The SMSF Club | The $200,000 Superannuation Myth
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The $200,000 Superannuation Myth

15 Apr The $200,000 Superannuation Myth

Myth-realityA common myth in the superannuation industry is that you should have a superannuation balance of at least $200,000 prior to establishing a Self Managed Super Fund (SMSF).

This is no longer the case.

Thankfully younger Australians with smaller balances now have the ability to take control of their investment decisions inside of super, without the need to have such a large super balance.

Example:

John and Simone are in their late 20’s and both have approximately $30,000 each accumulated in their super. They understand the importance of taking superannuation seriously at a young age, in order to have more money in retirement. Traditionally the costs of running their own SMSF have been too high, however, with the introduction of the Mini SMSF option, managing their own super is now within their reach.

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A Mini SMSF is your very own personal super fund that gives you total control over how your retirement savings are invested. The key difference to a regular SMSF is the fees. An accountant traditionally charges a flat dollar fee, however the Mini SMSF is charged at a percentage fee based on the total balance of the SMSF, similar to how a retail or industry superfund charges fees.

As this fee is significantly less than what a traditional accountant would charge, and very similar to their retail super fund, taking control of their super is now a viable alternative.

A Mini SMSF is therefore a great initiative for Australians who prefer to make their own investment decisions for their retirement, rather than leaving their superannuation savings to be invested by others.

Other things to consider:

To work out whether an SMSF or Mini SMSF is right for you, it’s important for you to consider the following six steps before making a decision:

  • Ensure you have sufficient time and skills to manage your own SMSF.
  • Consider the amount of super you need to make an SMSF viable. For a Mini SMSF you do require a combined minimum super balance of $50,000. (You can have up to four members for a Mini SMSF, if each member had a super balance of $15,000, you would easily meet this minimum).
  • Develop a thorough understanding of the various SMSF investment alternatives available.
  • Follow the super and tax laws and understand the risks.
  • Be sure you can meet your record keeping and reporting obligations.
  • Consider your options and seek professional advice.

Younger Australians can now start taking super seriously, as the earlier you do so, the more money you will have in retirement!

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