, which is I think it's G two hundred is the code. And then G N D Q, like you have Hayden, which is geared NASDAQ. And I think those were twenty five percent each.

Which takes me up to ninety percent of the geared ETFs. And then to make up the remainder I found another one which was a s effectively a geared Aussie equal weight ETF, which is basically a basket of I think it's around seventy Aussie companies and they're more or less equal weighted. So it's like one and a half percent in each company. And I think they might apply some quality filters and things like that. So it's not a perfect index fund, but it is not too far away and it's

not concentrated on big companies. So because it's equal weight it kind of skews more towards medium and a bit smaller companies than a typical index fund would. But I just filled that up with the Aussie portion of the fun. So when I combine it all together, I get a Ninety eight percent of the geared super fun because they'll have to leave a little bit for cash.

And then it's it's effectively when you analyse the breakdown inside those things, it basically works at almost exactly fifty fifty split between like global slash US and Aussie shares, which I'm pretty happy with that. The main question I have for you is that you said if you could so the reason there are limits on certain ETFs is because I believe the trustee enforces them based on their decisions about risk.

But I I I'm interested that you're like, I kind of wish I could have a hundred percent G HHF, you know, leverage DHHF, because in other episodes we've talked about portfolios and you don't sound like you invest in DHHF. outside of super, it sounds like, you know, you're you're a big kind of VAS, VGS kind of control. the two parts. So I guess it's like, why do you have this desire for an all in one approach a little bit more in the super fun?

Because that's the closest way I can get to a nicely balanced diversified portfolio in the simplest way possible. Because there's no there's no geared global shares, there's only geared NASDAQ. So if there was a like a geared VGS, like a G V G S or something, which they wouldn't call a V G S but

Would you do that and geared A two hundred? Alright, so there's now one from Beta Shares which basically is a replica of VGS that's a geared version. But Perla doesn't have it, mate, so I think you need to pull your finger out and add that one to the list'cause it's not on there,'cause if you did have that, then I might look at that instead, but'cause that would be a slightly cheaper fee I would say than geared G H H F. But

From memory the the fee on G H H F was actually fairly attractive, given those all in one funds tend to be more expensive. Yep. My next question for you would be, let's imagine that Perla releases the G GBL, the the geared global one, the V G S equivalent. Would you sell out

Or would you just be like that's just I don't like to sell, I'll hold that and I'll just put all my new stuff in these different layouts ETFs. Yeah, I would I'll a hundred percent keep it.'Cause it it defeats the point of putting it in an individually taxed account in the first place.

If I'm having to pay the tax on it. But do you think it's fair to say that it's not that you should be dogmatic to never sell? It's that there's no point selling because it's broadly aligned with your strategy anyway. Like If you came along, right, and for just some reason you were like, you know what? Global stuff sucks. I just only trust Australia. You probably would sell the GHHF, right? Because you're like your portfolio doesn't reflect

Where you think the world's going? Yeah, if I expected there to be a fairly different outcome that would warrant or justify the tax bill, which would admittedly be pretty small at this stage'cause I've only had it for a few months. um then yeah, I I would be open to selling. So it's not idealistically against selling, it's that there would just be nothing so similar then it just wouldn't make sense because it's so similar and I can simply allocate new funds to to that instead.

Or to to a different fund instead. And because G H H F is so similar to the combination of G A two hundred and G V G S or whatever the codes are, you're kinda like taking the fifteen percent tax hit, reducing my principal by fifteen percent. it's so unlikely that I would make up that tax effect basically because it's just so similar to the other stuff. You know, it's not gonna grow like way quicker if I split it up between these other two ETFs, so therefore it's just silly not to leave it alone.

Yeah, that's true. That makes sense. And I just I just confirmed the fees and the fees are actually the same on the geared global from Beta Shares, G G B L and and the G H F, the All In One Fund. So that's

kind of unusual compared to their normal funds where almost all the time an all in one fund is going to be more expensive than a single single index ETF. But in this case they're the same. So it actually makes G H H F more more attractive and more affordable than it otherwise normally would be.

