Superannuation Is one of The Most Important Factors of Wealth Creation.
For many of us, the concept of superannuation is a little overwhelming, especially when we are relatively young. Retirement seems like a lifetime away so we tend to confine super to the ‘too hard’ basket.
Many clients start to pay particular note of their super balances later in life, when the reality of life hits them, and they realise they probably haven’t got enough super to support their retirement plans. This can lead to people having to work longer to try and build a larger super balance or they may even have to revise their retirement dreams.
Coming to see us early to set your strategy up as early as possible is a great way to start. Having to rely heavily on an aged pension once you retire can be avoided if you start early enough.
PFP Private Wealth can walk you through the different options to invest your super, from Industry Funds, Retail Funds or the very popular Self Managed Super Funds (SMSF).
We are asked a lot about SMSF’s so here are some things to consider.
SMSF’s are definitely not for everyone and as the name suggests there is some work involved by managing your own super. Whilst we guide and advise you through the journey, the ultimate investment decisions are made by you, so having some investment experience is a good start.
Currently you can have up to 4 members in a fund. In a lot of cases this is usually husband and wife combining their super into one SMSF, but you can expand this and have up to 4 members.
If you are a property enthusiast and want to purchase direct property, then this can be achieved with a SMSF. Likewise, if you simply want to have greater control of your super and invest in a share portfolio then this can also be achieved. Having a diversified portfolio that includes a spread of different investments is often encouraged.
You need a healthy starting balance to start a SMSF. By combining your super it usually helps to get a balance large enough to make it worthwhile. ASIC, for example, recommends a starting balance of around $500,000, however it can be lower especially if you intend to purchase a property in your SMSF. It would be hard to justify a SMSF with a balance below around $250,000 – $300,000.
The costs to start and run a SMSF can be high which is why a larger starting balance is often recommended. It is interesting though that the larger your balance is, the more economically viable it can be.
You should never start a SMSF without first getting appropriate advice from a licenced Financial Planner. Never rely on your neighbours best friends cousin to give you advice!!!
