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 a 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 optimise your retirement savings.
Why manage your own super?
Self-managed super funds have the advantages of control and flexibility in 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. 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.
When you run your own SMSF, you need to…
It is important to know that, while there are many benefits of managing your own super fund, there are also a number of risks 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 centre 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-organised 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.
- Organise your own life insurance, income protection and disability cover.
- Be prepared for the ongoing costs of running a 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 and resources, you can easily save for retirement and sleep easy at night knowing that your finances are in your hands.
Visit Financial Mappers to learn more about using its power features and how our mapping tool can help you.
Disclaimer: Financial Mappers does not have an Australian Financial Services License, does not offer financial planning advice and does not recommend financial products.