5 questions to ask yourself before setting up a SMSF

Find out if controlling your own superannuation investments is right for you.

First things first, what is a self-managed super fund (SMSF)?

Put simply, it's a superannuation fund that gives you control over making all of the investment decisions. That may mean more financial freedom, however it also makes you responsible for complying with the super and tax laws. So, you must know your stuff!

The Australian Taxation Office outlines: "An SMSF must be run for the sole purpose of providing retirement benefits for the members or their dependents. Don't set up an SMSF to try to get early access to your super, or to buy a holiday home or artworks to decorate your house. These things are illegal."

To help understand the benefits and ultimately if an SMSF is right for you here are five questions to ask yourself before setting one up.
 

1. Why do I want to set up a SMSF?
Today more than ever, pre-retirees are looking for peace of mind when it comes to their super savings. And, you've probably noticed more people talking about SMSFs as a way to achieve it. If you want more control over your super investments and to try and save on super fees, a SMSF could be for you. However, there are restrictions on what you can invest in, and for the best super returns you must have a thorough understanding of your investments.

2. How does a SMSF differ from a retail or industry fund?
The big difference is an SMSF allows you to develop and implement the fund's investment strategy. For example, you can access direct shares, high-yielding cash accounts, term deposits, income investments, direct property, unlisted assets, international markets, collectables and more. Alternatively, with most retail and industry funds you have no say over which specific assets your super invests in. Plus, there are other differences in the number of members and trustees of the fund, regulations, compliance, and fraudulent conduct or theft.

3. Will a SMSF solve my pre-retirement issues or provide me with the benefits I'm after?
Setting up an SMSF is a great way to really understand your personal finances. By tracking your retirement savings, you can have peace of mind knowing your investment and lifestyle decisions are right for you. However, there are also many considerations and risks to be aware of, so do your research.

4. Do I have the time and skills to run the fund?
Setting up and managing an SMSF takes time. And, for the successful ongoing management of your superannuation you must dedicate yourself to understating your investments and what sort of return you will need to be better off than you currently are. If you are A. interested in personal finance and B. have a good grasp on market conditions, super rules and your personal assets, you are already a long way there.

5. Will I lose any insurance benefits by having a SMSF?
Most regular super funds offer insurance cover to members. Plus, discounted premiums can apply to large funds. If you are considering setting up a SMSF, find out if you need to purchase insurance for you and your members, and then shop around because these premiums may be higher than in other super funds.

Setting up a SMSF is a major financial decision, contact us for smart money advice as you prepare for retirement.

P.S. Check out our FREE Smart Retirement eBook and retirement calculator.