TES CRUZ can afford to put more into super, but doesn't want to.
"I don't want to tie my hands down I want to be able to pull funds out if I need," she says. "You want to enjoy life a little bit."
After her husband died earlier this year, she sold an investment property and put all the money in term deposits.
Three months is the longest, a far cry from what would be a 20-year commitment to superannuation.
The sharemarket doesn't appeal, although she has another investment property that is positively geared.
Tes would probably be happy rolling over her term deposits for at least the next 17 years, until she retires.
"If anything, they have more security and a better interest rate, so why not?" she says.
To the embarrassment of the funds management industry, that would have worked a treat over the past 10 years.
The trouble is, says Mike Ingham, the principal consultant at Obelisk Advisors, "97 per cent of the income she receives from her term deposits will be eaten up by inflation and tax", based on a 37 per cent marginal rate that cuts in at $80,000, and 3 per cent inflation.
So Tes needs something that will grow.
"Despite the impact of the GFC, the Australian sharemarket has still managed to return 8.9 per cent over the past 20 years and 7.1 per cent over 10 years," Ingham says.
"Australia's dividend imputation system, and the 30 per cent franking credit received with dividend income paid by many companies, makes shares a very tax-effective investment option."
And there's more than one way to skin a super cat. Insurance bonds are an alternative because they are more flexible, Suzanne Haddan, the managing director of BFG Financial Services, says.
"Tax is paid by the life office on behalf of the investor at a maximum rate of 30 per cent and the monies can be withdrawn after 10 years with no further tax payable," she says. "If Tes required the funds, she could withdraw within the 10 years, but the interest-earned portion of the withdrawal may be taxable at marginal income tax rates with a 30 per cent tax offset."
Another way around the problem is through insurance cover.
"Having to sell assets at an inopportune time is never a good thing and insurances would have mitigated this risk," Paul Moran, of Paul Moran Financial Planning, says.
"At Tes's age, the loss of flexibility in super is quite correctly an issue. However, trickling in funds via compulsory employer contributions and a little salary sacrifice can make a large difference in retirement comfort,"
"Life insurance is effectively tax-deductible if it is held inside super, but income protection is often better held privately, as it is personally tax deductible and can be more flexible if held outside of super."