Yeah, sure. Okay. So do you have any plans to I mean, you did kind of speak about your portfolio in a way that implied that it's not a it's not a permanent state of affairs that you may look at tweaking some things going forward or are you just happy with your new plan of

adding some geared funds and then leaving what you have already or are you particularly Yeah, I'd probably leave it alone. I think um there's a part of me that thinks oh the effect of gearing over multi decades is gonna be like better than avoiding the tax hit on the non geared stuff. But I think the other part of me, Dave, is like I just also feel like

this space is also evolving a lot. Like, you know, suddenly Vanguard might announce a geared ETF with half the fees in a year and a half and like it does feel a little bit like I don't need to optimize it all the time'cause it'll probably be imperfect Most of the time it's in the super fun'cause things keep changing. But I would say that If there was a flash crash where cause I think right now I'm looking at it, my my IVV's up nine percent and my VAS is up

Four percent. If there was a flash crash where I could Yeah,'cause right now if I sold them out, I would be roughly having to pay not a lot to be fair, but probably a few thousand dollars in tax, which is not that dramatic. In the grand, grand scheme of things, but it feels icky'cause I'm like, why would I just make that money evaporate? You know? Um so I can tweak, pull some levers. Um but no, I think if there was a flash crash, like the AI bubble pops.

And that caused the market to decline nine percent, which is very feasible that it could uh and VAS, you know, the Australian economy is pulled down by the US economy. Then yeah, I think if I think if it went back to zero or negative, I'd be like, yeah. Might as well uh might as well sell it out and buy some geared stuff instead. Probably. I've done that before and I th I think it's good advice if you kind of like if your portfolio's not up a crazy amount.

Like if it's up less than thirty percent and you kinda wanna change stuff, it can be beneficial sometimes to

Just wait till it gets down to zero. But it's worth me disclaiming, of course, that y you don't have to hyperfixate on tax because that makes sense in theory if like two things go down the same. Because obviously it doesn't make sense if like you want to go from investment A to investment B and investment A crashes So then you're like, Great, I don't have to pay any tax and then you sell it and you buy investment B when investment B hasn't crashed.

'Cause now you basically just bought in at a higher cost base. Like so I just want to link at that eye. Buying buying high buying selling low and buying high to avoid paying tax is like a weird thing. Rinse and repeat and you'll be rich.

Yeah, yeah, of course. So um you don't know don't overthink it too much. Um but yeah, no, I I would probably change it if there was a a f flash crash and it didn't seem like I was buying high, selling low. And that I mean that would make sense because If I was trying to invest in geared stuff and there was a flash crash, I imagine the geared stuff is

gonna suffer pretty badly in the short term. Like even right now, my geared stuff is down red. So Yeah, yeah. It definitely would. It'll just get lower. For anyone who hasn't really read about geared ETFs or they've heard people say that they're kind of you know, s slightly insane or something like that, or like it's a recipe for disaster. Please go and read my article'cause it's a lot more well thought out than it might.

than it might seem like on this podcast. And I'm actually gonna do a follow up article on it because there was a lot of questions afterwards. around how they work and what about this and what about that. So I'm gonna do a follow up that's gonna kinda clear up all the other concerns that were raised. Yeah, and go go check out that episode thirty eight as well. Um,'cause Dave unpacked a lot of that there and

A lot of topics in this podcast him and I are pretty evenly weighted in, but there's been a few where he knows a lot and he has wasted a lot of his life reading and git ETFs was one of them and even even the difference between different kind of Git ETFs was something um that I think made me be like, Okay, maybe these newer ones are worth it, so

Oh yeah, check out that episode and keep an eye out for anything Dave publishes, I guess. Yeah, we might try and put that link in the show notes'cause I'm sure there's a few people that's listening that's probably like, Mm, I don't know, that sounds a bit Yeah. Sounds a bit funny. Um but in terms of overall super, do you add to your super like do you max out your super each year? No, I've stopped doing that. Um I did that for a while and I I kind of Why? Why have you stopped?

