Friday, May 14, 2010

Retirement Strategies 15 May 2010


“We are grateful that, one day, you will be using our services.

“If we prove to be exceptional, would you refer us to three of your contacts?”

I’m Bernard Kelly 0414 778 518
Australia's Retirement Strategiest®


I was impressed with the website

It offers a kaleidoscope of concepts for anyone thinking about the final third of life, and it’s not just about jobs.


When Bismark introduced the pension into Germany in the 1860s, life expectancy was 57 and the pension entitlement age was set at 65.

It was obvious that the pension wasn’t to be paid to everyone, only long term survivors.

Applying the same logic today, when life expectancy is 79 (males) and 84 (females) males would be entitled to the pension at age 87 and women at 92.

Which may explain in part why they are now intending to raise the pension entitlement age – but only very slightly - in all developed countries.


Anthony Hatton owns a football club – Players Football Club in Canberra.

It’s really “a business on the side” as it only operates for half the year, and only on weekends.

As a football club it is affiliated with the local league, but it’s really a training academy for boys and girls aged 3 to 12. And so there are no volunteers in this football club, as everyone is a paid part-time employee.

Anthony says “there’s millions of little kids out there, and the parents are happy to pay modest fees.

“All my family is involved and it certainly keeps me young”, he says.


Of course, I’m really only thinking of really serious “bad debt” such as car loans and credit card debt.

And I should probably add some “indifferent debt” into this mix – such as a mortgage on your family home. This is indifferent debt because – while it’s is debt and will need to be repaid eventually – the asset that it’s attached to is expected to increase in value over time, and of course without it, you’d have to be paying rent.

The significance of both bad debt and indifferent debt is that you need an on-going source of personal income to pay them off. So you can forget about retirement.

Of course, if you have “good debt” – such as on you investment properties – that OK with me, as soon (If not already) the increasing rents will eventually make them cash positive.


Most of us will never truly be able to retire as our parents did.

Because we don’t have enough for 20-25 years of comfortable retirement, we will transit from our current career into another, as we will need to supplement our income for many years to come.

Here's why:

1. After the 15% tax, our 9% compulsory superannuation contribution is really only 7.6%. And historical rates of return on super assets is only 7% (before fees).

Now to be comfortable, we’ll need an (inflation protected) income in retirement of say $50,000, and for this we’ll need a nest egg of $1,000,000.

Do the maths. Apply these statistics to someone retiring today, and who saved 7.6% of their wages for the past 45 years. There’s no way that could have $1,000,000 today. And it will be – relatively - the same going forward for someone entering the workforce today.

2. Australia’s welfare and pension system cannot continue in its current form. With the growing aged population, and spiralling medical costs, something will have to give with this program. Under almost any scenarios, one of two things must happen: benefits must be cut or taxes must be raised (or some combination of both).

3. Medical and healthcare costs will continue to spiral – and will become rationed to those on government welfare. New treatments that give us a better lifestyle are to be welcomed, but scientific advances require new support systems when delivered to those in need. And the cost of new drugs continues to rise as well, putting even more strain on the Pharmaceutical Benefits Scheme that subsides the cost of many drugs.

4. Finally, people are living longer, requiring greater savings for retirement. In the 1950s life expectancy in Australia was just 67 years for men and 73 for women. Today, the figures are 79 and 84.


So enough with the doom and gloom, is there a solution if you are in late career and don’t have enough?

The simple answer is YES

Contact me – Bernard Kelly – anytime on 0414 778 518 and I’ll help you explore your options.


As we are likely to be retired for 20-25 years, planning this far into the future is not a particularly easy process.

Some of the variables would include lifestyle/family goals, longevity, future income tax rates, investment returns, and the impact of inflation.

Let's quickly review the basics of these variables as they relate to your retirement plan.

Lifestyle Goals

Would you like to travel? Own a summer home and a winter home? How expensive are your hobbies? These questions and others like them are necessary to help create a budget for your specific retirement needs.


How old were your parents when they died? What medical conditions did they face in old age? Attempting to gauge how long we're going to live in retirement is a task that's becoming more and more difficult. Medical advances have led to later “estate events”, however hospital and medical costs might be enormous along the way. But we need a end date for our planning, so just assume that you'll live to age 100.

Future Tax Rates

Since we can only spend our "after tax" income, and various taxes will be there during our retirement, we’ll have to build them into our calculations. However, as we can’t predict what governments will do, just assume that 30% will be a good approximation.
Investment Returns

The long-term 10 year moving average return for superannuation is 7%. Of course in some years it is higher, and we also know that in recent years it has been zero or less. My best advice is to be counter-cyclical i.e. in the boom years take it all out and put it into cash, and then when the journalists are wailing and gnashing their teeth, jump back in.


Loss of purchasing power caused by rising prices must be included in any retirement plan. Which is why I favour investment property because rents rise to combat inflation.
Family Constraints

Who will care for you?

Who will care for your children and your parents? Your answers will require you to put a dollar amount beside this line item.

So, to summarise

While the future is unknown, we do know that life will go on, some of our investments won’t work out as intended, interest rates will fluctuate, politicians will fiddle with taxes, and inflation and deflation will fight it out. One thing, however, is certain: we will retire someday.


Over the years, various people have wanted to pay me for this service.

If you are similarly incliened, feel free to go to my membership site and pay $110 for a full membership


You probably know many people who need my experience and expertise right now.

Here’s the deal – you invite a few people to a lunch or after-work seminar, and I’ll present Retirement Strategies for Employees.

I’ll pay you $150 for your expenses, and a further $1000 for every participant who has me share an investment property with them.

About Bernard Kelly:

Bernard Kelly BEcon MBA CRPC Australia’s Retirement Strategist®, is a highly sought-after advisor, retirement authority, thought-leader, author and radio commentator because he makes the complicated and mundane topics of investing and retirement fun! Bernard has over 20 years experience providing families with financial thought. He is the author of Live Your Dreams in Retirement, Property Investing for Couples, Goolwa by Breakfast and Raising Decent Kids into Substantial Wealth and publishes a fortnightly newsletter that reaches thousands of subscribers worldwide.

19 Prospect Street, Box Hill 3128 Australia. Tel 61-3-9899 8577 mobile 0414 778 518



At 6:08 pm, Anonymous Anonymous said...

Hi Bernard,
Thanks for the little review on my Player's Football Club.
If any of your readers are interested in becoming involved with our club in their area and earning a nice part time income they can email me for more information at
Thanks again,
Anthony Hatton


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