Everyone wants to look forward to a bright future as they approach retirement, but how do you make sure that you will be financially stable in your golden years? An SMSF can be a great way to plan for retirement, depending on your personal financial situation. Read on to discover more in our guide.

What Is an SMSF?

An SMSF is a self-managed super fund. This is a fund that will help you to grow your wealth through investment and interest gain over time, but it will not be accessible until you reach retirement age. In this sense, it is identical to other forms of superannuation, but there is one key difference: it is self-managed. In others words, you — as well as other trustees, if there are any — will be responsible for overseeing the fund and its investments.

The Advantages of an SMSF as You Plan for Retirement

What makes an SMSF a good candidate for those seeking to optimise their wealth ahead of retirement? There are a number of advantages to this type of super.

How to Plan for a Great Retirement with an SMSF | Sydney Brokers Blog

Diverse Possibilities in Investment

One of the key advantages of an SMSF is that you have the potential to enjoy a wide range of different investment options. This makes it easy for fund trustees to achieve a diverse portfolio that is protected against ups and downs in the market. SMSFs can purchase properties and physical assets, as well as shares and securities that help retirement wealth to grow over time.

Tax Efficiency Ahead of Retirement

You will have to pay tax on your SMSF fund, but again you have some control over this. For instance, you may be able to claim tax deductions on personal contributions to your superannuation fund. You may also be able to enjoy tax benefits when you purchase an investment property registered to the SMSF.

A High Level of Control

As you, or other trustees, will be managing the fund yourself, you are effectively in the driving seat. If you encounter an opportunity for investment, you will be able to act on this. Conversely, if you find that you need to make alterations to your investment portfolio, you’ll be able to execute this quickly and effectively. This removes some of the anxiety associated with planning for retirement.

Protection for Your Retirement Funds

All of the assets and investments of the SMSF are held by the fund, not by you or by any other of the trustees. This means they are protected from creditors in the event of administration or liquidation of assets. As a result, you will be able to pursue other business ventures without putting retirement investment and capital at risk.

More Leverage When Working Together

You are permitted to pool your SMSF with other trustees. While this does not affect the amount of money you will be able to draw upon on retirement, it does provide you with more investment potential. By pooling resources, you may be able to purchase additional assets for the SMSF and then split the resulting wealth gains.

The Disadvantages of an SMSF as You Plan for Retirement

It’s important to approach retirement with a comprehensive understanding of your options, and this means considering the disadvantages of an SMSF as well as the advantages.

Time and Effort Required for Management

As mentioned, you and your fellow trustees are in the driving seat when it comes to managing your SMSF, but this means putting in the work. It is estimated that SMSF trustees spend more than 100 hours a year managing their funds.

Cost of Operation

There are operating costs associated with your SMSF. As many of these are fixed costs, you will need to consider whether you will be able to input enough capital to make running your SMSF worthwhile.

Legal Liabilities and Duties

You and your fellow trustees will be held responsible for any issues with your fund. If you breach ATO regulations, even accidentally, you may be liable for a penalty.

SMSF Lending

Another thing you need to be aware of as you plan for retirement is SMSF lending. As the trustee of an SMSF, you may be able to borrow against the fund in order to purchase investment assets, such as property.

Remember that this property belongs to the fund and not to you. No trustees will be able to reside in the property once it has been purchased for the fund.

Get Started with Home Loan Borrowing and Property Investment

The Sydney Brokers team is here to help you find the perfect home loan product so you can purchase the investment property you need to grow your wealth for retirement. Whether you are borrowing against your SMSF or taking out a mortgage as an individual, we can help you find what you need.