When it comes to securing your retirement, Self-Managed Superannuation Funds (SMSFs) offer control and flexibility.
According to recent data from the Australian Taxation Office (ATO), the number of SMSFs has been steadily increasing, reaching over 600,000 funds as of the latest figures. This surge in popularity underscores the appeal of SMSFs in providing greater autonomy over retirement investments.
SMSFs generally make sense for people with a large amount of super savings (around $200,000 or more) and a strong understanding of investment. The added responsibility and complexities of managing an SMSF can outweigh the benefits for those with less experience.
But why should you consider incorporating SMSFs into your retirement strategy? Let’s break it down.
- You have the freedom to invest in a diverse range of assets.
Giving you the flexibility to adapt your strategy as your circumstances change, you have control over how your wealth is distributed to your beneficiaries, providing peace of mind for the future.
- SMSFs offer tax advantages that can boost your retirement savings.
By strategically managing contributions, withdrawals, and investment income, you can minimise tax liabilities and maximise returns. For example, SMSFs may benefit from concessional tax rates on investment earnings, access to franking credits on dividend income, and the ability to claim deductions for certain expenses, such as insurance premiums and investment-related costs.
A study conducted by the University of Melbourne found that SMSF trustees are more likely to actively manage their portfolios, adjusting asset allocations and investment strategies in response to market conditions and personal circumstances.
Additionally, SMSFs offer control over the timing of contributions and withdrawals, allowing trustees to optimise tax outcomes in retirement.
- SMSFs provide greater flexibility in estate planning
SMSFs allow trustees to control how their superannuation benefits are distributed upon death. Unlike traditional super funds, where beneficiaries are often limited to dependents or legal personal representatives, SMSF trustees can nominate specific beneficiaries and allocate their benefits according to their wishes.
A survey conducted by CoreData found that 72% of SMSF trustees cited estate planning flexibility as a primary motivator for establishing an SMSF, underscoring the importance of this feature in wealth transfer strategies.
This flexibility can be particularly valuable for individuals with complex family arrangements or specific legacy objectives, ensuring that their wealth is transferred efficiently and in accordance with their intentions.
While SMSFs offer numerous benefits, they also entail increased responsibility and oversight.
- Time commitment
Managing an SMSF requires a significant time commitment, including research, administration, and compliance tasks
- Cost considerations
Setting up and running an SMSF incurs various costs, including accounting, auditing, and financial advice fees. While these expenses may seem daunting, it’s important to weigh them against the potential benefits and long-term cost savings of managing your superannuation investments.
Considering an SMSF?
Managing an SMSF requires a significant time commitment and a strong understanding of superannuation regulations. For those considering an SMSF, consulting with a qualified financial advisor specialising in SMSFs can ensure a smooth setup and ongoing compliance.
Eclipse Advisory is a financial advisory firm with a team of experienced professionals who can guide you through all aspects of managing your SMSF. We can help you navigate the process and ensure your SMSF operates effectively to meet your retirement goals.
In summary, SMSFs provide a number of retirement advantages, but also come with added responsibility. Carefully consider your circumstances and seek professional guidance to determine if an SMSF is the right choice for you.
If you take in consideration the advantages of SMSFs and the advice of qualified advisors, you can make informed decisions about your retirement savings and enjoy a financially secure future.
David Robson, Eclipse Advisory Pty Ltd
To learn more about SMSFS, schedule a free consultation with David Robson or you can send your queries through email at admin@eclipseadvisory.com.au
