Why do super funds make this crucial information so hard to find?

It would be unwise to place money in growth investments such as stocks at this stage in your life. I have no doubt you will find a job soon, at which point you can re-evaluate and put together a longer term plan with much more confidence.

I always read your answers, especially the ones for retirees, and am impressed by your words about the 4 percent super withdrawal requirement and the 17 percent tax. I’m amazed at both of them.

We are not on a government pension and live on investment income. My wife is 74 and I am nearly 80. With IT, I have a defined benefit fund just above the retirement threshold and my wife will get 50 percent if I die first. He has approximately $145,000 in Australian super untouched since he retired at age 60. Given that we don’t need the money, could leaving it there cause problems? We also have an adult son on a disability pension. We want to provide him with as much as possible. Should we step up with my wife’s super so more of it gets passed on to her?

If a person has super in retirement mode, they need to draw down a percentage of their balance each year through a superannuation. If the money is in savings mode, there is no such requirement.

But the downside of having money in savings mode is that you pay a flat 15 percent tax on its earnings. Leaving the money in savings mode will not cause such problems for your bottom line, except that it will receive a lower net rate of return.

The best way to protect your son is to make him a nominated beneficiary of your spouse’s retirement area, because then it will automatically go to him. This is preferable to relying on the will, since the fund will be able to pay it directly without any disputes.

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You’ve written several articles recently about compound growth and the power of starting early. What advice would you give to family and friends who are setting up as a savings or investment strategy for a newborn?

Compounding requires automatic reinvestment of earnings so that the amount grows faster as time passes. You also need to consider the punitive child tax, which applies to earnings left to a child once they exceed $416 per year.

The best solution is an insurance bond, which is a tax-payable investment (the tax payable is deducted from the fund’s earnings each year). There is nothing on anyone’s tax return during the investment period.

Additionally, when the child reaches 18 or at a convenient time, as decided by the grandparents or parents – the money can be transferred tax-free. It is a very effective and simple investment.

by Noel Whittaker Retirement Made Simple and other books about personal finance. Questions: Noel@noelwhittaker.com.au