It can be frustrating when you feel as though you’re not in control, and that is a very frequent case with superannuation funds as well. Many people feel this way, and it almost feels as though your own superannuation funds are taunting you. Granted that they are security for when you retire, and will enable you to lead a comfortable life; however, you can now decide how and where to spend this money, with the help of a Self-Managed Super Fund, which is also known as smsf.
How does SMSF work?
Self-managed super funds are used by people who want to earn enough money for when they have retired in order to lead a comfortable life. Normally, you would not be allowed to touch your superannuation funds, but with the self-managed super fund, you can invest your money wherever and however you want to. You can now invest it on properties, as you have the freedom to spend the money however you want to.
However, you will need to follow all the strict rules set up by the Australian Taxation Office, as neglecting to do so might lead to severe consequences. That said, you need to be wary, because running a self-managed super fund is no different from running your own business, as it is both difficult and time consuming. You can have 3 more people with you to help you run the funds, and you need to be ready to deal with legal duties.
You need to plan and strategize, and be sure to stick to that strategy, ensuring that you have made enough profits to help you in the future. Remember that you need to start off with a huge sum of money for the start up, and to ensure that you will be able to continue making profits throughout the year. You will also need to have financial experience, to ensure that you will not make a loss, and be prepared to spend a lot of time behind this, as this is very time consuming. And to cover for disability and income protection, be sure to have a life insurance.
Pros and Cons
As mentioned earlier, you need a huge amount of money at startup and also have to invest a lot of time doing this, and these 2 points are definitely the biggest flaws of smsf. That said, the advantages include, being in full control of the way you spend your funds, and being able to invest in properties. And the biggest advantage, you are allowed to borrow money for investments, so you won’t have to fully pay on your own for that one property you’ve had your eye on.
You can now be fully in control of the way you spend your funds, and that is all thanks to the self-managed super funds. That said, with great power, comes greater responsibility, and you have to take on that responsibility in order to ensure that you have earned enough to lead a peaceful life after your retirement.