Aug 03

Is a SMSF the Best Vehicle for Your Retirement Savings?


Thanks to our guest blogger - Jo Stephens, MBC Wealth Director and Financial Adviser, for sharing her insight and extensive knowledge of SMSF’s with us below.

People ask me all the time is a Self-Managed Superannuation Fund (SMSF) right for them?

At MBC and MBC Wealth we look after many SMSF clients. We see our role as helping you to get where you want to be, both personally and financially.

So, the answer is YES - we can help you ascertain if a SMSF is the best vehicle for your retirement savings. Firstly, it’s important to get your head around the basic concepts of a SMSF and what it will mean for you.

What is a SMSF?

A SMSF is a trust structure used to save for retirement. A SMSF differs from an industry super fund and retail super fund in that you are the trustee. Industry and retail funds have trustees who look after the governance of the fund. With a SMSF - you are the responsible entity.

One of the advantages of a SMSF is the level of control you have in tailoring the fund to meet your retirement needs. Currently a SMSF can have up to four members.

Who Should Have a SMSF?

A SMSF is usually suited to people who like to have control of their own financial situation. It is important to note a SMSF is not for everyone, the fund will not be cost efficient for those with a balance below $200,000.

When considering if a SMSF is right for you, you should consider how much time, knowledge and energy you have to devote to the responsibilities of running your own fund.

A SMSF is a good retirement tool for business owners who wish to purchase property or own the property they work out of. The SMSF can purchase the business property, the business would then pay rent to the Super Fund. The rent paid by the business will be tax deductible and the rent would increase the member balances. The members of the SMSF can also make the usual contributions.

Knowledge and keeping abreast of the changes to superannuation and relevant tax laws are also important for anyone considering a SMSF. At MBC and MBC Wealth, we offer workshops and guidance for our clients who have SMSF’s to ensure your fund remains compliant.

Why Use a SMSF?

Most superannuation funds have a point of difference. Industry funds offer a cost-efficient model that quite often doesn’t require active involvement from the member. Industry funds generally offer a range of premix investment choices, with some now moving towards shares and managed funds as part of their menu.

Retail funds are usually used with an adviser and offer managed funds, term deposits and shares as investment options. SMSF on the other hand can offer managed funds, shares, term deposits, cash deposits, unlisted property funds and direct property.

A SMSF can be a truly DIY fund or you can engage with an adviser to assist you with the investments and superannuation trustee requirements.

Where a client has a predisposition to owning property a SMSF may be a good fit. A SMSF can also use borrowing to purchase both property and shares. Caution should always be taken when utilising borrowing. Borrowing allows you to invest more money than you currently have available and can give you a better positive return, but it can also increase the risk of negative returns.

Always Seek Professional Advice

Maximising your retirement savings is important in ensuring you will have sufficient funds to provide you with the lifestyle you desire in retirement. Making the right decisions now will increase the chance of meeting your retirement goals.

Always seek the assistance of a professional who can work with you to determine the pros and cons of any strategy considered. Superannuation is your nest egg. MBC and MBC Wealth will work with you to identify what strategy is best for you and your family. Remember…one size does not fit all when it comes to SMSF’s!

Give us a call for some professional advice tailored to your individual requirements on 02 6362 0988.