Hi mkYou're absolutely right.My simple maths is that a rate of...

Hi mk

You're absolutely right.

My simple maths is that a rate of return of 8% is made up of a 5% real rate of return and 3% inflation compensation. I choose 5% because that is the target for the Future Fund, and so represents what the Government Actuary/Treasury think is achievable over the long term at a reasonable level of risk. I think they are rather more objective than an adviser or Fund manger trying to get their hands on your cash.

If you pay 2% in fees it might not sound like a lot, but it means that your real rate of return is only 3% after inflation, and less after tax. This is not a recipe for getting rich in time for your old age. And when you get there you are required to take 4% a year minimum - more after 65 - so you'll gradually be going backwards.

By contrast, our SMSF invests directly in equities and a little fixed interest. After all charges (SMSF manager, brokerage, ATO and actuary fees), our cost ratio is less than 0.25%. So at a 8% nominal rate of return (less than the grossed up dividends currently available from many ASX200 companies), our real rate of return is quite close to 5%, 60% higher than if we were investing through funds with 2% fees. And we have a lot more flexibility in regard to investments and the timing of tax and pension liabilities.

Regards ubhopeful