Self Managed Super Funds | What Is An SMSF? | The Researcher

What Is a SMSF And Why Do I Need To Know?

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Self Managed Super Funds are regaining popularity as Australians look to gain more control over their retirement portfolios.

We live in very uncertain times which has renewed a lot of interest in Australians looking at all the options to help protect their financial futures. SMSFs are something that we haven’t covered extensively here on The Researcher but are getting brought up more and more so we thought it time to run through the basics.

Check out this video to learn more: https://www.ato.gov.au/Super/Self-managed-super-funds/

What Is a SMSF

A SMSF or Self Managed Super Fund is a way of saving for your retirement much like an Industry or Retail Super Fund with the fundamental difference being that members of SMSFs are also the trustees of the fund. A SMSF can have as many as 4 members with the sole purpose of providing an income for it’s members upon retirement. Members/ trustees are responsible for ensuring the fund has an investment strategy and that investment decisions are appropriately implemented. 

Why Is a SMSF a Good Option?

A Self Managed Super Fund isn’t for everybody. It is an absolute must to sit down and go through your situation and requirements before making the move, but here are the basics as to why many Australians are turning to SMSFs or are already using them.

1. Full Control Over Investments

Unlike industry or Retail Super Funds where you generally have very limited say over where your Superannuation is invested, in a SMSF members have complete control of how and where money is invested. Generally desicions are made with the assistance of a financial advisor and accountant but in scenario’s such as we are seeing today with the Coronavirus and back during the GFC it allows for members to take affirmative action to stop large losses

2. Can be More Affordable

Generally speaking SMSFs can occur less running costs than Retail or Industry Funds. Costs will vary depending on your setup and requirements and saving on administration fees shouldn’t be your primary motivation to move over to a SMSF.

3. Allows Property Investments and Other Assets

Industry and Retail Industry funds are generally quite restricted in asset classes they invest in, generally shares, bonds or currencies. With an SMSF your investment options are almost limitless and is a big reason it becomes the Retirement Savings option of choice. Asset classes like property are especially appealing in times or economic crisis as they are stereotypically more stable and have a far quicker recovery time. Property and SMSFs are a powerful tool for limiting losses and leveraging your wealth more effectively. Assets such as shares as we are seeing at the moment are far more volatile and as we saw in the GFC can take a decade to fully recover.

4. Allows Pooling of Resources For Increased Leverage

As an SMSF can have up to four members it allows your to pool retirement funds to then leverage in various assets. A very quick example is if you had four people with $200k in an industry fund they would all only be accruing interest based on the $200k investment. If however they created an SMSF together they could put that $800k into property or other assets and create a portfolio worth $1.5 million or more and accrue growth on that much larger amount.

Is It Right For Me?

SMSF opportunities are near limitless with the right resources and advice but aren’t for everyone. You need to look at your current situation and goals before making a final decision and should without a doubt seek professional advice. Now you know what an SMSF is, have a basic understanding why an SMSF is a good option and can see how a SMSF and property could be a good match you can start to map out your next move.