You're a tax saving fanatic. You're our resident tax nerd on the podcast and trying to reduce your tax, mate. What's going on? Why the change of heart? Well I think I I think I said this in another episode when it when I was asked this question. It's like I think there's a chance that just based on my ongoing contributions and compound that my super fund will be at least fifty percent the size I would like it to be one day. Therefore I'm kinda hesitant to lock the money away, basically.

And my conclusion with it was like I think contributing into soup is a great idea for anyone if you are just like so certain you're gonna be short anyway.'Cause I I think the way to think about it is like Broadly speaking, if you don't need the cash flow, I I think it's better if you can put money in concessionally now.

That's better than getting older and then having to put money in non concessionally in large chunks to make up for it at the last minute. So it's like if you if you're pretty sure you're gonna have to like dump more money into super one day anyway. you might as well start putting it in now because it's a great deduction. Um and you get the compounding effect and everything else. But I think I'm I think having done that for a number of years, I I kind of just look at the balance and I'm like, ugh

I don't suddenly feel a hundred percent sure that I'm gonna have to put a lot more money in. I feel kind of just like pretty sure. And that doesn't feel as strong enough for me to put money in right now, if that makes sense. So when you think about that and you think about the future balance that you expect to be able to reach or hope to be able to reach

Is that based on anything other than your personal life? Is that based on where you think certain supersized balances will be taxed differently in the future or anything like that? Um, no, it's mostly just like compound interest calculator, what expenses would I need in the worst case kind of thing. I kinda have this attitude of like

If life goes really well and you stumble into really good jobs and professionally things work out or economically things work out, then you're probably not gonna be like, Oh damn it, I didn't put money in concessionally when I was twenty five years old. You're just gonna be like, Life is good. So I mostly try and plan for the scenario of like what happens if

What is like the most plausible downside case of how things plan out financially? And then it's like, okay, well, how much money would I want in super in that case? And how's it looking and tracking? So it's it's pretty rudimentary stuff. But you know, I I started putting money in concessionally when I was like twenty twenty five and I had a super balance of like Thirty grand or something. So that's a no brain.

You know, if you're twenty five with thirty grand and super and you're earning good money and you're gonna get a tax deduction, you might as well, you know, get get that money in early, is my view at least. But yeah, yeah. I don't I don't overth I don't overthink the tax policy stuff. I mean We even saw this, like Labour had their unrealised gains tax policy and then um it got changed.

to a something that everyone seemed more happy with. And you know, it's it's hard. Like it's hard to remember sometimes that bad policies often don't make it in to implementation too. Like

I you know, I I get I'm surrounded I'm in various circles, Dave, that are like very progressive and very conservative, you know? And like I've been to certain work dinners um in rooms full of men in suits where like all they're doing on stage all night, like the MC is just Bagging out Albo, you know, like like like like demeaningly in a way, you know, like silly, silly labor leader doing silly policies, you know, and

You forget that the you know, whenever there's a policy and maybe you get worried about it that it has a good way of getting shaken up between all sides of the world to something

a little more digestible most I mean that's oh we've got to pass the Senate or whatever they say, right? So and even if even if it passes the next government comes in and changes crap anyway, right? They can just do that. They can just unwind things. So I I you know, I generally think it's all gonna be pretty simple and from what I understood about the last super policy version I saw, I was like, mm, doesn't seem absurd.

So no, I try not to I try not to overthink that stuff at the moment. And maybe that's just a form of self protection'cause it feels like a race to the bottom as well, is constantly being like, Oh, what's the government gonna do?

with super and stuff. Yeah, I try not to worry about or think too much about uncontrollables like that either. Like obviously you can try and be aware of them and try and make your own predictions, but because of the just the sheer uncertainty with life and the future, you can't really

make thirty five year plans based on something that may or may not come true. I guess you've got you've always got to work on probabilities and things like that. So it sounds to me like you're more

the what would you call it? Maybe the risk reward or the preferences trade off has changed for you over time where you now see your super balance getting to somewhere pretty decent over time, even if you don't add more to it. So now you're like, mm, I prefer to keep some of this cash and use it outside super right now is that Pretty much how you're thinking about it?

