How much do I need in Super to start my own SMSF?

How much do I need to set up my own SMSF

and what do I need to know?


 

The Royal Commission has ignited a lot of talk in the media surrounding Self Managed Super Funds raising more questions than answers

We are not financial planners nor sharing financial planning advice merely quoting sources and or using basic logic in what we are sharing with you

 

What we do know is that industry funds (generalised) tend to perform at 5% to 7% per annum over the long term + fees, where in your own SMSF you have a wide choice of investment vehicle and can therefore be more hands on with our own Super destiny

 

NB : It is important to find out what all the fees/costs are being charged to you now wherever your super is being invested. Allows you to compare to what you could be doing and the fees there

 

There are investment platforms out there where there are no minimums, but before you set up your own SMSF you need to realise that there are some upfront costs for setting up the SMSF and also a SMSF requires annual audits which also cost money

 

What this means to you and your super is that once you understand the upfront and the ongoing then work out the minimum you would require in super that not only covers your annual audit / accounting fees but also give you returns in excess of average super funds performance

 

Set up fees could range between $700 and $2,500 depending on complexity and purpose and annual costs for Admin & Audit from around $665 to $1700 for basic SMSF’s and higher for more complex Self-managed funds and some other minor fees

Meaning that the lower the balance the higher the cost as a ratio, thus requiring investments to cover costs and return an ROI you are comfortable with

 

You will have heard a figure of $200k required by ASIC  as a minimum to have your own SMSF, this figure used to be a recommendation and not a legal requirement

If you have an amount you are comfortable with knowing you could achieve the financial return on investment you want then having control and choice over your retirement wealth is imperative to enhancing your retirement goals. This is why there as so many SMSF’s registered with Billions of Dollars under Self Manged Super Funds management

 

You may encounter negativity from your financial advisor and the media (it’s their job) however an advisor is obligated to put your interests ahead of theirs or the conglomerate they represent, your own research and due diligence will allow you to come to an informed decision

 

Once again : the amount you have in super, the rate of return you are getting versus what your research indicates you could get, less upfront and ongoing fees should help you determine what is the correct strategy and investment vehicle for you and your family

 

Other aspects for consideration could include : how best to maximise your wealth in retirement planning, what flexibility do you have and want, the varying investment vehicles available to you giving you a wide array of choice and thus control when comparing where the funds are invested now and what choice, control, flexibility, return on investment and ongoing fees  

If you are unable to do the comparisons and calculations speak to your financial advisor and or your accountant or ask us for a referral to a reputable professional who

can assist you so that you can make your very own informed decision of how you want your monies in Super to be working for you

 

Whilst Planning

Did you know that a major advantage of investing in a property within a SMSF is that you are able to Leverage?

 

What this means to you and other SMSF members is that you can invest only 20% (or more) yet achieve Capital Growth on 100% of the property value + your tenant will help you build wealth by paying rent and depreciation can be deducted against Super contributions further lowering the tax on contributions

 

The numbers which are underpinning an investment in property could return you around 10% to 17% per annum – *depending on the type of dwelling, rent, interest rates, deposit, capital growth etc, we can help you estimate the cash flow

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Industry Super Funds continued Poor Performance and ongoing high fees

Buying property in Super

Why set up your own Self Managed Super Fund?

Industry funds dismal long term (lack of) Performance :

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Industry Funds results from 1996 to 2010 :

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  • corporate funds on average provided returns of 5.84% pa
  • industry funds 5.35% pa
  • the public sector funds 6.30% pa
  • and retail funds 3.66% pa

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And … more than 150 of the growth funds tracked by Morningstar have not earned more than 3.5 per cent a year — or 1 per cent above inflation — over the past decade. These funds contain about $16 billion of workers’ retirement savings.

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Thirty-three funds have delivered average investment returns of 5 per cent or more for the past 10 years, including some of the biggest funds.


“Ask yourself how does this help you create sufficient retirement income on your super contributions?”


It is widely known that Industry Super Funds attract ongoing annual fees which are further eating into your own retirement value. What most investors don’t consider is that you pay your Fund Managers every year even in years where your fund goes into negative performance. You are paying for this privilege – why??

  • In your industry fund, not only are you achieving dismal long term performance results on your own retirement funds but if you have $125,000 in your current super, ONLY this $125k is working for you!

Wouldn’t you prefer to take advantage of the power of Leverage; whereby you invest say only 20% of the value of the property and have the bank and a tenant fund 80% of the investment meaning you now have an Asset of over $500,000 working for you in your own SMSF and you only invested around $100k for the privilege


Compounding Returns on Investment

Compounding Returns comprise of Interest being earned on top of Interest for the life of the investment; the longer one invests this higher a compounded return will be … we agree

Based on the above returns of 5% pa, $100,00 invested in your Industry Super account would have grown to $1.54m in 15 years (excluding Industry Super annual fees for this exercise) but if the return was 10% per cent pa, the balance would only be $.51m over this same period

What this means to you is that being in control of your own Super Destiny you could be better off by over $900,000 this time in your own pocket!


“This is serious stuff you would agree!”


What if you set up a SMSF (Self Managed Super Fund) and secured a prudent investment property which generated a return on investment of 10% pa; can you imagine the returns on your investment at a regular 10% pa versus industry averages of a dismal 5% pa?!?  Could equate to over a Million $’s over 15 years more in your own pocket


How will a 10% compounded over 10 years or more positively effect your retirement lifestyle. What will this mean to you?


*This is not rocket science nor financial planning advice; merely using Logic and industry statistics

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