Superannuation is often something that people put off until later in life, but the truth is the earlier you get your superannuation sorted, and the more often you monitor your performance, the better off you will be when retirement inevitable rolls around.
While many people simply invest their super into a public offer super fund or industry fund that is often chosen by their employers, a self managed super fund can give you more control of your financial decisions and greater input into the investments you make.
A self managed super fund (SMSF) is a private superannuation fund that is still regulated by the Australian Taxation Office (ATO), but self managed and normally with a financial planners advice.
A SMSF has three life cycle stages and knowing each stage can help guide you through the process. The ATO treats each stage differently and this allows you to change your investment strategy accordingly.
The three stages of a SMSF are:
- Accumulation- this is where you actively contribute funds, invest and try to accumulate as much savings as possible.
- Retirement Transition- this phase deals with moving from working full time to retirement and depending on your personal circumstances you might still be saving or moving towards spending.
- Pension- includes drawing from your super in retirement while still trying to generate income with your capital. Your SMSF at any cycle is also a good estate planning vehicle.
Peter Roan from Roan Financial Group said it’s vital that you know where you are at any point in time, and what is most important for you to action to ensure your fund remains compliant. “You have access to intuitive information and online facilities that provide you a ‘real-time’ overview of your fund’s position but a financial adviser will deliver timely and intuitive information so you can make better decisions about your fund,” he said.
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Peter said one of the big advantages of a SMSF is the level of control you have over your financial decisions. “You need to have a reasonable income, a reasonable super fund and need to have an expectation of not spending more than you earn. Strategies such as salary sacrificing can help put you in a strong position”.
“The benefit of a SMSF is that it allows these strategies to be conducted in a more simple and effective manner as you have more control of your finances,” he said.
In any financial situation you should always get expert advice. Everyone’s situation is different and you need to ensure that the financial strategies you employ will put you in a better position.