What is the right age to set up your very own SMSF? This is a very topical question as we continue to see the average age of people starting a SMSF come down as more young couples become frustrated with their traditional retail or industry super fund and seek the control and flexibility that only an SMSF can offer.
The new trend
As long as you are eighteen years old or older, you can legally meet the criteria to be an SMSF trustee. Even though SMSF members generally have higher-than-average fund balances, the average age of a SMSF member is dynamic.
In 2013, the average age of SMSF members with newly-created funds was approximately fifty years old. In fact, the amount of SMSFs created by those aged thirty-five to forty-four showed considerable growth. Approximately 42% of all new SMSFs were started by individuals younger than forty-four years old.
Never too young to start
The major factors behind the growing number of newly-established SMSFs may be attributed to the growing need for individual control over retirement income, as well as more diverse investment choices, according to the Financial Services Council’s State of the Industry report. The sheer number of younger people actively interested in SMSFs indicates that they understand long-term opportunities, as opposed to just the short-term benefits.
Regardless of your age, the advantages of an SMSF are often the same for many people – autonomy, control, flexibility, transparency, stronger investment options than the average superannuation fund, and the ability to be in control of your own financial future. Starting an SMSF in your 30’s or 40’s allows you more time to take advantage of the benefits that a SMSF offers.
To decide whether or not an SMSF is right for you, consider the legal, regulatory and tax requirements of an SMSF. Ask yourself, “Do you have the time, discipline and ability to take control of your own investment choices?”
Source: ATO
Primary concerns
An SMSF will generally have between two to four trustees eighteen years of age or older. Depending on your personal state of affairs, you will want to contemplate the advantages and disadvantages of being added as a trustee to an existing family SMSF, involving different members of the family in your own SMSF, or establishing your own SMSF.
Before setting up any SMSF on your own, ask yourself if the time and energy will be worthwhile. Do you think your SMSF can do better than a professionally-managed superannuation fund? Do you have the skills and team of professionals required to manage it better than your current superannuation fund? Can you outsource parts of the SMSF set up and administration to specialists?
Generally, a couple or family who are looking to set up a SMSF should have $200,000 or more in combined superannuation savings in order for a SMSF to be cost effective when compared to a public offer fund.
Author: Pat Casey – Managing Director, Assure Wealth
Resources
• ASIC Moneysmart’s guide to Self-Managed Superannuation Funds
• The ATO guide to setting up a SMSF
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Author: Pat Casey – Managing Director & Financial Planner Sydney – Assure Wealth
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