ZG #1 - Zeke Calls BS On Gregarious News Gimmick 'Super Sweet Spot' (Retirement Strategy) - The Finance Bible

Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Zeke Guenthroth (00:00):
Imagine draining your hard-earned
retirement savings just becausethe mainstream media told you
it's the smart move, sacrificingfinancial security for a
pension gimmick, and by the timeyou realise the truth, it's too
late.
Today I'm calling out thisoutrageous, laughable advice and
breaking it down piece by pieceand showing you what the real

(00:20):
numbers behind a successfulretirement should look like.
Welcome back to another episodeof the Finance Bible Podcast.

Speaker 2 (00:39):
You're joined with myself, zeke, and your co-host,
oscar.
But before we get into it,please note that nothing in this
podcast should ever beconsidered as personal financial
advice.
But if that is what you areseeking, get in touch, let us
know and we will hook you upwith the correct professionals.
Sit back, relax and enjoy theshow.
Let's get into it.

Zeke Guenthroth (01:03):
Welcome to the first episode of just me running
a mark, doing what I do.
We'll jump straight into it.
I've been seeing a lot in themedia lately about the pension
increase.
Everywhere I look, you've gotthe same claims popping up left,
right and center about how tomaximize your pension by
reducing your assets.

(01:23):
It's rubbish, simply put,outlandish, foolish, idiotic
rubbish.
Media outlets are encouragingyou to spend your retirement
savings, dropping them down to$400,000 so you can qualify for
the full pension, and it'spositioned as this magical,
mythical strategy, but when youbreak it down, it's just simply

(01:45):
another gimmick, and it's aseasy as that.
This episode we're going to betalking about cutting through
the noise, breaking down thenumbers behind the claim,
explaining why it's wrong andshowing you how real wealth is
built and maintained.
That's probably the main part.
Remember this Don't believeeverything you see, hear or read

(02:06):
, even from myself.
Do your own research and alwayscheck the facts.
If you hear something from me,it's probably right, but go and
research it, check it yourself,make sure it is right.
If you hear something in themedia, go check it.
Simple.
What are they actually claiming, these media geeks?
They're claiming if you have$400,000 in your super fund, you

(02:28):
can live a better life thanmillionaires simply by claiming
full-age pension with modestsuper drawdowns.
Realistically, if you've got amillion dollars in super,
they're saying you won't live asgood as someone with $400,000
because they can claim thepension and increase their
overall income to more than whatyou can as a millionaire, by

(02:48):
millionaire.
We're talking this specificexample one million dollars in
superannuation.
So apparently and I mean thisis, this is written, it's not me
making it up apparently theideal strategy we'll call it is
to spend your way down to amagical amount of $400,000 in
your super fund.

(03:08):
Because why would you want 1million in super when you could
have less common sense, right?
Why would you have a millionwhen you can just spend 600k and
have 400k and do better than amillionaire?
Well, I don't know.
So we'll break that down andwe're going to go through all
the numbers.
Eventually.
We're going to go through allthe numbers.
Eventually, we're going to gothrough everything.
But I just want to give somesome context.

(03:28):
First of all, today we're goingto be talking about couples in
particular, because that's whatI've done the numbers on.
But it does work.
A similar concept, spoiler alertthe math is the same, no matter
who you are, where you are,what you're doing.
It's slightly different singles, but the concept is the same.
Let's break down the claim.
So the full pension for acouple okay, the full pension

(03:52):
they're under the thresholds is$44,855 per year, but it's going
to call it 44, 45k give or take.
What they're saying is, if youget that full pension, you have
$400,000 in super.
Then you can live off about$72,000, $73,000 per year and
the $28,000 difference therebetween the $44,000 and the

(04:13):
$72,000, $73,000 is from yoursuper.
And they assume that youachieve a 7% return in your
super fund but you're drawingdown $28,000 of it per year to
fund your retirement and get youup to $72,000, $73,000 per year
income.
They assume a consistent 7%growth annually, which isn't out

