05 Mar The Surprising Thing About Who Wants an SMSF
Now, more than ever, young Australians are getting the message that they must take control of their own retirement plans if they expect to enjoy their sunset years. We see this evident in a report issued by Investment Trends, which reveals that a quarter of Australians who plan to open up an SMSF this year are 35 and under!
Nearly half (46%) of future SMSF investors – those who expect to open an SMSF in the near future – are part of Generation Y!
With retail funds losing in excess of $150 billion in value during the GFC – requiring many Australians having to change their retirement plans – we’re seeing an explosion in the number of Australians who are tired of paying huge fees and getting little to show for it.
Here’s four likely reasons why Gen Ys are opting to set up an SMSF now rather than when they’re older:
1. Save on fees as your balance grows
Regular super fund fees are calculated as a percentage of your investment – up to 2% of your cash every year. The more you put away in super, the more you’ll be paying in fees. If you were paying a flat rate (as you would with an SMSF) your fees would essentially go down as they would amount to an ever shrinking percentage of the whole.
Now 2% may not seem like a lot but when you add it up over 20 or 30 years it can add up to quite a sum! The Australian Securities and Investments Commission has reported that a 1% difference in fees today could amount to a 20% difference in your super payout in 30 years!
2. Join forces with family members
Each SMSF fund can have up to four members so you can really cut costs by combining your savings with others. The same fee will apply to the fund – whether it has one or four you’ve still got the one flat fee. This is a great way to cut costs for everyone as each individual will only have a portion of the fee rather than the entire amount.
3. Choose your own investments
In answer to the Investment Trends survey, people under 44 said they chose an SMSF because they wanted to be in charge of their own investments. When you establish an SMSF you open yourself up to a world of possibilities; cash, shares, property, CFDs, term deposits and more. This means you can fit your investments to match your own situation and investing desires rather than trying to fit into a fund manager’s idea of investing.
4. Become a property owner
About 30% of SMSF investors aged 44 and younger who were questioned about why they chose an SMSF said that buying a property through an SMSF appealed to them. It’s not possible to invest in direct property with a traditional fund, however it is possible to buy property – both residential and commercial through an SMSF with leverage.
Buying property through your SMSF is an involved process therefore it’s a smart idea to find experienced and knowledgeable professionals who can help you get started in the right direction!