InvestSMART

Superannuation and the bucket strategy

Question

Hi, I did you’re excellent investing boot camp recently and learnt a lot. One of the key takeaways for me as I look to dip my toe into investing, was the three bucket strategy. I had a question though about that as I never quite understood which bucket superannuation sat in, or if I should not even include it (eg sort of keep it off the books for a rainy day)? Partially as it would significantly impact the % in those buckets that I have. - Submitted by Sam

Answer

Hi Sam

Great question, and the answer is a little different depending on your stage of life.

If you still have several years (over 7 as a minimum) to retirement the strategy would most likely be applied ‘separately’ i.e. Super has one investment strategy set up, your investments outside of super has another.

Why that’s the case is that you can’t access your super until you are 65, so you can’t draw on it in anyway for example putting your super in ‘bucket 2 or 3 or both’ and allow it to trickle down etc. to your personal use.

You can however set up your Super with this strategy in mind, so when it becomes available at retirement the bucket strategy is there ready and waiting in your super set up.

If you are at retirement, you can start to integrate your super and personal investments under one investment strategy. Be aware you will need your super and personal investments to be ‘separate’ in terms of the accounts holding but you treat all your investments are one.

Talk to your accountant for more advice on the tax implications of super etc.

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Evan Lucas
Evan Lucas
Chief Market Strategist