Sunday 3 October 2021

Net Worth: SEP 2021

My monthly NW estimate has been updated in NetWorthShare for the end of September. Chart is in the side-bar.

Stocks and managed fund investments decreased this month, down -$12,244 (-3.74%) to have $315,135 net equity in my geared share portfolios.

Our estimated house price for September (my half) increased by $12,790 (1.30%) to $999,651. The pages where I normally get the average sales price data for our suburb was last updated with the price data for 31 August, so the estimate might be one month behind what my NW calculations normally use. As the Sydney property market is still trending upwards, this might underestimate out house value and my overall NW slightly.

The value of my retirement savings decreased during September due to stock market weakness here and in the US, to $1,490,324 (down -$32,846 or -2.16%). I am hoping to reach (or exceed) the 'transfer balance cap' (currently $1.7m, but likely to rise to $1.8m) by the time I hit 65 years of age and can transfer the TBC amount from my accumulation SMSF account (where the tax rate is 15% on earnings and 10% on realised capital gains) to a Simple Account Based Pension (SABP) where the tax rate will be 0% on both earnings and realised capital gains. Although I plan to still be working past age 65 (either in my current full-time employment, and/or self-employed part-time as a registered Financial Adviser) and will therefore have a normal taxable income stream, I will then also have a tax-free self-funded pension income from my SMSF SABP (there are minimum withdrawal/pension rates applicable to SABP accounts.

A Simple Account Based Pension (SABP) is an income stream that you receive from your SMSF when you reach age 65 or alternatively when you are aged between preservation age and 64 and "Retired".

Age-based minimum pension payments (as a percentage of the SABP balance) apply:

Age <65    4.0%
65 - 74    5.0%
75 - 79    6.0%
80 - 84    7.0%
85 - 89    9.0%
90 - 94   11.0%
95+       14.0%

The idea behind this is that superannuation is concessionally taxed in order to provide a self-funded retirement income stream (and hence reduce demand for the Age Pension) and is not intended as a tax minimisation scheme for accumulating wealth to pass on as part of one's estate.

There were variations to these minimum rates (to 50% or 75% of the normal rates) during times of market volatility due to the GFC, pandemic etc. in FY 2008-09, 2010-11, 2011-12, 2012-13, 2019-20, and 2021-22. The idea being that reduced withdrawal rates would allow self-funded pensioners to preserve some of the SABP during a market down-turn when they may be earning other income from employment.

The value of my precious metals (gold and silver proof coin collection) decreased slightly during September, to $24,151 (down -$336 or -1.37%). My unallocated precious metal holdings with the Perth Mint online depository are included in the geared share portfolio net value.

Overall, my estimated NW decreased slightly to $3,137,043 by the end of September - down by -$32,363 (-1.02%).

Although I'm not currently tracking any change in valuation of my 'lake house' or the off-the-plan apartment that is currently being constructed, the strong real estate market in Sydney and NSW should have boosted the value of these properties above their 'cost base' (so the $1,377,952 value listed under 'Other Real Estate' is probably a considerable understatement). Once the investment apartment construction is complete in early 2023 (and I have mortgage payments, expenses and rental income impacting my cash flow) I will start tracking changes in the estimated value of the apartment compared to the initial valuation I will get when applying for the mortgage (hopefully the mooted changes to lending ratios don't prevent me from getting the required mortgage for settlement of the property). I won't track changes in the valuation of the 'lake house' as I intend to hold onto this indefinitely and leave it to my sons as part of my estate.

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