To VR or not to VR; that is the question

I've just been offered voluntary redundancy, and am crunching the numbers to decide if I will take it. I need to decide by Wednesday.

I've set up a reasonably detailed financial model in Excel, but there are two parameters that I'd like people's opinion on. I am in my late 40's, so my superannuation will be sitting untouched for at least 10+ years.

What range of values would you assume for:

1. Average superannuation rate of return over the longer term (10 to 20 years)?
2. Average CPI over the longer term (10 to 20 years)?

I'm just as interested in the difference between the values as I am about the actual values.

I've been assuming an investment rate of return 1% or 2% higher than inflation, (eg. 3% CPI and 4% super return, or 3% CPI and 5% super return) which I think is pretty conservative, although even changing between those two makes a very significant difference.

Not after any 'financial planning' advice. I know all the relevant rules, just curious about what range of numbers people think are realistic for 1 & 2 above.

The assumptions I make on those two numbers are going to determine how much longer my wife is going to need to keep working.

Probably a good time to think about setting up a self managed super fund. More control and more options. The government buggers with the superannuation rules regularly no matter which party is in vogue.

If your money is not making 7% minimum nett, it is in the wrong place.

As far as the job goes, that is really a personal decision.

Question 1. Your super fund should be delivering minimum 10% p/a long term depending what your spread is. Mine is a "balanced portfolio" ie medium risk, medium return. However super funds rely on shares too much I believe and as we all know, shares are very volatile.

Question 2. CPI is what it is. Calculate on 4% p/a.

If you are looking for placement of money, these guys are worth a look. www.cromwell.com.au/

I have money with them which is in an unlisted property trust which is neither capital nor return guaranteed however from day one I have been receiving 8.5% p/a returns paid monthly, tax deferred and has grown to 8.75% returns and the capital value has grown to $1.20 on the $1.00 invested. The tenant in the building is the Queensland Government and the Queensland Government and Federal Government are broke. Go figure.

The whole of life is risk. You just need to calculate the risk

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busterwa said..
Don't take it hold in there along as you can, There just thinning out dead wood ! If they were that keen on getting rid of you you'd get promoted to management!

Good in theory, but sometimes its not a good choice. When I took my VR I was paid out at 4 w$ [Av Gross] / per Y of service (max 25 year limit) the next wave got 3 w$ [Av Gross] Y (max 25 y) then the 3 round got 3 w$ [base rate and not yearly gross as were previously used] So Im glad I left when I did.

When you are calculating your Super remember that you may NOT be putting into super for quite a few years, either you may take a while to find a job, or being self employed with very little super input.

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GPA said..
FYI - Just as a cautionary tale, I know two very good employees that I had worked with for 15yrs and could highly recommend... both took redundancy in Oct/Nov and neither have been able to find fulltime work. One is in IT, the other Admin.

The other thing I have noticed is that salaries are down...

G.

Have to agree I took my VR 13 years ago and have not found 'full time' work in the traditional sense in that time (and I do search lots), I do now have a reasonable income made up from about 3-4 casual jobs.
Do I regret it? .... NO, the VR gave me 100 weeks pay + 2x lots of [unused] long service leave payments. Some of the other people that took the VR from the same company have struggled.

I'm not planning on getting another job. All my calculations are based on me retiring now. My wife is a teacher, and she'll keep working for a few years. That's why I'm curious about interest rate assumptions, because I'm wondering how much my super is going to worth when I hit 60 after leaving it sitting earning interest for a decade or so.

Harrow, have you factored in your part time sales assistant work?

As mentioned above work on 10% interest on your super, that seems to be the average over the past 10 years, I believe some funds are achieving 12% this year. Having the defined benifit pension is a plus, unless there is a change after the election, consider the benefits of 'transition to retirement' there maybe room in there to assist you but I assume from you post that your preservation age is not for a while yet

Yes, VR

This is an interesting read for early retirement: www.mrmoneymustache.com/

As per cisco's comment, I'd expect super to be closer to 10%, mine has been consistently around that (except probably 2008 and maybe 2011).

Bend your knees (a lot!) and lean forward. Keep you carve wide and come out pointing a little downwind

You are about to find out that it is hardly ever windy and you have to do more housework

Mention the term "Voluntary Redundancy" in ten years time and people will say "Huh, what is that??"

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cisco said..

Mention the term "Voluntary Redundancy" in ten years time and people will say "Huh, what is that??"

Yeah, my industry is attempting to slash the existing agreement, and replace VR provisions with a forced redundancy based on the fair work minimum standard 3 months payout. I got out just in time.

Now need to figure out what to cook for dinner. Any recipe ideas? Soon I'll be tearing pages out of copies of Women's Weekly borrowed from my mother-in-law .