With more and more people opting to manage their own super fund each year, you may have heard great things about how a Self-Managed Super Fund (SMSF) offers more choices and greater freedom. But does an SMSF suit you and your lifestyle, and do you really know what’s involved in managing one? We take a look at how to take control of your super fund and optimize your retirement savings.
Why manage your own super?
Self-managed super funds have the advantages of control and flexibility in the choice of investments and can include investment property. If you have the expertise to invest and manage your own SMSF, there may be considerable savings. For example, you may decide to self-manage either your share portfolio or real estate. If you have a fund manager you will be charged a percentage of the fund’s value for management.
An SMSF will incur accounting and auditing fees, but as the fund grows in value, the relative cost will be reduced, thus making it more cost-effective than paying a percentage of your total funds under management.
It is important to know that, while there are benefits of managing your own super fund, there are also a number of risks and obligations you should be aware of and take into consideration.
The Australian Taxation Office (www.ato.gov.au/super/SMSF) offers sound advice on what is required.
Super Guide (www.superguide.com.au) is an excellent independent resource center for all things relating to superannuation and is highly recommended.
From these two sources are some key points you should consider:
- Create and follow a well-researched investment strategy that ensures that your fund will meet all of your retirement needs. Guessing is not a good idea!
- Keep well-organized and thorough records of everything. You will need to provide financial statements, complete a tax return, and participate in an audit every year.
- Comply with important legal and tax policies, and be aware of the responsibilities of being the trustee of your fund. Should you ever do anything wrong, there are also big fines and penalties.
- Make sure you have enough time to do administrative tasks, like paperwork, research and fund management.
- Have good financial and legal skills or advisors who will assist you in these matters. Your retirement fund is probably your largest investment after your home, so it’s important to know what you are doing.
- Organize your own life insurance, income protection and disability cover.
- Be prepared for the ongoing costs of running an SMSF. Fund trustees require accountants, auditors and advisors.
- Make an exit strategy for the sale of your real estate. There are minimum drawdown periods in the pension phase and there will come a time when the rents from the property and other investments are not sufficient to pay your drawdown. Give yourself sufficient time to sell the real estate as this can take months
How to make managing your SMSF easier
Planning for the future and keeping a track of your SMSF can be an overwhelming and challenging task. How can you monitor your investments and project their growth over the next 20-30 years? With Financial Mapper’s wealth guidance report, you can now see how your SMSF investment strategy should track and what your future projected financial position might be. Managing your own super fund can be a daunting idea — but with the right financial planning tools, resources, and advisors you can easily save for retirement and sleep easy at night knowing that your finances are in your hands.
Financial Planning Software for integration of SMSF
Your SMSF can be planned in advance using Financial Mappers.
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Glenis Phillips SF Fin – Designer of Financial Mappers