For Kevin and Marlene, retirement was a time for taking greater control over their financial future and actually growing their retirement savings.
They started an SMSF and soon found they had a talent with shares.
Retirement is usually a time when you start drawing down on your savings, gradually spending the capital you’ve accumulated over the years.
But for very savvy investors like Kevin and Marlene, superannuation can actually keep growing.
Kevin and Marlene, from Banora Point in New South Wales, retired in 2004. Like many Australians, they had their money in another type of super fund.
Kevin wasn’t satisfied, though. He was aware of self-managed super funds and already had an interest in the financial markets.
Kevin started out by doing research into different fund providers. The aim was to take control over his own finances, not to have someone else in the driving seat again,
so he was looking for a ‘record keeper’ rather than an advisor. ESUPERFUND was among the fund providers he looked at,
and he found it offered the best service for the cost.
We were paying high fees for someone else to manage our savings, but thought we could do a better job ourselves.
Taking the SMSF plunge
In 2006 Kevin and Marlene took the plunge and moved their money into an SMSF set up for them by ESUPERFUND.
“I wouldn’t have done it if I hadn’t found someone like ESUPERFUND that handled the administration side of the fund management.
They made it very easy: I just followed their prompts and they guided me every step of the way.”
One of the most helpful things for Kevin has been the generic investment strategy that ESUPERFUND provides for free.
This satisfies compliance requirements and has turned out to be quite suitable for the couple. Within this strategy Kevin sets up his own asset allocation;
he currently divides his savings between a share portfolio, bonds, property trusts and cash.
He and Marlene, as both trustees and beneficiaries, review both the strategy and the allocations annually.
It was much cheaper than paying managed funds to look after my finances for me, so there was a cost element that led to the control element.
Fund growing despite draw down
Kevin has enjoyed such success with managing his SMSF that even though the couple is in pension mode, their capital growth is currently exceeding their draw down.
“Because we’re in pension mode we have a strong bias towards income-earning shares, rather than those with a growth aspect. We look for those that pay high dividends.
If we were with a managed fund we wouldn’t have so much control over that; they would invest in a whole range of shares that wouldn’t necessarily suit our purposes.
But the overall performance of the market – both shares and property – has been so strong that even though we’re drawing down, we’re still in front.
A long term strategy
Kevin describes himself as a ‘long term investor’. He looks for large, blue-chip companies that offer good dividends regardless of their day-to-day share performance,
and buys them for the long haul. He sees chopping and changing all the time, which brokers often encourage, as unsuited to his own goals and strategy.
As part of his research he follows business channels and newspapers, and finds industry reports particularly useful for giving him macro-economic background to the markets.
But ultimately he makes his own choices about shares.
“Because we have enough to live on, I’ve got the time to be patient. If a bank’s shares go down 10 or 15 per cent, their dividends remain the same, and eventually they’ll recover.
When they are going through a correction phase I’ll follow that, and when I think they’ve reached their bottom I will buy more.”
Kevin is enjoying managing his SMSF, which has become part of his daily routine.
First thing in the morning I check where the investments are at and what they’re doing.
I’ve got web access to everything: ESUPERFUND provides an individualised portal which keeps all our records for us.
Weathering the GFC
When the global financial crisis struck, Kevin and Marlene managed to weather the worst of the storms.
While their shares were hit and nearly halved in value, their dividends and cash reserves were able to keep them going.
This was partly due to a hunch that Marlene had from seeing negative market news on the television every day.
Shares had already fallen about 10 per cent in the lead-up to the big crash but interest rates remained high, and she wanted Kevin to sell their shares.
“She wanted peace of mind so I compromised and sold out of half of them, and put the money into interest-bearing deposits at around seven per cent.
When the market picked up again a year later, I took the money out again, plus all the interest earned, and reinvested it in a rising share market.
So our fund wasn’t as hard hit as it might have been, but looking back I wish I’d followed her instincts fully!”
The couple believes the flexibility of an SMSF helped them through the GFC.
Other funds might have required them to withdraw more money, or might not have kept such a large cash allocation as Kevin was able to.
They also saved a lot on fees, as ESUPERFUND has a single, fixed annual fee.
Self-managing a super fund is great for those who already have a basic knowledge of finance, and who know how to use the internet to transact online.
We found ESUPERFUND made the process particularly easy, as they guided him all the way.