Am I too young to manage my super?

Self-Managed Super Funds are among the fastest growing superannuation vehicles in Australia and they’re not just for older investors – investment-savvy Millennials are catching on.

The Australian Taxation Office (ATO) reports that significant numbers of people below the age of 45 are investing through Self-managed Super Funds (SMSFs). The proportion of SMSF members in that cohort was around 14.0% over the twelve months to June 2021.

Historically, SMSFs were considered the province of only the rich. However, as set-up fees and running costs decrease, younger people are viewing SMSFs as a viable alternative to industry funds or off-the-shelf retail funds.

If you’re in this category, read on.

A SMSF is a highly-regulated retirement strategy. Every fund requires between one and six members. Each member must be a trustee, or if you appoint a corporate trustee, a director.

SMSFs exist only to provide member retirement benefits. They follow a strict investment strategy designed to meet the needs of those members.

Those best suited to running their own super fund are meticulous about record keeping. Regulatory bodies, including the tax office, maintain rigid reporting guidelines so it’s crucial that records are accurate and kept up-to-date.

Thinking about hopping on board? Here are a few points to consider:

  • Start with a lump sum substantial enough to make the fund worthwhile. Annual running costs can be around $2,500 so a realistic minimum balance is at least $200,000 with a dedicated growth plan.
  • Regulations stipulate you engage qualified professionals to handle the accounts, tax, audits and all the legal requirements.
  • You will need both time and financial experience. The Australian Securities and Investments Commission (ASIC) recommends you use a qualified financial adviser to help with administration and investment decisions.
  • Regulations require that you consider life insurance as part of the fund’s overall strategy. This includes income protection and total and permanent disability cover for all members of the fund.

It is imperative that you seek professional advice because as a trustee or director of the fund, you are personally responsible for all investment decisions.

That said, what are some of the benefits?

  • SMSFs offer greater levels of control than retail or industry super funds.
  • A wider range of investments and asset types are available to SMSFs as you have total control over the investment of the fund's assets, subject only to legislation and the fund's investment strategy.
  • SMSFs can borrow to purchase direct shares or property, as long as members adhere to strict legislative controls.
  • Tailoring a portfolio to suit your needs has the potential to yield a greater return compared with industry or retail funds.

If you’re still not sure about the best option for your retirement when it still could be 20+ years away, talk to us. Ask about SMSFs and other options such as superannuation wrap accounts, which may be a cheaper, albeit a less flexible alternative.

McConachie Stedman Financial Planning is an Authorised Representative of Wealth Management Matters Pty Ltd ABN 34 612 767 807 | AFSL 491619