(04:35):
of the ordinary.
That's pretty standard.
7%, 8%, 9% that is fine.
They don't take into accountanything to do with dividends,
which is a problem becausedividends are in australia, an
average of about three, threepoint five percent, which is
great for income.
But again, that only works ifyou've got enough principle to

(04:55):
generate a decent amount ofreturns.
Right, because 3.5 on 400k isbugger, all 3.5 on,000.
So $400,000 won't cut up thelong haul because it's not
generating enough to keepbuilding up, but we'll get onto
that later as well.
Another issue with the pensionis basically it comes in at 67.

(05:19):
So if you are floating around60 years old you want to retire,
then this strategy doesn't workfor you anyway, because you're
going to be seven years withoutthe pension.
So how do you live?
You don't?
The next thing to talk about ishow reckless it is to spend
your money down.
If you've got a million,they're practically inferring

(05:41):
okay, go ahead, spend 600K anddrop your super down to 400,000.
So just get rid of that 600,000.
Why would you keep it?
Common sense?
It's a magical, mystical landwe live in, where you just get
unlimited money and rely on thepension and you're going to be
better off than someone with amillion dollars.
No common sense applies.
In fact, even just suggestingthis in an article on Facebook

(06:05):
is outlandish, reckless and itcan cause a lot of problems.
What they're saying is get ridof the safety net so you can
rely on the government.
That's virtually like saying oh, why don't you quit your job
tomorrow and rely on the doll onCentrelink?
Spending your savings toqualify for a pension leaves you
with less flexibility, nobuffer for unexpected expenses

(06:28):
and no control over your future.
What about holidays?
What about medical expenses?
What about if something goeswrong?
Why would you want to rely onthe government and not have a
safety net at all?
So that's just another thing tobring up.
Inflation is also a risk.
You know, if grocery prices goup, it's a silent killer.
Your purchasing power goes down.
You can't buy as much things,whereas if you've got money

(06:49):
invested, then it goes up withinflation.
What the media wants you tobelieve is that financial
security comes from spending allof your money.
But here's the truth Povertyisn't a strategy and dependency
is not freedom.
What do we actually need to doand break this down properly?
Okay, we'll jump on into it.

(07:09):
We need to talk about compoundgrowth and dividends a bit
further to get into the realnumbers.
But compound growth works in away where, if your super grows
at 7%, it doubles roughly every10 years.
So if you have $1 million at$60, you're looking at around
$4.7 by the time you're 90.
That's the power of compounding.

(07:32):
There is a compound interestcalculator.
If you go on likemoneysmartcomau then oh,
actually it's moneysmartgovau, Ithink, because it's government.
But if you go on that website,you can put in calculations and
figure things out for yourself.
It's pretty easy.
And dividends come in at about3.5% dividend yield.
So 1 million would generate you35K per year and then your

(07:53):
compounding growth 1 millionwould generate you about 70,000
per year, and then yourcompounding growth 1 million
would generate you about 70 000per year.
That is a fair breakdown on theactual numbers and getting a
bit of an understanding beforewe dive into the actual claims
and how they work.
So the theory behind the articleis and there's three different
scenarios scenario one is thearticle, scenario two is me and

(08:16):
scenario three is me.
Number two is we're going torely on dividends only and
number three is we're going touse some dividends and some
growth.
We'll come back and explainthem.
So the pension strategy numberone, the magical strategy, the
government strategy, the mediastrategy, whatever you want to
call it, the idiot strategy theysay get down to 400K super and

(08:41):
rely on the pension and drawincome from your super as well.
So year one you've got 400K,you get that 44K pension and
then you get 28K give or takefrom your super.
So you draw down the growth onit and a bit more as well.
So you won, you have 400K andyou draw about.

