You must have heard the great deal of hype surrounding self-managed super funds (SMSF), but what are they actually and would they be beneficial to you? What are the factors which make them so popular that people are now weighing their retirement savings options? Self-managed Superannuation Funds are a great way to build assets for retirement. This can also be done in a tax effective way bysacrificing your salary into your SMSF to grow these assets. Actually, SMSF’s helps you to reduce your superannuation fees while maximizing your returns. Side by side, it reduces your tax as you have to sacrifice your salary. The Australian Government, under the superannuation legislation has motivated people about their superannuation so that people can be self-dependent in their old age, after their retirement, and not be reliant upon the pension. Your SMSf has the added bonus of purchasing direct assets like commercial, residential, or rural properties or even units or holiday apartments and more.
You must have noticed that almost all corporate, retail or any industry super funds calculate their total fees based on your superannuation fund, in spite of charging a flat fee. It is the human nature that we do not want to pay for anything when we do not have to. Using your SMSF to purchase any asset like residential property will give you that leverage, as your super accumulates, as it allows you to pay a flat fee only, as opposed to an increasing percentage. An SMSF’s fee (depending on the provider/administrator) would not increase as your fund gets higher. Now, you can yourself imagine that you can save a huge amount of money with an SMSF on fees only, as your super accumulates wealth.
Another amazing benefit you can avail from SMSF is that it allows you to split your investment. For example, you can simultaneously invest in shares, residential properties, managed funds, etc., in whichever proportions. It is obvious that if the market fell down, you can shift your assets to any other investment. Whereas if you invest in a company or retail, it will limit your opportunity for returns as you are exposed to their particular strategy.
If you sacrifice your salary for SMSF, you are making a contract with your employer to pay a part of your pre-tax income in your SMSF. Now, this is a totally win-win situation as the contribution you are putting in SMSF is not taxed in your name, but in your SMSF at 15%. If you are paying more than 15% as tax, you will get a tax benefit.
Australian government has made a wonderful contribution to the savings of the people who believes in savings. Government make the dollar for a dollar contribution to your SMSF balance. You will get the government’s contribution to a particular limit only, but still you can save a lot of money. Ask your employer to set up an SMSF for you today. Many reputed companies have proper paper work and detailed information about it, discuss in detail and start saving!!
In making any decision with your superannuation, you should consider your overall retirement goals first. Where do you want to be in retirement? How much money will you need to sustain your goal retirement? These are great questions you can ask when sitting down with a licensed financial adviser.In taking this all into consideration, it is important to note that self-managed superannuation requires a lot more attention and work to be done, as opposed to your default or traditional superannuation fund. The above has been provided as general advice and has not been tailored to meet your needs or taken into consideration your circumstances or goals. Before proceeding speak to a licensed financial adviser about whether or not a self-managed super fund would be beneficial for reaching your retirement goals.