Posted , October 3, 2016.

Financial freedom in retirement should be one of your goals, no matter how young you still may be. It’s simply prudent to save for the future as this is without a doubt an important factor in ensuring your welfare as a retiree.

It really behoves you to explore your options as early as you can so you can get started on a program for funding your retirement while you have plenty of time and means to do so. Your choice will probably depend on the level of responsibility you’re willing to take on. If you want more control over your retirement investments, consider setting up a self-managed superannuation fund.

WHAT IS A SELF-MANAGED SUPER FUND (SMSF)?

An SMSF is an investment portfolio that allows you to take the do-it-yourself approach in saving for your retirement. This means that the members of an SMSF are also the trustees and they have the freedom to run it in the manner they deem to be most beneficial to them.

If an SMSF appeals to you, you can set one up for yourself, making sure you adhere to the strict regulations of the Australian Taxation Office. You may do it on your own or with one to three more members besides yourself.

WHAT BENEFITS WILL YOU GAIN FROM AN SMSF?

As mentioned, you have greater control and enjoy better flexibility over your investments. You and your fellow trustees get to decide what to invest in and how to operate the fund. The same applies when it comes to picking the right insurance policy to suit your situation.

Cost could be another benefit, depending on the size of the fund. Account-keeping fees are fixed instead of percentage-based. An SMSF also has the advantage of being tax efficient with the option to make longer-term investments that allow you to negotiate for lower rates.

You have the option to leverage your SMSF to invest in property. This allows you to diversify your investments. You can also employ strategies that allow you to hold commercial premises in super if you own a business.

This fund is effectively a trust that can serve as a family wealth mechanism which you can pass on through the succeeding generations in your family.

HOW CAN YOU GET AN SMSF DONE RIGHT?

Running your own fund can be a complex process. The best way to ensure that you’re doing it correctly is to engage the services of a super fund accountant. Assistance from such a specialist involves ensuring that you meet all pertinent legal obligations and determining that your fund keeps within its purpose of providing you with financial security when you retire. You get guidance and analysis without you ever relinquishing control.

HOW CAN YOU MANAGE YOUR SMSF ON AN ONGOING BASIS?

To make sure that your SMSF is consistently managed, hire a super fund accountant to regularly monitor it so that you can be certain that you are not breaking the rules, that you’re keeping up with costs and fees, and that your fund is essentially doing what it is supposed to do.

IS AN SMSF RIGHT FOR YOU?

An SMSF isn’t for everybody, so it’s best to consult an expert before deciding to go for it. Will the benefits apply to you? Do you have the time and skills necessary to make it work for you? Is it the most cost-effective option for you? These are just some of the points to consider.

WHAT ARE THE COSTS, BOTH UPFRONT AND ONGOING?

For individual trustees, the upfront cost should be around $800 to $1,000. For corporate trustees, it’s no more than $2,000. Ongoing fees include account keeping fee, audit fee, and ASIC fee (if you’re a corporate trustee). Simple funds shouldn’t run higher than $2,000 per year. More complex funds cost around $2,500 to $3,000 a year. These cover the base cost. There may be additional costs as well.

HOW CAN YOU BUILD WEALTH WITH AN SMSF?

An SMSF can be an integral part of your overall wealth plan and be used for estate planning, for making additional investment, for ASIC protection, etc. It should be combined into your overall wealth-building strategy.

A self-managed super fund is an effective financial vehicle for funding your retirement. If you would like to set up your own SMSF, contact our super fund accountant at (03) 9587 9747 to find out more.