(09:02):
We'll just round it up, we'llcall it $73,000 in the year to
live on.
Now, that's fine.
You can do that for the rest ofyour life, until you're 90, if
you really want, if you onlywant 72 grand per year, and when
you hit 90, you end up withabout $300,000 left.
So it's not a huge problem,right, if you want to live on 72

(09:24):
grand as a couple.
But if you've got more houserepayments, if you've got any
form of holidays, you want to doany medical expenses that come
up that you need to pay, thenyour super balance is going to
dwindle pretty quick and you'llrun out of money in your super
and then you're just relying onthe pension, which is that 44,
45 grand that we're talkingabout.
So what would happen then inthe event that you are a couple

(09:47):
that's used to a bit higherlevel income, let's say a
hundred thousand?
Well, year one, you need to drawdown an extra $28,000, so
$56,000 from your super, gettingyou up to that total of
$100,000 because you got $45,000from pension, $55,000, $56,000
from super.
Okay, then your balance dropsto about $350,000.

(10:08):
Year two, it drops to $300,000.
Year three it drops to $250,000, and so on.
It gets lower and lower.
You run out of super and beforeit's been five, six, seven
years, you're relying on that 44, 45k from the pension,
pointless You're done, you'reout of money, game over.
So that strategy is terrible,it's dumb, it's outrageous.

(10:32):
The fact that they would evensay spend 600 grand, go on a
spree and dwindle your savingsto qualify for the pension is
just one of the most outlandishclaims I've ever read in my life
and I've read some stuff.
So what are the other twoscenarios and what are the
better ways to do it?
And this will depend on you andyour spending and it's not

(10:54):
financial advice.
But if we just move on toscenario number two, which is
dividend only so this is when welive purely on the dividends If
we've got that $1 million andit's growing at 7% per year,
then it gets to about $1.07 milat the end of year one and it
will pay you $35,000 individends.

(11:16):
So you live on that $ grand inthat instance it's important to
note here that this can start atage 60 because you're not
relying on the pension anymore.
So year three we'll just fastforward a few years so I can
provide numbers and make surethat you guys are understanding
the numbers behind it.
So it continues to grow at 7%per year.

(11:36):
At the end of year three you'vegot about 1.2, 1.25 million and
your dividends now your 3.5% onthat is about 40,000.
So still not a huge amount.
Not a huge amount.
Year five it goes up a littlebit more.
Fast forward to year 10, you'vegot about $2 million in there
and you're getting about $64,000worth of dividends per year.

(11:58):
That's a bit of a better number, but it's still not really
where you need to be or want tobe.
If we fast forward to 23 years,which is age 90, assuming you
start at 67, then you've gotabout $4.7 million, which pays
you about 150K per year.
So there's a very big jumpbecause compounding, the more it
goes on, the better it getsright.
If you get to that point,you've got 4.7 mil left and

(12:22):
you've got 155K per year comingin.
So you can figure out as you go.
Do you want to draw down more?
Do you want to draw down less?
What do you want to leave foryour children?
And that's one of the mainthings with this strategy is,
this is more of a setting upyour children kind of strategy.
Or, if you don't have a largeexpense.
So with strategy one, thepension strategy, one of the

(12:43):
biggest problem is if you wantto create a legacy or leave
something for your children,you've got nothing.
At the end it's game over.
With this scenario, you've got4.5, 4.7 million remaining that
you can pass on.
Here is where the fun begins.
Scenario three, which isdividends and growth If you take
3% of the growth out of yoursuper fund and you leave it

(13:08):
growing by 4% per year, soyou've got the 7% of grows you
take 3 of it and live on thatand live on the dividend, so
it's only growing at 4% now.
So it only goes up to $1.04million at the end of year one,
but it can pay you $65K inincome that year.
If you move on to year three,then it's only worth $1.12
million, which is like $110grand less the scenario two,

(13:33):
because you're taking thatgrowth out.
Remember, it's worth 1.12 mil,but it can pay you 70 grand a
year at that point, which isvery similar to what the pension
strategy pays and close todouble what the dividend
strategy pays.
You then move on to year five.
It's at 1.22 million.
It's paying you 76k.

