Five things to consider before starting a SMSF

Deciding to establish a Self-Managed Superannuation Fund (SMSF) often comes as a reaction to a specific investment opportunity or desire. It could be acquiring commercial property for your business, diving into the cryptocurrency market during a downturn, or investing in that often-discussed unlisted property fund.

The motivations are varied, however, setting up an SMSF isn't solely for those nearing retirement or belonging to a particular demographic. An SMSF is a viable option for individuals at various income and investment levels. 

The question is: is an SMSF right for you?

Five essential considerations for those contemplating an SMSF.

1. Age is just a number.

Age does not determine the suitability of setting up an SMSF. Whether you're in your 30s, eager to proactively manage your retirement savings, or in your 60s, seeking control over your retirement funds, the appropriateness of an SMSF is determined by your specific needs and circumstances. What's imperative is having a well-thought-out plan tailored to your personal goals.

2. Cost & control.

While an SMSF offers greater control over your retirement savings, it also incurs costs, notably the annual audit fee. These costs can significantly impact younger individuals or those with smaller superannuation balances. The Australian Securities and Investments Commission (ASIC) has indicated that an SMSF with less than $500,000 might yield lower returns, after expenses and taxes, compared to a regulated superannuation fund. However, having a strategic reason for choosing an SMSF can justify the costs, regardless of your super balance.

3. It’s a big commitment.

Managing an SMSF requires dedication, and for some, it’s too much. Significant time and effort must be invested in researching and making informed investment decisions. For those in their 30s, the idea of taking active control of your super might be appealing, but it's crucial to consider whether you have the time or resources to commit. If not, exploring other avenues for engaging with your retirement planning might be more suitable.

4. Family dynamics.

Including family members in your SMSF to share costs, especially audit fees, might seem advantageous. Yet, differing investment goals and retirement planning needs can introduce conflicts that could easily be avoided with a different superfund structure. Once someone is a member of an SMSF, removing them can be complicated, so it's essential to ensure that inclusion decisions align with your overall plan from the beginning.

5. Know your “why”.

Establishing an SMSF shouldn't hinge on your age, marital status, or family involvement, but rather on a clear and personal "why". If you have a solid reason for starting an SMSF, it might be the right choice for you. Otherwise, sticking with your current retirement planning approach may be the best path forward.

Call in the experts.

Making an informed decision on whether an SMSF is the right choice for your retirement planning strategy is best made with a pro on your side. We have a network of trusted individuals we can connect you with so you can ensure a SMSF will set you up for success. To secure your future with an SMSF, contact us today.