Plenty of Australians believe that a self-managed super fund (SMSF) is right for them. According to the tax office there are almost 560,000 operational SMSFs, with a combined 1,050,000 members. All up these super funds control around $572 billion in assets.
SMSFs continue to be a growing trend; over the past twelve months an average of 88 new SMSF funds were set up every weekday. There was also an average of 5.2 SMSF funds wound up every weekday. So an SMSF is clearly not for everyone. How do you know if it’s something you’re suited to? Here are three questions to ask yourself:
- Do you know enough about investment to manage the money properly? Superannuation is a retirement savings vehicle. As the trustee of a super fund you need to ensure that you are investing the money in the best interests of the beneficiaries for their retirement. You’ll need to have a written investment strategy, regularly reviewed and you’ll need to stick to it.
- Do you have the time? Being Trustee of a super fund involves a certain amount of paperwork and time. Yes, you can outsource investment and administrative chores, but as Trustee you are ultimately responsible for the Fund decisions – so at the very least you’ll need to carefully read and understand all the documentation produced and required.
- Do you have a large enough sum of money to justify the cost? For those with a large amount of money to invest, an SMSF may be a very cost-effective retirement vehicle. If you only have a small amount though, the setup and ongoing costs might be dearer than a good value public super fund.
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If you’re suited to it, an SMSF can be fantastic. But go into it with your eyes wide open.
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