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Running your own super fund offers control of how your nest egg is invested. But there are strict rules to follow, and this is an area where good advice is essential.
Around 907,000 Australians have their retirement savings invested in a self-managed superannuation fund (SMSF)*. It's an option that works well for many, and if you are comfortable taking responsibility for your nest egg, a SMSF could be the right choice for you.
*Australian Taxation Office Self-managed Super Fund Statistical Report - March 2013
In many respects, SMSFs work in much the same way as regular super funds. During your working life you and your employer make contributions to the fund. The money is invested so that over time you build a decent pool of savings for retirement.
Just about anyone can establish a SMSF though there is a limit of up to four members per fund. There are various costs associated with setting up and running a SMSF so you’ll need sufficient money to make a SMSF worthwhile.
SMSFs benefit from generous tax concessions. Contributions to the fund plus the returns on the fund’s investments are all lightly taxed so more of your money goes to work for your retirement.
The beauty of a SMSF is that you have complete control over how your retirement savings are invested – within legal guidelines. It’s important to hold a mix of investments, and this can include term deposits, shares, property and other assets. You’ll need a written plan that shows how the fund is investing for the benefit of its members.
One of the key rules of SMSFs is that the fund can only be used to invest for retirement – you can’t normally access the money before reaching retirement age.
SMSFs must be run within strict guidelines. As each member of a SMSF is also a trustee, you are responsible for meeting those rules, and if you’re considering a SMSF it’s essential to be aware of what’s involved.