If you’ve heard the term “self-managed super fund” over the past few years, it’s with good reason. Self-managed supers are becoming an increasingly popular way to save for retirement. In this article, you’re going to learn what a self-managed super fund (SMSF) is, and you’ll also be given the pros and cons of having one and using it as a vehicle for your retirement savings.
What is an SMSF?
An SMSF is essentially a do it yourself super fund. Instead of being managed by an employer, these funds are managed by their members. This means in general, the members are usually the trustees of the fund. As for the members, an SMSF has between one and four of them.
What are some of the Advantages of an SMSF?
- More flexible
- You have more control over the assets invested in
- You receive more transparency since you know exactly where your money is going
- You can buy and sell your assets very quickly
- You can use SMSFs to pool assets with family members
- If pooling with family members, you only pay one set of fees
What are some Disadvantages?
- They are regulated by the Australian Taxation Office
- Due to the above, you need to have a strict understanding of rules and regulations
- Penalties for not being in compliance is high
- Trustees need to prepare an investment strategy
- An SMSF auditor must be appointed each year
- They can be costly to set up (around $2,000 dollars)
- A lot of time and energy needs to be devoted to managing it
As you can tell, a self-managed super fund comes with both advantage and disadvantages. If you’re wondering if an SMSF is the right retirement savings vehicle for you, it’s best to speak with a qualified financial advisor who can review your unique financial situation with you and explore the best options.