The SMSF Dilemma (“should I or shouldn’t I”)
It’s rare these days to discuss superannuation without the topic of self managed super coming up.
The number of self managed super funds has grown dramatically over the last decade, and today around 30% of all retirement savings are held in such funds.
With this in mind, how do you know whether or not an SMSF is right for you? Should you switch to an SMSF, or should you stick with your traditional super fund?
Considering the Switch
Traditionally the rule of thumb has been that a super balance of $200,000 is the tipping point for switching to an SMSF.
This simple rule was based on the way that super fund fees are calculated, and it was said that $200,000 was the point at which an SMSF become more economical in terms of the ongoing fees.
But there is more to the SMSF dilemma than fees alone, and this shouldn’t be the deciding factor on whether or not to switch.
Ongoing fees are certainly one of the major drivers of Australians switching to self managed superannuation.
As your fund balance grows, the benefits of the SMSF fee structure become increasingly advantageous in comparison to the fee structures of traditional super funds.
Another major advantage is the investment flexibility that is offered within an SMSF.
Self managed super allows you to invest in a range of assets which are not typically available through a retail or industry fund. One of the most popular examples of this is direct property investment.
What to Look Out For
An SMSF will not be for everyone, and there are a number of potential dangers to DIY super.
You need to keep in mind the importance of superannuation. It’s all too easy to start playing around in the share market and putting your nest egg at risk without the right knowledge and experience.
It is for this reason that many people with an SMSF still rely on professional advice when investing their super.
When deciding whether or not to switch, and even after you have made the switch, it is important to have a trusted professional such as a financial advisor assisting you with your retirement plan.
Utilising an SMSF can be a great way to build and manage your wealth, but make sure you’re doing it for the right reasons and never underestimate the value of professional advice.