No one wants to put money into super that they're gonna regret putting in. So you think there's a chance you may regret putting more in if you were to do that for the next five or two months? I think it's definitely like ten or twenty percent. But It was easy to put money in when I was like there's a zero percent chance I'm gonna regret this.

And do you think that's possibly because you're interested in buying a house potentially in the next five years or so? Is that part of that sort of thinking?

Yeah, I I think all of that plays into it for sure. Um yeah, I think I think when you're younger and you don't have any kind of capital or anything like that, you know, like even recently I've been trying to dabble around to figure out if I should refinance a loan and extend the size of the loan to do more debt recycling and then I'm like, oh, if I extend it that big, I don't even have the cash sitting around to pay off that little

Extra loan and I'm like, Oh, it would be nice if I had that cash sitting around, you know. Yeah, yeah. So there's there's always chances. Yeah, and I you know, at the end of the day, like no no one's out there sipping, you know, mango smoothies. on the beach being like, Oh, thank goodness. I made those concessional contributions in two thousand and four. You know, like

They like that's not a thing. So I mean it's the whole thing, right? We've talked about this on the podcast before. It's like negative energy is stronger than positive energy, right? We hate losing five dollars more than we like gaining five dollars. So I think sometimes it is a form of self protection of like

Well, if I think there's a chance I might experience some negative energy doing this, as opposed to no chance realistically, then maybe I just won't do it. Even though the chance of positive energy is higher, you know, I'm not gonna miss what never was. Whereas like if I actively do something and it causes me some grief.

That'll make me sad. But to be clear, I don't actually think about this a lot, to be perfectly honest. I've been two things. One, I've been very, very busy the last couple of years. So like overthinking super contributions isn't that high. But also, because of the Australian government's carry forward rules with unused concessional contributions, it kinda doesn't matter too much because I think I was maxing out my concessional contributions all the way through

two thousand twenty one or two anyway. So it's like technically I could throw some stuff in some unused caps in a couple of years anyway with the money I've got in any anyhow. So it's not exactly the same of course. 'Cause of how to bring down your marginal tax rate and at some point the benefit might be less, but It's it's not like it's a lost cause. I think that's an important thing to flag to people too, is if you haven't put money into super last year and you feel like you've

you've missed out on stuff. It's like you probably haven't,'cause of how you can, you know, carry forward those unused contributions. And it's definitely a worthwhile thing to look at because in many cases, especially if you have huge amounts of cash and especially if you want to put a lot of money into super, you're talking about like

thousands, in some cases, tens of thousands of dollars back on your tax return, if you think that's the right place to put it. That's a very interesting segue, mate, because that's exactly what I'm gonna be doing in the next say six months or so.

With the proceeds from the sale of a rental property, we're gonna be doing the I was about to ask, like you don't even have an income'cause you're f financially independent, but it's because of the sale and the the tax you're gonna have to pay. Yeah, yeah. So I haven't had a job where I've earned any super for Yeah, eight years now. So I have five years worth of unused cap space essentially. So effectively that means I'm able to add a hundred and thirty thousand dollars

into super and claim a deduction. And so at the point that we're at now, we can afford to do that without it affecting our financial independence, like our assets outside super are enough to the point where we could add a hundred grand or two hundred grand into super.

That is technically what would be called like surplus wealth for the purposes of financial independence. So that starts to make more sense. I would much prefer to have access an optionality over the money, but with selling a property the capital gains owing is like not negligible. So by doing this, even though it's gonna tri even though it's gonna trigger that div two nine three rule.