(13:55):
Move on to year 10.
It's about 1.5 million, paysyou 90k.
And then year 23 is where youget a lot of fun happening.
That's now 2.5 million nearlyand it's paying you 154k per
year.
So that strategy you get moreincome quicker.
Within a couple of years you'reon the same amount as the

(14:17):
pension strategy, so the pensionplus super, but you're on
dividends and growth.
You're not actually drawingyour super down.
Your super's still going up andyou've still got 1.2 million in
there.
You hit the age 90 if youretire at 67, and you've got 2.4
million, paying you 154K a year.

(14:39):
So your income's really goodand you've still got 2.4 mil
left for whoever's nearby if youpass away, so your family, your
children, whatever, whoeveryour beneficiary is.
So just to break it down againstrategy one pension strategy,
the magical myth.
You've got a low amount ofmoney as a base, but you get a

(15:03):
decent amount of income.
You get 72 grand a year untilyou run out.
You start off on 72 grand ayear, but there's a potential
that you end up on 44k per yearwith no money left.
Scenario two, which isdividends only you start off
with a decent base 1 million butyou're only getting 35k of

(15:23):
income per year, but then youend up with a base of nearly 5
million, getting an income of150k per year.
So your kids get a lot.
Scenario three, which isdividends and growth.
But you allow it to still grow.
You start off with $1 million.
You're getting $65,000 per yearfor the first couple of years

(15:45):
and within three and a halfyears you've overtaken the
income level on the pensionstrategy and you finish in 23
years with nearly $2.5 millionand $154k income per year, as
opposed to the $44k with no sum.
Here's the truth.
Spending your way to $400k from$1 million spending $600,000

(16:05):
gets you $72k per year and nosecurity, whereas if you grow
the million to 4.7 million, itgets you 155k a year and
complete freedom.
Which one sounds better to you?
Common sense, right?
Just to summarize pensionstrategy isn't security, it's

(16:26):
dependence.
Real wealth comes from growthand independence and common
sense.
Always question what you hearand make decisions based on
numbers, not gimmicks.
Moving forward everything yousee in the media about finance,
about share prices, aboutsuperannuation.
When you see a clip that says,oh, this is how much the average

(16:47):
couple in australia needs toretire on a comfortable income
or whatever the nonsense is,it's absolute statistical
garbage.
It shouldn't be read.
It shouldn't be listened to, itshould be completely ignored,
and the fact that they can evenput it up is absolutely baffling
and mind-boggling.
So ignore it.
Do your own numbers, researcheverything, contact

(17:09):
professionals, do what you needto do to make sure that you
understand and take the rightsteps, Because if you read that
and you go and spend your 600kto try and get this magical
strategy, that 600k is gone.
You're not getting it back andthen you're going to run out of
money and it's going to beterrible.
If this episode opened youreyes, share it with your friends
, your family, put an end to badfinancial advice.

(17:30):
Put an end to the mediamanipulating people into running
out of money.
And remember again don'tbelieve everything you hear,
even from me.
Do your research, plan wiselyand take control of your
financial future.
Dale, as always, we hope youenjoyed the episode and if you

(17:53):
did, you know exactly what needsto be done.

Speaker 2 (17:55):
Hit that follow button, subscribe, share it to
friends, family or even yourco-workers, as sharing this
podcast helps not just us, buteveryone in the world to learn
about their finances.
Thank you, dale.

All Episodes

ZG #1 - Zeke Calls BS On Gregarious News Gimmick 'Super Sweet Spot' (Retirement Strategy)

Episode Transcript

Popular Podcasts

Stuff You Should Know

Dateline NBC

The Breakfast Club

.css-15opob5{left:0;position:absolute;top:0.8rem;} All Episodes

.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}ZG #1 - Zeke Calls BS On Gregarious News Gimmick 'Super Sweet Spot' (Retirement Strategy)