I’m frequently asked by people about selfie super funds, which are otherwise known as a self managed super funds, SMSFs or DIY funds – you get the drift.
What you might hear is that selfie funds can help you save a lot of money on fees, and that’s true, but at the same time they are not for everyone.
In short they require a fair but of work, research, commitment and a very health super fund balance to make it worth your while.
It’s estimated that women make up about 47 per cent of all selfie members, according to a study published this year by the Commonwealth Bank of Australia and SMSF Association.
Compared to men, women are less likely to suggest the set-up of a selfie fund and are less confident when it comes to managing a fund.
But if running a fund interests you, there are a few critical questions worth asking yourself.
Why are you looking at an selfie fund?
Some of the sensible reasons to consider establishing an SMSF include:
Control: You want greater control of where your super funds are invested.
Efficiency: You desire a more cost-effective super solution for multiple family members – a single SMSF can have up to four members, which can dramatically reduce the administration costs associated with running four separate funds.
Savings: This is a no brainer – many retail super funds charge percentage based administration fees of one per cent or more. On a balance of $200,000 this means admin fees of at least $2,000 every year.
Wealth: You want to increase your focus on your super to grow your balance for retirement. But please note, as an SMSF trustee, you’re obliged to understand its investment strategy and take an active interest in your super.
Do you have enough available to set up an SMSF?
There are no hard and fast rules on what kind of investment you need to establish an SMSF.
But it does not make a lot of sense to set up an SMSF with less than $200,000 as a starting balance.
The admin, audit and regulatory costs of running an SMSF typically range between $1,200 and $2,000 per year, so at $200,000 you are paying one per cent in admin fees in year one. This is actually comparable with many retail funds.
Can you meet all of the rules obligations?
This is where stuff gets more complicated. SMSF trustees are required to control and make all of the investment decisions for their fund.
This includes maintaining records, establishing an investment strategy, complying with super laws and lodging annual returns. Most can be outsourced but the overall binding responsibility is with you, the trustee.