Um, where you go over what was it, two hundred and fifty grand or something like that? Because they calculate your So like my my what would you call it? My writing income and then my investment income and then my capital gain on top of that and then they also add on whatever amount you're adding to super. And then they calculate whether you owe this tax based on that. So I will actually have to pay that tax. So the super

Uh contribution won't be as efficient as if I was just putting in, you know, a smaller amount under a normal year. But it is still worth it. I think it's still gonna save something like eighteen thousand dollars ish. Something like that. So it's f it's fairly decent and I decided that it that was worth it. That was worth it for the next like whatever, twenty four years.

to um put this chunk of money there because it we're gonna be selling another property and we can invest that elsewhere. I'll just reiterate to people again'cause I think I think it's an easy thing to forget and that's why I love this deduction so much like The super deduction's crazy. The fact that Dave can basically take a chunk of money and just

shift it to his old self, nearly dollar for dollar, obviously gets taxed to fifteen percent as it enters super. And then suddenly the government's just like, Here you go, here's a bunch of cash to you shifting most of your money to a later date, whilst it quietly compounds effectively too, right? So

Um I think that's great that you're able to to utilize that, Dave, for your own benefit. Yeah, I think it makes sense. And on an ongoing basis, I may also start adding to super just You know, normally up to up to maybe thirty grand if I have spare cash sitting around'cause we are in that fortunate position where it is like so essentially surplus income that we can

you know, put put in different places. So the although the you know, the control and access and optionality is preferable, it du it does start to make sense at some point as our like investments start to you know, grow and gain more traction and the the tax rate starts to get up there a bit. But um I would be very curious to know if like you're mapping out your future super at least casually and very roughly in your mind.

Do you envision yourself like at sixty turning on that income stream, or do you envision yourself sort of using the lump sum to maybe pay off Some debt like debt on a house or something like that, or you just haven't thought about it whatsoever. Haven't thought about it whatsoever. Yeah. Give me an answer right now. What I what I do with the super money. Yes, pick one. Try and live off it passively. Okay. Yeah. What if you had debt still? You would keep the debt?

I'm going to assume if I was older I'd be sick of the debt, even though right now I'm not scared of it. Hmm, okay. Interesting. We'll see.

So maybe lump some then? Yeah, maybe. Never thought about it. I think it's a great question though. I mean it's good to think about what you do in the future. So let me rain check you on that one. We'll revisit that in episode number seventeen thousand. Yeah, yeah. So that's pretty much it for us today. I think we've covered everything we need to. We've talked about Dave's super portfolio, my super portfolio, how it's changed over time and how we think it might change over time in the future.

We also did talk a little bit about the choice of super funds and in particular the interesting effects of pooled and non pooled funds. Not that we universally think one of them is, you know, better than the other, but they have different effects which depending on who you are and how you use your superfund and what you want to invest in, um, it may be, you know, very interesting for you to consider if if that's the right one for you.

But it has been really fun talking about super. It's a big topic'cause it's where a lot of people's money ends up and You know, for many Australians, it's actually probably the largest place they are investing, realistically too, especially if you're they're cash strapped and they're not able to

You know, if you're not saving 10% of your take home pay, you're putting more money into super than you are everything else you're putting aside, right? So it's something that we think people should be engaged on. generally as much as they can. But if you do have any uh questions you'd like to ask us about the episode, you can always email us at hello at Ozzyfirepod dot com or you can reach out to us on socials at Dave.

Strong Money Australia or myself at Perla. If you do have any particular questions you'd like us to cover on the pod, There is a link in the show notes to ask those questions. And if you would like to offer your own circumstance and potentially join us on the pod as a guest, as you've seen in the last episode, then you can also

Follow the link in the show notes to uh potentially be part of one of our case study episodes. But otherwise, thank you so much for listening and we'll catch you in the next one. Cheers, guys. See you next time. We hope you enjoyed this episode of Aussie Fire. For more FI inspiration, head to Perla.com to browse our resources, calculators, and community insights. Perl is an authorised representative, number 128. Of Sandland Private Wealth, PTY L T D with AFSL number 337.

Knowledge is power, especially when investing, so always seek advice and/or check out the relevant disclosure document for any financial product, including the PDS and TMD before deciding. These are available from the product issuer's website. When you invest your capital