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Is a Self-Managed Superannuation Fund Right for You? A Young Investor’s Guide

Blog, Investing, Self Managed Super, Superannuation, Wealth Planning

At Insight Wealth Planning, we are seeing a trend: more young professionals are looking at Self-Managed Super Funds (SMSFs) as a way to take control of their retirement savings. While SMSFs were once the domain of older, wealthier investors, recent ATO data shows 13.2% of SMSF members are now under 45. So is an SMSF right for you? You should always consult a licensed financial adviser when setting up and managing an SMSF to get it right.

Self-Managed Super Funds: The Basics

Think of an SMSF as your own super fund where you’re in control. You can have one to six members and each member must be a trustee (or director if you have a corporate trustee). As an SMSF trustee, you are responsible for managing contributions and rollovers for members, and your skills and experience will impact the decision to establish an SMSF. It’s like running a small business – you make the investment decisions, but you also have all the responsibilities that come with it.

Young Investors

Why are more young professionals looking at SMSFs? Here are the reasons:

  • More control over investment choices
  • Can invest in a wider range of assets
  • Can borrow for property investment (subject to conditions)
  • Can align investments with your values and goals
  • Better returns than traditional super funds
  • Can choose your own investments without having to set up a self-managed super fund (SMSF)

Pros and Cons

A Self-Managed Super Fund (SMSF) has many benefits but also its downsides. Let’s break it down so you can decide if an SMSF is right for you.

Before you get in, consider these key factors:

  1. The Money – Starting an SMSF isn’t cheap. Annual fees can be around $2,500 so you’ll need a big balance – we recommend at least $200,000 – to make it worthwhile. Remember these fees eat into your returns so the numbers have to stack up.
  2. Time and Expertise Required – An SMSF isn’t a set and forget strategy. You’ll need to:
  • Keep records up to date
  • Stay on top of regulatory requirements
  • Make informed investment decisions
  • Comply with super laws
  • Consider insurance for all members

Managing an SMSF can be time-consuming, with trustees often spending over 8 hours a month on these tasks.

  1. Professional Support – You’ll need to work with qualified professionals for:
  • Account management
  • Tax
  • Annual audit
  • Legal
  • Investment strategy

You should get advice from a licensed financial adviser who can provide SMSF specific knowledge and advice for your fund.

Is an SMSF Right for You?

Consider an SMSF if:

  • You have sufficient super savings (ideally $200,000+)
  • You are comfortable making investment decisions
  • You have time to manage your fund
  • You want more control over your investments
  • You understand your trustee obligations
  • You have evaluated your overall financial situation

Red Flags

An SMSF may not be right if:

  • Have a smaller super balance
  • Want a ‘set and forget’ approach
  • Are too busy to manage the fund regularly
  • Aren’t comfortable with financial decisions
  • Don’t want the legal responsibility of being a trustee
  • Can’t ensure investments are in the best interests of all fund members

Other Options to Consider

If you’re not ready for an SMSF but want more control, consider:

  • Superannuation wrap accounts
  • Small APRA funds (SAFs)
  • High-performing industry or retail funds with good investment options

These options offer more flexibility than traditional super funds without the full responsibility of an SMSF.

Next Steps: Get Informed

  1. Check your current super balance and future contributions
  2. Evaluate your investment experience
  3. Calculate the time you have to manage the fund
  4. Understand all the costs
  5. Consider your long-term retirement goals
  6. Understand the roles and responsibilities of SMSF trustees, including legal obligations and risks, with ATO resources.

We Can Help

At Insight Wealth Planning, we help young professionals make informed decisions about their retirement savings. Our team:

  • Check if an SMSF is right for you
  • Compare super options
  • Guide you through the setup process if you go ahead
  • Introduce you to professional services
  • Develop your investment strategy

Ready to Get Started?

Book a free consultation to see if an SMSF is right for you. We’ll help you understand all your options and make the right choice for you.

Remember, while SMSFs are great for young investors, they’re not a one-size-fits-all solution. It’s about making an informed decision based on your individual circumstances and goals.

Contact us today to start the conversation about your super future.

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