Is a SMSF right for me?
In a post GFC world it's easy to see why the option to manage your own superannuation savings is an appealing one. A SMSF gives you greater control over your investment decisions, as well as the option of more choice over what those investments might be.
But before taking on what is likely to be the biggest DIY project of your life it's worth stopping to ask yourself a few questions.
How much have I got to invest?
$200,000 is often touted as the minimum cost-effective fund balance needed to make a SMSF a competitive alternative to a retail super fund. It remains a good benchmark despite the fact that almost 25% of SMSF have $200,000 or less.
Do I really understand what's involved?
A quick look at our 'Steps to SMSF Set-up Success' shows there are a number of steps involved in setting up an SMSF, from
deciding on structure, nominating trustees, and drafting a trust deed, through to the ongoing management of the fund. And once your SMSF is up and running making sure that it operates within the zero tolerance compliance regime of the ATO is enough to tax even the greatest of financial minds.
Will my DIY super really perform better than my old industry super?
Having the flexibility to make your own investment decision is no guarantee that they will be better than the investment decisions currently being made on your behalf by your existing super fund. What would you do if your fund started to lose value?
Will I lose existing benefits?
Discounted life and disability insurance are often features of industry super funds. Are you confident of getting at least as good a deal for your new insurance, and will your premiums suffer as a result of the changeover to a new policy?
The potential benefits of a SMSF are bigger for an informed investor, but simply understanding superannuation is not enough to set up and manage a SMSF within the constraints of the law, so it's no surprise the ATO recommends getting expert help.